The Office of Thrift Supervision has fined American Savings Bank $37,730 for not complying with mortgage flood insurance requirements and ordered the bank to strengthen practices under a federal law designed to detect drug dealers, terrorists and tax evaders trying to launder money.

The bank's agreement with the Office of Thrift Supervision was disclosed yesterday in a regulatory filing by Hawaiian Electric Industries Inc., American Savings' parent company.

The OTS, which regulates federal savings and loan associations, declined to go into detail when contacted, saying it could not do so because of regulatory requirements.

But the regulator did place two consent orders with American Savings on its Web site, saying the bank failed to ensure adequate flood insurance coverage for loans it made or had failed to provide appropriate notification for loans that didn't have or had inadequate flood insurance. The violations involved 98 loans.

HEI's regulatory filing said the state's No. 3 financial institution had failed to comply fully with requirements of the Currency and Foreign Transactions Reporting Act, also known as the Bank Secrecy Act. The law covers a wide range of records and reports that help law enforcement authorities detect and deter money laundering.

Among the reports required under the law are those that alert officials when a financial institution receives $10,000 or more of cash in a transaction and those for any suspicious activity.

American Savings issued a statement late yesterday afternoon after being contacted about the filing.

In it, bank Executive Vice President Tim Schools said the bank expects to be able to fully comply with the regulator's orders.

"American Savings Bank has already added more resources, staffing and training as part of its ongoing efforts to strengthen its compliance and risk-management area," Schools said in a prepared statement.

"We know that the banking industry as a whole is being increasingly scrutinized for compliance, particularly under the Bank Secrecy Act and significantly tightened post-9/11 measures."

American Savings said the deficiencies came to light during the regulator's annual audit. This year's audit was for the 12 months ending in June 2007.

Schools said recommendations included more staffing and training, establishment of a compliance committee within the bank and enhancing policies and procedures to reflect regulatory requirements.

The bank declined to say what specific infractions were found related to the anti-money launder law.

The consent decree with the Office of Thrift Supervision said American Savings didn't fully comply with regulations governing suspicious activity reports and other regulations.

It also noted American Savings had begun to take corrective actions, which include developing written policies and procedures for tracking and monitoring internal incident reports, investigations and suspicious activity reports.

Schools said the changes being implemented at the bank will not affect service levels.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.