Boston bank probably did launder, US official says

The First National Bank of Boston probably was involved in money laundering in some of its international cash transactions -- although the involvement might have been unintentional -- a US Treasury Department official told a congressional panel this week. ``There's every indication that the $600 million of small bills that the bank took in was the laundering of drug money,'' the Wall Street Journal quoted John Walker, assistant Treasury secretary for enforcement and operations, as saying.

On Feb. 7, First National, Bank of Boston's prime subsidiary, pleaded guilty to failing to report to the federal government $1.22 billion in international currency transactions with nine foreign banks. The law requiring reports of overseas transactions went into effect in 1980, but the bank maintains it didn't fully understand the law, and thus did not comply with it, until last summer.

Appearing Tuesday before the House Banking Committee, which is scheduled to begin hearings on the Bank of Boston March 20, Mr. Walker also said the Treasury had told the bank of its reporting failures in 1982. Last week the office of the Comptroller of the Currency said it had notified the bank of its international errors, but it later retracted this.

Bank of Boston spokesman Wayne Taylor says the subject of international reporting procedure did come up in a telephone conversation between one of the bank's officers and a Treasury official in 1982. But even after the phone conversation, ``there was no understanding on the part of the bank officer that the bank was required'' to report the international transactions, Mr. Taylor said.

Forty-one banks are under investigation of failure to comply with the Bank Secrecy Act, said Walker. The act requires that cash transactions over $10,000 be reported to the Internal Revenue Service to curb laundering.