State Bank of Withee

Walter Ollech
410 Division Street
Withee, WI 54498


May 3, 2005

Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW.
Washington, DC 20429


Dear Mr. Feldman:

We are a $60 million commercial bank located in Clark County with four 
locations.  We are a rural bank with about 50% of our customers being in 
or related to the dairy industry.

We appreciate the opportunity to comment on the proposed rule issued by 
Federal Deposit Insurance Corporation and other Federal financial 
institution regulatory agencies concerning outdated, unnecessary, or 
unduly burdensome regulatory requirements pursuant to the Economic Growth 
and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). 

This letter primarily offers comments in the area of money laundering, as 
our costs for compliance in this area have increased substantially.  We 
used to be able to open a new account in fifteen minutes, now it takes 
thirty minutes.  We also had to buy software  at a cost of $1,100.  All to 
comply with AML

Money Laundering Regulations:

Our bank strongly supports the goals of the Bank Secrecy Act (BSA) and its 
related regulations and recognizes the significant value these rules 
provide in the fight against the financing of terrorism and other illicit 
enterprises. The decision by the Agencies to address the many issues 
associated with BSA and anti-money laundering (AML) compliance is 
encouraging news to the industry. We understand that addressing the issues 
raised by BSA and AML compliance cannot necessarily be resolved in a brief 
period of time. Nonetheless, we strongly believe there are recommendations 
that can be implemented in a relatively short period of time so as to 
provide much needed and more immediate regulatory relief in this 
particular area of compliance.

We encourage the Agencies to reconsider certain rules relating to Currency 
Transaction Reports (CTRs), Suspicious Activity Reports (SARs), and Money 
Service Businesses (MSB). One of the major concerns we share with the 
Agencies is the massive volume of reporting and the clogging effect it has 
on the system. First and foremost, the $10,000 threshold for CTRs should 
be increased. This threshold has not been adjusted for inflation since 
first introduced. At a minimum, the increase should reflect inflationary 
pressures in effect since its introduction in 1979. Considering the 
frequency of transactions in this range nowadays, failing to adjust this 
figure will only contribute to the clogging of the filing and reporting 
system and the dilution of the quality and value of information the 
government receives. 

Additionally, this low CTR threshold has the effect of artificially 
increasing the number of SAR filings. To illustrate, a customer deposits, 
deliberately or inadvertently, an amount of cash below but close to the 
$10,000 threshold. The deposit could conceivably be deemed to be an 
attempt to circumvent reporting requirements by structuring cash 
transactions. This would be considered suspicious and would trigger a SAR 
filing. Thus, a low CTR threshold amount artificially increases the number 
of SAR filings. The effect of a low CTR threshold and its impact on SAR 
filings is equivalent to the effect defensive SAR filings have. 


Of course, the artificial increase in SAR filings means that bankers are 
now obligated to fulfill other due diligence, reporting, and recordkeeping 
requirements. Financial institutions are expected to file SARs every 90 
days after the initial SAR filing. This requirement should be relaxed so 
that a SAR filing every 90 days is necessary only if suspicious activity 
is believed to be taking place, not just as a matter of course. To be 
consistent, an increase in the CTR threshold should be accompanied with an 
increase in the SAR filing threshold. 

From a more general standpoint, the purpose for the filing and reporting 
requirements pursuant to CTRs and SARs ought to have a wider rather than 
narrower focus. In other words, we argue that a better approach is one not 
focused on a cash transaction event on any given date, but one where the 
focus is on the cash transactions over a relatively longer period of time. 
We further argue that it is easier to detect a pattern of potentially 
illegal or improper activities when data is analyzed over an extended 
period of time, such as biweekly or monthly. This will also decrease the 
volume of filings and resources spent by financial institutions and the 
Agencies alike. 

With regard to MSBs, the filing requirements are triggered when an 
individual conducts $1,000 or more in money services on any given date. 
For small accounts or an account where this event is rather sporadic, 
filing and recordkeeping requirements can be burdensome. This is 
especially true for smaller financial institutions. 

We strongly encourage the Agencies to change the language in this rule 
such that the triggering event is one where the $1000 or more threshold in 
money services is a standard practice.

As stated above, other BSA and AML issues are more complex and require a 
long-term approach. First and foremost, we strongly believe that BSA and 
AML efforts ought to be centralized. The Agencies, and the government in 
general, should assume a more proactive approach to this very important 
issue of money laundering and terrorist financing. Section 314(a) of the 
USA PATRIOT Act is a case on point. 

Section 314(a) requires the Secretary of the Treasury to adopt regulations 
to encourage regulatory authorities and law enforcement authorities to 
share with financial institutions information regarding individuals, 
entities, and organizations engaged in or reasonably suspected, based on 
credible evidence, of engaging in terrorist acts or money laundering 
activities. Section 314(a) enables federal law enforcement agencies, 
through FinCEN, to reach out to 41,530 points of contact at more than 
20,000 financial institutions to locate accounts and transactions of 
persons that may be involved in terrorism or money laundering.

I believe that a multifaceted approach to a financial institution’s review 
of the  section 314(a) list is necessary to allow for more expeditious and 
efficient handling of such requests. We strongly encourage that the 
Agencies allow key data processing vendors to have access to the section 
314(a) list directly on behalf of their financial institution clients. In 
that way, a review of the list is accomplished with a mainframe data 
processing solution, much like OFAC reviews are accomplished. 

Moreover, the rules should be harmonized and promulgated by one body. 
Currently, there is one body of BSA and AML law but several different 
regulatory agencies imposing similar but sometimes different standards, 
interpretations, and examination procedures. For instance, a SAR must be 
filed when there is (a) money laundering or BSA violations involving 
amounts of $5,000 or more; (b) insider abuse regardless of the dollar 
amount; (c) a federal crime conducted through the institution or that 
affects the institution, with a known suspect, involving the $5,000 
threshold; (d) and if there is no known suspect, the threshold jumps to 
$25,000. Notice, however, that (a) above is a requirement imposed by the 
Department of the Treasury (Treasury). The other requirements are imposed 
by the Agencies. This is extremely important because if a financial 
institution fails to report a case of structuring, for instance, both the 
Treasury and our institution’s primary Federal regulatory agency may 
properly cite our institution.  

There can be no question that this lack of a unified approach to BSA and 
AML compliance, and lack of concrete guidance by the Agencies and the 
government alike, has contributed to confusion in the industry. For 
example, more guidance is needed to help bankers understand when to file a 
SAR. Currently, the rules are such that it requires a banker to use law 
enforcement techniques, subjective judgment, and sometimes detailed 
knowledge about allegedly suspicious customers to determine if a SAR 
should be filed. SAR reporting essentially turns financial institutions 
into criminal investigation bureaus. 

Unfortunately, it has been well documented that a very small fraction of 
SAR filings receive follow up by the appropriate agencies. We strongly 
encourage the Agencies to coordinate training and guidance with other 
government agencies, such as the FBI, that are better equipped to provide 
specific guidance and direction as to what is adequate, complete, and 
useful information that will minimize the volume of filings but increase 
the frequency of investigations by the Agencies or other governmental 
bodies. Perhaps issuing a publication on a regular basis that highlights 
elements, events, or circumstances that prompted further investigation by 
the investigating governmental body would be helpful to the industry. Out 
of so many filings, knowing what exactly made certain filings worthy of 
further investigation will benefit the industry and perhaps reduce the 
volume of filings.

In addition, a safe harbor or clear guidance is needed addressing 
Regulation B concerns when attempting to comply with BSA’s Customer 
Identification Program (CIP) requirements. On the one hand, many 
institutions’ CIP policies require the copying of a photo ID in order to 
verify the identity of the customer. Yet, on the other hand, the Agencies 
frown on this practice indicating it could easily result in a Regulation B 
violation of illegal discrimination in lending. 

Also, financial institutions need better, and more reasonable guidance 
with respect to “politically exposed persons.” Treasury issued a 
regulation implementing Section 312 of the USA PATRIOT Act, which requires 
U.S. financial institutions to guard against accepting the proceeds of 
foreign corruption from kleptocrats, their families, and other associated 
“politically exposed persons.”  For this deterrence policy to effectively 
work, we believe that better guidance is needed on what is really expected 
when transacting with “politically exposed persons.”  Limiting the scope 
of individuals who are covered will result in greater efficiencies for the 
Agencies and the financial institutions charged with monitoring and 
reporting on these individuals. 

Another unresolved issue more appropriately addressed by a unified 
approach deals with whether or not the disclosure of SAR information to 
the institution’s board of directors should eliminate the protections 
afforded by SAR safe-harbor rules. We argue that if the institution’s 
policies allow for the sharing of SAR information to board members and the 
information is not disclosed or shared with others outside the board of 
director’s meeting, then this sharing should absolutely fall within the 
protection of the safe-harbor rules. 

Appraisal Standards for Federally Related Transactions
Much like CTRs and SARs, Safety and Soundness rules are primarily 
contingent on a rigid monetary threshold and should be revised to be more 
representative of today’s economy and better reflect its realities. Hence, 
we strongly encourage the Agencies to increase the $250,000 appraisal 
threshold to reflect historical and current inflationary pressures and to 
routinely make cost-of-living adjustments. In 1994, the Agencies issued 
the Interagency Appraisal and Evaluation Guidelines to primarily foster 
prudent appraisal and evaluation policies, procedures, practices, and 
standards. Since then, however, the $250,000 threshold has not been 
adjusted. 

Conclusion:

I appreciate the opportunity to comment and make recommendations 
concerning this most recent review of money laundering and other rules. 
While the review of such rules pursuant to EGRPRA will take a long time, 
we strongly encourage the Agencies not to overlook short-term approaches 
to provide some much needed regulatory relief, particularly in the area of 
money laundering rules. Given the costs incurred by our financial 
institution to comply with these rules, more specific guidance resulting 
in a reduction in the volume of filing is needed. Thank you for your 
consideration of our comments.

Sincerely,


Walter Ollech