Title: PROPOSED RULE--Personnel Administration; Referral of Crimes and Suspected
Crimes--12 CFR Parts 612 and 617

Issue Date: 10/13/1992
Agency: FCA
Federal Register Cite: 57 FR 46819
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FARM CREDIT ADMINISTRATION

12 CFR Parts 612 and 617

RIN 3052-AB33

Personnel Administration; Referral of Crimes and Suspected Crimes


ACTION: Proposed rule.

SUMMARY: The FCA, by order of the FCA Board, issues for public comment a proposed regulation governing the referral of known and suspected criminal violations. Proposed part 617 would mandate the use of a uniform FCA Criminal Referral Form (FCA 8058, hereinafter, Referral Form) which will replace the various form that are currently being used by Farm Credit System (FCS) institutions. Conforming amendments to part 612 would be.

DATES: Comments must be submitted on or before November 12, 1992.

ADDRESSES: Comments should be mailed or delivered (in triplicate) to Patricia W. DiMuzio, Division Director, Regulation Development Division, Office of Examination, Farm Credit Administration, McLean, Virginia 22102-5090. Copies of all comments received will be available for examination by interested parties in the Regulation Development Division, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:

Eric Howard, Policy Analyst, Office of Examination, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4498, or

Anthony N. Torres, Litigation and Enforcement Division, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4040, TDD (703) 883-4444.

TEXT: SUPPLEMENTARY INFORMATION: Pursuant to the Farm Credit Act of 1971, as amended, the FCA regulates and examines FCS institutions for safety and soundness and compliance with laws and regulations. FCS institutions have the responsibility to establish and maintain safeguards designed to detect, deter, and report criminal activity involving the assets, operations, or affairs of the institution. Violations of Federal criminal statutes may affect the safety and soundness of FCS institutions and may undermine public confidence in the FCS. Additionally, the law enforcement agencies need to receive timely and specific information on known or suspected criminal activity to permit them to determine whether investigations and prosecutions are warranted.

The Interagency Bank Fraud Working Group (Working Group), a task force consisting of Federal financial institution regulators and law enforcement agencies, has designed a uniform referral form (Referral Form, FCA 8058) to facilitate the reporting of criminal activity by financial institutions and to enhance the law enforcement agencies' ability to investigate and prosecute the matters reported. In order to promote use of the Referral Form and ensure proper reporting, the FCA proposes to adopt regulations that would (1) mandate uniform procedures for filing criminal referrals and (2) mandate the use of the Referral Form in making certain criminal referrals.

The Referral Form, with instructions explaining how to complete, file, and distribute the form, can be obtained from the Office of General Counsel (OGC) of the FCA. Filing of the Referral Form would be required in all cases in which one of the circumstances listed in 617.2(a) exists, but only when such circumstances exist. However, nothing in this proposed regulation should be construed as reducing in any way the general responsibility to report criminal activities in which these circumstances do not exist to the appropriate investigatory and/or prosecuting authorities, whether State or Federal. Therefore, the FCA strongly encourages institutions to report all known or suspected criminal activity to the appropriate Federal, State, or local law enforcement authorities.

Comments are sought on all the provisions contained in the regulation.

List of Subjects

12 CFR Part 612

Agriculture, Banks, banking, Conflict of interests, Rural areas.

12 CFR Part 617

Criminal referrals, Criminal transactions, Defalcations, Embezzlement, Insider abuse, Institutions of the Farm Credit System, Money laundering, Theft.

For the reasons stated in the preamble, parts 612 and 617 of chapter VI, title 12 of the Code of Federal Regulations are proposed to be amended to read as follows:

PART 612 -- PERSONNEL ADMINISTRATION

1. The authority citation for part 612 continues to read as follows:

Authority: Secs. 5.9, 5.17, 5.19 of the Farm Credit Act; 12 U.S.C. 2243, 2252, 2254.

2. Section 612.2180 is amended by revising paragraph (b) to read as follows:

612.2180 Enforcement.

* * * * * *

(b) The bank, Funding Corporation, or service organization shall promptly notify the Farm Credit Administration of those cases where it has determined that there is a known or suspected criminal violation (See part 617).

* * * * * *

3. Part 617 is revised to read as follows:

PART 617 -- REFERRAL OF CRIMES AND SUSPECTED CRIMES

Sec.

617.1 Purpose and scope.

617.2 Referrals.

617.3 Notification of board of directors and bonding company.

Authority: Secs. 5.9, 5.17 of the Farm Credit Act; 12 U.S.C. 2243, 2252.

617.1 Purpose and scope.

(a) This part applies to all institutions of the Farm Credit System as defined in section 1.2(a) of the Act (12 U.S.C. 2002(a)) including, but not limited to, associations, banks, service corporations chartered under section 4.26 of the Act, the Federal Farm Credit Banks Funding Corporation, the Farm Credit System Financial Assistance Corporation, and the Federal Agricultural Mortgage Corporation (hereinafter, institutions). The purpose of this part is to reduce potential losses to institutions resulting from certain known or suspected criminal activities by requiring notification on forms designed to help law enforcement agencies determine whether investigations or prosecutions are warranted. This part requires that institutions use FCA Criminal Referral Form (FCA 8058, hereinafter, Referral Form) to notify the appropriate Federal authorities when any known or suspected Federal criminal violations of the type described in 617.2 are discovered by an institution.

(b) The specific referral requirements of this part are limited to known or suspected criminal violations of the United States Code involving the assets, operations, or affairs of an institution in certain cases. This part prescribes procedures for referring those violations to the proper Federal law enforcement agencies and the FCA. Nothing in this part shall be construed as reducing in any way the general responsibility to report criminal activities to the appropriate investigatory and/or prosecuting authorities, whether State or Federal.

617.2 Referrals.

(a) Each institution shall refer known or suspected criminal violations of the United States Code involving or affecting its assets, operations, or affairs to the appropriate regional offices of the United States Attorney and the Federal Bureau of Investigation in the manner required by this section in circumstances where there is:

(1) Any known or suspected criminal activity (e.g., theft, embezzlement), mysterious disappearance, unexplained shortage, misapplication, or other defalcation, regardless of amount, where an institution employee, officer, director, agent, or other person participating in the conduct of the affairs of such an institution is suspected;

(2) Any known or suspected criminal activity involving an actual or potential loss (before reimbursement or recovery) of $1,000 or more where the institution has a substantial basis for identifying a possible suspect or group of suspects and the suspect(s) is not an employee, officer, director, or agent of the institution;

(3) Any known or suspected criminal activity involving an actual or potential loss (before reimbursement or recovery) of $5,000 or more where the institution has no substantial basis for identifying a possible suspect or group of suspects; or

(4) Any known or suspected criminal activity involving a financial transaction that used the institution as a conduit for such criminal activity (such as money laundering/structuring schemes).

(b) Each referral required by paragraph (a) of this section shall be made on the Referral Form in accordance with the Referral Form Instructions relating to its filing and distribution and the requirements of paragraphs (c) and (d) of this section.

(c) No later than 14 days after the institution's management has determined that there is a known or suspected criminal violation, the Referral Form shall be filed and a copy shall be provided to the FCA's Office of General Counsel. In circumstances where there is also a known or suspected violation of State criminal law, the institution shall also notify the appropriate State law enforcement authorities.

(d) In addition to the requirements of paragraph (c) of this section, the institution shall immediately notify by telephone the offices specified on the Referral Form upon discovery of cases involving known or suspected criminal violations requiring urgent attention or where a referable violation is ongoing. Such cases include, but are not limited to, those where:

(1) There is a likelihood that the suspect(s) will flee;

(2) The magnitude or the continuation of the known or suspected criminal violation may imperil the institution's continued operation; or

(3) Key institution personnel are involved.

617.3 Notification of board of directors and bonding company.

(a) The institution's board of directors shall be notified, not later than their next meeting, of the filing of any Referral Form by the institution. Each institution shall establish effective policies and procedures designed to ensure compliance with this part, including, but not limited to, adequate internal controls.

(b) If any losses can be recovered under a surety bond or other contract for protection against losses, the institution involved shall promptly make all required notifications.

Dated: October 7, 1992.

Curtis M. Anderson,

Secretary, Farm Credit Administration Board.

[FR Doc. 92-24791 Filed 10-9-92; 8:45 am]

BILLING CODE 6705-01-M