[Federal Register Volume 59, Number 117 (Monday, June 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14893]
[[Page Unknown]]
[Federal Register: June 20, 1994]
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FARM CREDIT ADMINISTRATION
12 CFR Part 617
RIN 3052-AB33
Referral of Known or Suspected Criminal Violations
AGENCY: Farm Credit Administration (FCA).
ACTION: Proposed rule; resolicitation of comments.
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SUMMARY: The Farm Credit Administration (FCA), by order of the FCA
Board (Board), reproposes a rule amending its regulations governing the
referral of known or suspected criminal violations. The proposed
regulation was originally published in the Federal Register on October
13, 1992 (57 FR 46819). The objective of this reproposed regulation is,
in part, to promote efficiencies and timeliness in reporting,
investigating, and prosecuting known or suspected criminal activities
within Farm Credit System (FCS or System) institutions. Therefore, this
reproposed regulation would require System institutions to notify law
enforcement agencies of known or suspected criminal violations that
meet the threshold reporting limits. Generally, a criminal violation
must be reported under this part if the borrower/shareholder or insider
has an intent to ``defraud'' a System institution.
The reproposed regulation would also mandate the continued use of
the existing criminal Referral Form. System institutions should expect
this form to be replaced with a new FCA Criminal Referral Form in the
future. The existing criminal Referral Form or any replacement form is
referred to hereinafter as Referral Form.
The FCA believes that the regulation should be reproposed due to
the lapse of time since the proposed rule was originally published in
the Federal Register (October 13, 1992). Although the reproposed rule
incorporates many of the comments received in response to the proposed
rule, the FCA Board also believes that the public should be given
another opportunity to comment due to the number of changes proposed
and the level of interest in the issues. To the extent that commenters
wish to comment on the dollar thresholds for reporting known or
suspected criminal activities or an institution's cost of complying
with the regulation, the FCA requests that commenters provide pertinent
empirical data in support of their comments.
DATES: Comments should be submitted on or before August 19, 1994.
ADDRESSES: Comments should be mailed or delivered (in triplicate) to
Patricia W. DiMuzio, Associate Director, Regulation Development, Office
of Examination, Farm Credit Administration, McLean, VA 22102-5090.
Copies of all comments will be available for examination by interested
parties in Regulation Development, Office of Examination, Farm Credit
Administration.
FOR FURTHER INFORMATION CONTACT:
Eric Howard, Policy Analyst, Regulation Development, Office of
Examination, Farm Credit Administration, McLean, VA 22102-5090,
(703) 883-4498,
or
Jane Virga, Senior Attorney, Administrative Law and Enforcement
Division, Office of General Counsel, Farm Credit Administration,
McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION:
I. Decision to repropose
The proposed regulation was published (57 FR 46819) in the Federal
Register on October 13, 1992. The comment period for the proposed
regulation amending part 617 closed on November 12, 1992. The FCA
received two letters on the proposed regulation. The Farm Credit
Council (Council), on behalf of its membership, provided comments and
suggestions on the wording and requirements of the proposed regulation.
The FCA also received a letter from the Farm Credit Bank of Baltimore
adopting the Council's comments. Many of the commenters' suggestions
were incorporated to improve clarity.
The Council requested, among other things, that the FCA Board
republish the proposed regulation. The FCA Board agrees that the
proposed regulation should be republished to afford the public another
opportunity to comment. All comments submitted to date have been
considered and responded to concerning the proposed regulation.
Responses to these comments are detailed below, and corresponding
changes were made to the proposed regulation in many instances. The
commenters also addressed whether the dollar thresholds for reporting
known or suspected criminal activities should be increased. One of the
stated reasons to raise the thresholds was to limit the perceived
reporting burden that would result from implementation of the proposed
thresholds. It was believed that if the reporting thresholds were
increased, the reporting burden would decrease.
Those commenters who wish to comment again on the dollar thresholds
are requested to provide any pertinent empirical information that would
indicate that the thresholds should be increased. Commenters who
address the cost of complying with the proposed regulation, e.g., time
and cost of investigating and completing the Referral Form under
existing thresholds in part 617 and the proposed thresholds, should
also provide pertinent empirical information in support of their
comments.
II. Background
Pursuant to the Farm Credit Act of 1971, as amended, the FCA
regulates and examines FCS institutions for safety and soundness and
for compliance with Federal laws and regulations. Violations of Federal
laws and regulations may affect the safety and soundness of FCS
institutions and could undermine public confidence in the FCS. System
institutions have the responsibility to establish and maintain
safeguards to detect, deter, and report criminal activity involving the
assets, operations, or affairs of the institution. Law enforcement
agencies need to receive timely and specific information from FCS
institutions on known or suspected criminal violations to determine
whether investigations and prosecutions are warranted.
The Interagency Bank Fraud Working Group (Working Group), a task
force consisting of the Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision, the National
Credit Union Administration, the Farm Credit Administration, the
Federal Bureau of Investigation, the U.S. Secret Service, the
Department of Justice, and the U.S. Department of the Treasury, was
formed 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. To accomplish these
objectives, the Working Group developed uniform reporting standards and
processes for filing criminal referrals and is in the process of
developing a uniform criminal referral form.
Pursuant to the proposed regulation and consistent with the Working
Group's recommendations, FCS institutions would be required to make a
criminal referral and file a Referral Form when a criminal violation of
the United States Code involving the institution's assets, operations,
or affairs appears to have occurred and one of the circumstances listed
in Sec. 617.2(a) exists. However, the proposed regulation should not be
construed as reducing in any way an institution's responsibility to
otherwise report criminal activities when these circumstances do not
exist. The referrals would be made to the appropriate investigatory
and/or prosecuting authorities, whether Federal, State, or local.
Originally, the FCA proposed the use of a uniform criminal Referral
Form which was designed by the Working Group. A uniform criminal
Referral Form was expected to aid law enforcement agencies in
determining whether investigations and/or prosecutions are warranted by
standardizing requests for information and documentation. The FCA
planned to incorporate this form's standards and procedures in its own
criminal Referral Form. When first published, the proposed regulation
indicated that the Referral Form, with instructions explaining how to
complete, file, and distribute the form to the appropriate
investigatory agency, would be obtained from the FCA's Office of
General Counsel (OGC) or from the FCA Examination Manual. Due to
unforeseen circumstances affecting all the Federal financial regulatory
agencies, the Working Group has not yet promulgated a uniform criminal
referral form. Consequently, the new Referral Form has not been
developed. As now contemplated under the proposed rule, System
institutions would continue to use the existing criminal Referral Forms
found in the FCA Examination Manual. However, System institutions
should expect the distribution of the new Referral Form after the
Working Group completes the standardized uniform criminal referral
form.
III. Analysis of Changes and Comments by Section
A. Section 617.1--Purpose and Scope
The Council noted that the proposed regulations did not include a
sample of the Referral Form and, as a result, it could not determine
whether System banks would maintain any role in the criminal referral
process. As previously stated, the FCA did not publish the Referral
Form with the proposed regulation because the uniform criminal referral
form, which the FCA intends to incorporate, had not, and has not yet,
been promulgated by the Working Group. The existing Referral Form,
which may be obtained from the FCA Examination Manual, does not create
any substantive requirements, nor will the new Referral Form. The
Referral Form merely serves as a vehicle for ensuring that System
institutions report the information necessary to make a criminal
referral. The new Referral Form is not expected to require System
institutions to submit any more information than they previously have
been required to submit using the existing Referral Form. For these
reasons, the FCA believes even if the new Referral Form were available
at this time, its publication would not be necessary. If the uniform
criminal referral form ultimately promulgated by the Working Group
creates new and previously-unanticipated requirements, the FCA will
reconsider whether to incorporate it in its entirety into the System's
Referral Form.
B. Section 617.2--Referrals
The Council questioned whether or not the proposed regulation
adequately addressed ``borrower transgressions.'' The FCA believes that
the proposed regulation provides for the referral of all known or
suspected violations of Federal criminal laws, including both insider
and borrower transgressions. In Sec. 617.2(a) (2) and (3), the proposed
regulation specifically addresses borrower transgressions and would
require a criminal referral when known or suspected criminal activity
occurs if certain circumstances are met. Section 617.2(a)(2) applies
when the suspect is not an employee, officer, director, agent, or other
person participating in the affairs of an institution, i.e., a
borrower. Section 617.2(a)(3) applies when there is no substantial
basis for identifying a suspect, which may include a borrower.
Therefore, no amendment is believed to be necessary. For instance, a
referral would be required when known or suspected criminal activity
involving actual or potential losses of $1,000 or more occurs and the
institution has a substantial basis for identifying a possible suspect
or group of suspects as a borrower(s). A referral would also be
required when known or suspected criminal activity involving actual or
potential losses of $5,000 or more occurs and the institution has no
substantial basis for identifying a possible suspect or group of
suspects. In this latter instance, the possible suspect or group of
suspects could be a borrower(s). Also, Sec. 617.2(a)(1) addresses
insider transgressions and would require a criminal referral,
regardless of the amount of an actual or potential loss, where an
institution employee, officer, director, agent, or other person
participating in the affairs of the institution is suspected.
The Council was concerned that the dollar thresholds for reporting
known or suspected criminal activities as described in Sec. 617.2(a)(2)
and (3) were too low. It also stated that the respective $1,000 and
$5,000 thresholds would result in reporting known or suspected criminal
activities that law enforcement agencies would not prosecute, and that
the thresholds were a radical departure from prior practice. The
Council also commented that some district banks have been advised by
U.S. Attorneys that criminal activities involving collateral conversion
or misrepresentation of financial information are not prosecuted when
the diversion or misrepresentation is less than $25,000 to $50,000 or
if the institution does not incur an actual loss. As a result, the
Council believes that the thresholds should be increased to higher
levels.
The Working Group, which included the FCA, established the same
thresholds for all Federal financial regulatory agencies. The Working
Group believes that uniform thresholds will enhance the ability of the
Federal financial regulatory agencies and the law enforcement agencies
to detect, investigate, and prosecute known or suspected criminal
activities. The Working Group also believes that the lower thresholds
are necessary to ensure the reporting of potential multiple criminal
violations by one individual at several different institutions. The
Department of Justice, as a member of the Working Group and oversight
agency for the Offices of the U.S. Attorneys, assisted in the
establishment of the thresholds. Therefore, as a participant in the
Working Group and in concurrence with the Department of Justice's
judgment on this matter, the FCA continues to support the Working Group
and proposes the regulation with these thresholds. The FCA will
reconsider this issue should the Working Group modify the threshold
levels in the future.
It is important to note, however, that only a known or suspected
criminal violation (meeting the dollar threshold requirements of
Sec. 617.2(a)) must be reported. Generally, a criminal violation that
must be reported under this part involves a determination that a
borrower or insider intended to ``defraud'' an institution in violation
of a Federal criminal statute. Institutions, therefore, must make an
initial determination of whether a misrepresentation of assets or a
collateral conversion, for example, was done inadvertently or with the
intent to defraud the institution. Accordingly, in ascertaining whether
a criminal referral is appropriate, an institution should consider all
facts and circumstances, including evidence of intent, to determine
whether there is a known or suspected criminal violation. If the
institution is persuaded that there is no evidence of intent and,
hence, no criminal violation, then it need not make a criminal
referral. Thus, System institutions are vested with considerable
discretion. Should they feel the need for guidance in exercising this
responsibility, they may consult legal counsel.
Due to expressed concerns about the referral threshold, the FCA
reviewed the Systemwide criminal referrals for calendar years 1992 and
1993. In 1992, there were 47 criminal referrals, of which 30 reported
no dollar loss or an unknown dollar loss. In 1993, there were 53
criminal referrals of which 30 reported no dollar loss or an unknown
dollar loss. In addition, the FCA received 7 criminal referrals in 1992
and 17 criminal referrals in 1993 reporting dollar losses over $50,000.
Of the criminal referrals received, there was a total of four insider
transgressions in 1992 and 1993. It appears from these statistics that
System institutions may already be reporting criminal referrals
consistent with the proposed thresholds and that the thresholds are not
a radical departure from current practices. Accordingly, the FCA
proposed regulation contains the same thresholds as originally
contemplated. Commenters who continue to have concerns that the
thresholds are too low are requested to provide empirical data
indicating to what extent the thresholds would result in a departure
from their current reporting practices.
The Council remarked that the proposed regulation did not
adequately define ``potential'' loss. In further explanation of the
proposed regulation, it should be noted that the regulation (and
Federal law) does not require that an institution sustain an actual
loss; the potential for a loss satisfies the regulation (and Federal
criminal law). Furthermore, the proposed regulation specifically states
that the loss or potential loss is to be determined before
reimbursement or recovery. In other words, whether or not the loan is
adequately collateralized has no bearing on the determination of
whether there is a loss or potential loss. For example, if a borrower
with a loan that appears to be adequately collateralized converts
$10,000 of secured property or makes a false statement by omitting a
$10,000 liability from a financial statement, the institution would be
required to report this known or suspected criminal violation to the
appropriate authorities. This is necessary because the institution has
a potential loss of $10,000 before it receives actual payment on the
loan or recovers on the secured property. Although the loan may appear
to be adequately collateralized notwithstanding the conversion of
$10,000, the institution nonetheless has a potential loss before
reimbursement or recovery. The loss need not actually have occurred for
a reportable violation to exist. The FCA believes the foregoing
explanation should adequately address the potential loss concept. It is
further noted that, in attempting to clarify this section, the language
of Sec. 617.2(a)(2) and (3) has been amended to clarify that a
situation involving a potential loss could arise through the use of a
false statement or other fraudulent means.
The Council further commented that the proposed regulation did not
adequately address criminal acts that do not specifically require a
monetary loss, e.g., false statements under 18 U.S.C. 1014. As
discussed above, such a criminal act has a potential for monetary loss
and should be reported in all situations where the threshold is met and
it is reasonable to believe that a criminal act occurred. The proposed
regulation has been amended to clarify that a referral would be
required when there is a false statement that meets the threshold
amounts.
The Council expressed concern that the standard for reporting
noninsider transgressions was vague and difficult to apply. The Council
noted that determining when a substantial basis exists for identifying
a suspect can be complex and raises questions as to whether criminal
intent can be inferred. The Council suggested that this determination
should be vested in System general counsels or their attorney
designees. The FCA expects that, in reporting noninsider
transgressions, an institution will often be able to use its own
judgment in determining whether it appears that a criminal violation
has occurred. In complex cases, however, institutions should continue
to feel free to obtain advice, legal or otherwise, as necessary. A
System association may always consult with its affiliated district bank
during consideration of all the facts and circumstances to determine
whether it is more probable than not that a criminal activity occurred.
The Council also commented that an institution should have
discretion on whether to report known or suspected criminal activities
of State criminal laws to State law enforcement authorities. In
response to this comment, the proposed regulation was amended to
provide that nothing in this part shall be construed as reducing, in
any way, an institution's general responsibility to report criminal
activities to the appropriate investigatory and/or law enforcement
agencies, whether Federal, State or local. Therefore, institutions
would have to be cognizant of, and take the necessary steps to comply
with, State reporting requirements. The appropriate law enforcement
agency would then decide whether or not such acts constitute a
violation of a criminal statute.
The Council was concerned that the proposed regulation did not
identify whether a Farm Credit Bank (FCB) or a Federal land bank
association (FLBA) would report known or suspected criminal activities
when the FLBA services the loans of the FCB. Due to this concern, the
FCA amended Sec. 617.2(a) to clarify that an FCB would have the
responsibility to refer known or suspected criminal activities
identified by the servicing FLBA to the appropriate law enforcement
agency.
The Council commented that the proposed criminal referral
regulation appears to make the criminal referral process burdensome
because the institution lacks the discretion not to refer known or
suspected criminal violations above the threshold amounts. At this
time, it appears that any additional burden would be slight and offset
by the regulation's benefits, such as the promotion of efficiency and
timeliness in reporting, investigating, and prosecuting known or
suspected criminal activities. Also, the regulation would standardize
the reporting process and ensure that all individuals, including
borrowers, employees, officers and directors, are treated equally. It
is believed that the proposed regulation, which conforms to those
proposed and final regulations of other financial regulatory agencies,
would improve the law enforcement agencies' response to System
institutions' reports of criminal activities. However, commenters may
want to provide empirical information on the cost of compliance, as
requested above.
The Council questioned the institution's role or ability to make a
recommendation concerning prosecution. The Council suggested that
reporting ``minor'' violations could hamper System relationships with
the U.S. Attorney as well as with its customers. While the regulation
establishes threshold referral levels, an institution is free,
nonetheless, to express its view on whether prosecution does or does
not appear to be warranted to the Federal authorities, including a U.S.
Attorney or other investigatory agency. A well-reasoned recommendation
against prosecution in appropriate cases should go far toward
addressing the Council's concern without undermining the uniformity
that the referral requirements seek to promote.
The Council commented that the 14-day period to report criminal
activity was insufficient to investigate, document, review, and submit
referral information. On further reflection, the FCA agrees. To ensure
thorough documentation and reporting by System institutions, the FCA
has amended the proposed regulation, increasing the reporting period to
30 calendar days from the date of discovery of the known or suspected
criminal violation. Nonetheless, System institutions would be
encouraged to submit a criminal referral report as soon as possible
following the discovery of a reportable known or suspected criminal
activity.
The Council commented that it was uncertain as to when the period
for reporting a criminal referral begins. Upon further consideration,
the proposed regulation was amended to address this concern. The
reporting period would begin when management has discovered that there
is a known or suspected criminal activity. In the alternative, the
reporting period would begin when management should have discovered
that there was a known or suspected criminal activity. This amendment
is believed to be appropriate because management must ensure the
institution's safety and soundness and should be diligent in the
exercise of their attendant duties, e.g., the timely identification and
reporting of known or suspected criminal activity, and in the adequate
investigation and documentation of such criminal activity.
The Council commented that Sec. 617.2(c) (now Sec. 617.2(b)) should
define ``management'' as senior management of the institution or the
institution's criminal conduct officer/coordinator. The proposed
regulation would require that management make the criminal referral.
The board of directors of a System institution, which is responsible
for the safe and sound operations of that institution, should establish
appropriate policies and internal controls for management to comply
with these regulations. However, the board would have the discretion to
implement the regulation in a manner suited to its institution and
could require senior management or the criminal conduct officer/
coordinator to make the criminal referral.
The Council suggested eliminating Sec. 617.2(d), which requires
prompt notification, by telephone or other expeditious means, to the
appropriate law enforcement agency of situations requiring immediate
attention or of ongoing reportable violations. In coordination with
other Federal financial regulatory agencies, the FCA included this
section to provide for circumstances in which direct telephone or other
expeditious communications with the appropriate law enforcement agency
would be necessary or appropriate, even though an institution would
have begun the referral process required by Sec. 617.2(a). While a 30-
day notification period may be adequate in many situations, immediate
notification would be considered essential when the safety and
soundness of an institution may be threatened by potential fraud,
losses, or an ongoing criminal activity, when there is a likelihood a
suspect will flee, or when key institution personnel are involved. For
the foregoing reasons, it does not appear that this section would
impose any unnecessary burden on System institutions.
C. Section 617.3--Notification of Board of Directors and Bonding
Company
The Council commented that the regulatory reporting requirement
concerning criminal referrals should be left to the discretion of each
board of directors, rather than requiring a report to the board of
directors by their next scheduled meeting. The intent of this section
is to keep the board of directors informed when a known or suspected
crime has been committed against the institution. In response to the
Council's comment, this section has been amended to require that the
board of directors be notified promptly of the filing of any Referral
Form by the institution's management. Reporting ``promptly'' to the
board of directors means reporting the criminal referral at a regularly
scheduled meeting, or earlier if the estimated loss is of such
magnitude that it would have a significant impact on the safety and
soundness of the institution. Alternatively, reports involving
insignificant losses may be summarized and reported periodically at a
regularly scheduled meeting of the board. Because violations of Federal
criminal statutes may affect the safety and soundness of FCS
institutions and/or undermine public confidence in the FCS, a board of
directors should be promptly notified of all known or suspected
criminal activities. Furthermore, boards of directors should treat this
information with the same degree of care and confidentiality as other
similar types of information are treated.
Additionally, the proposed regulation was amended to provide some
discretion in the event a member of the board of directors is the
subject of a criminal referral. In this instance, it may be appropriate
to seek guidance from legal counsel or other appropriate sources.
List of Subjects in 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, part 617 of chapter VI,
title 12 of the Code of Federal Regulations is proposed to be revised
to read as follows:
PART 617--REFERRAL OF KNOWN OR SUSPECTED CRIMINAL VIOLATIONS
Sec.
617.1 Purpose and scope.
617.2 Referrals.
617.3 Notification of board of directors and bonding company.
617.4 Institution responsibilities.
Authority: Secs. 5.9, 5.17 of the Farm Credit Act (12 U.S.C.
2243, 2252).
Sec. 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 4.25 of the Act, the Federal Farm Credit Banks Funding
Corporation, the Farm Credit System Financial Assistance Corporation,
the Farm Credit Leasing Services Corporation, and the Federal
Agricultural Mortgage Corporation (hereinafter, institutions). The
purposes of this part are to ensure the reporting of known or suspected
criminal activity, the safety and soundness of the institution, and
public confidence in the Farm Credit System, thereby reducing potential
losses to institutions. This part requires that institutions use the
Farm Credit Administration Criminal Referral Form to notify the
appropriate Federal authorities when any known or suspected Federal
criminal violations of the type described in Sec. 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. This
part prescribes procedures for referring those violations to the proper
Federal authorities and the Farm Credit Administration.
(c) Nothing in this part should be construed as reducing in any way
an institution's responsibility to report known or suspected criminal
activities to the appropriate investigatory or prosecuting authorities,
whether State or Federal, even if circumstances required for a report
under Sec. 617.2 are not present.
(d) Each referral required by Sec. 617.2(a) shall be made on the
Referral Form in accordance with the Referral Form Instructions
relating to its filing and distribution and the requirements of
Sec. 617.2 (b) and (c).
Sec. 617.2 Referrals.
(a) Each institution and its board of directors shall exercise due
diligence to ensure the discovery, investigation, and reporting of
criminal activity. Within 30 calendar days of determining that there is
a known or suspected criminal activity, the institution shall refer
such criminal violation of the United States Code involving or
affecting its assets, operations, or affairs to the appropriate
regional offices of the United States Attorney and either or both the
Federal Bureau of Investigation or the United States Secret Service,
using the Referral Form. In the event that a Farm Credit Bank makes a
loan through a Federal land bank association which services the loan,
the Farm Credit Bank has the responsibility to refer known or suspected
criminal violations under this section. A report is required in
circumstances where there is:
(1) Any known or suspected criminal activity (e.g., theft,
embezzlement), mysterious disappearance, unexplained shortage,
misapplication, or other defalcation of property and/or funds,
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,
through false statements or other fraudulent means, 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, agent, or other person participating in the conduct of the
affairs of such an institution;
(3) Any known or suspected criminal activity involving an actual or
potential loss (before reimbursement or recovery) of $5,000 or more,
through false statements or other fraudulent means, 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 in which the institution was used as a conduit for such
criminal activity (such as money laundering/structuring schemes).
(b) A copy of the completed Referral Form, accompanied by any
relevant documentation, shall be provided to the Farm Credit
Administration's Office of General Counsel no later than 30 calendar
days after the institution's management, has discovered (or should have
discovered) a known or suspected criminal violation.
(c) In circumstances where there is also a known or suspected
violation of State or local criminal law, the institution shall also
notify the appropriate State law enforcement authorities.
(d) In addition to the requirements of paragraph (a) 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.
Sec. 617.3 Notification of board of directors and bonding company.
(a) Unless the criminal referral involves a member of the board of
directors, the institution's board of directors shall be promptly
notified of any criminal referral by the institution.
(b) If the criminal referral involves a member of the board of
directors, discretion shall be exercised in notifying the board of
directors of such a criminal referral.
(c) In any event, 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.
Sec. 617.4 Institution responsibilities.
Each institution shall establish effective policies and procedures
designed to ensure compliance with this part, including, but not
limited to, adequate internal controls.
Dated: June 13, 1994.
Curtis M. Anderson,
Secretary, Farm Credit Administration Board.
[FR Doc. 94-14893 Filed 6-17-94; 8:45 am]
BILLING CODE 6705-01-P
