Members of a Senate subcommittee yesterday accused U.S. Comptroller of the Currency C. T. Conover of "gross negligence" and "inexecusable" lapses for failing to catch the Bank of Boston's violations of foreign cash reporting requirements three years ago.

The criticism came after Conover acknowledged that bank examiners who audited the Boston bank in 1982 were unfamiliar with Treasury Department regulations designed to combat money laundering by requiring banks to promptly report large foreign cash transactions.

"We have an abysmal performance by bank examiners," said Sen. Warren Rudman (R-N.H.). "It's a sorry performance, Mr. Conover. I hope that you do better in other areas because I don't have very much faith in what I've seen here."

In a case that has prompted growing concern over the problem of money laundering, the Bank of Boston last month paid a $500,000 fine after pleading guilty to a felony charge of "knowingly and willfully" failing to report $1.2 billion in foreign cash exchanges with mostly Swiss banks.

John Walker, an assistant secretary of the Treasury, said yesterday that 40 to 50 other U.S. banks are now under active investigation for similar violations and that the problem of bank noncompliance is "widespread."

Separately, the American Bankers Association said yesterday that one of its lawyers, acting at the request of "four or five" of its members, recently met with Treasury Department officials to discuss what banks that have violated the requirements should do. But Walker and U.S. Attorney William Weld emphasized in separate statements that no banks are immune from prosecution, even if they voluntarily disclose their violations.

The Treasury Department regulation in question, which requires banks to report all cash transactions larger than $10,000, including those with foreign banks, was first issued in 1980. During yesterday's hearing before the Senate permanent subcommittee on investigations, Bank of Boston Chairman William L. Brown said the bank wasn't aware that the regulatory change included foreign transactions.

But Brown acknowledged that his initials and those of seven other top bank officials were on a Comptroller of the Currency circular that went to the bank in July of that year and which clearly spelled out that the new requirements included "the filing of a report of transactions with or originated by foreign banks."

"It came in, it was reviewed at various levels -- it just wasn't caught," Brown said about the circular. "I don't personally have any explanation for it."

"I find it difficult to comprehend that," Rudman replied. "Eight people at the Bank of Boston absolutely neglected to understand the importance of this. . . . Is that the explanation you want to leave us with?"

"I can't believe it either, but that's what happened," Brown replied. "I don't know why it happened. . . . I believe hundreds of banks did not pick up on the 1980 regulations, and quite obviously, the regulators didn't either."

Testifying separately, Daniel Dormer, the bank's vice president for coin and currency, who was directly responsible for the foreign cash exchanges, said he mistakenly thought the comptroller's circular referred to a U.S. Customs Service form the bank was already filing. He said he didn't become aware of the international reporting problem until last year. Asked why the bank attorney's didn't review the memo, Dormer said, "I don't know, sir."

"I can only stress that we would not knowlingly engage in, or assist others to engage in, money laundering," Brown said.

While senators stressed yesterday that they did not believe the Bank of Boston had knowingly engaged in money laundering, they charged that the failure of banks to follow the requirements was helping drug traffickers and organized crime figures launder billions of dollars through the U.S. banking system.

Massive amounts of these funds are believed to be funneled through foreign banks and then into bank accounts in the United States. But other transactions occur entirely in domestic banks, such as the separate disclosures by the Bank of Boston that members of the Angiulo family, reputed leaders of the Boston Mafia, regularly brought bags of cash into one of its branches and converted them into a total of about $2.1 million in cashier's checks.

Brown said yesterday that the manager of the bank's North End branch had left two Angiulo-controlled real estate companies on a special "exempt" list that allowed their transactions to go unreported, even after Treasury Department officials had raised questions about the companies' inclusion on the list in 1982.

The exempt list was designed for retail businesses, such as supermarkets, that handle large amounts of cash in their daily business. But the manager of the North End branch, who was not identified and has since retired, decided that the Angiulo real estate companies should be included on the list "because they dealt with 'consumers' and because it was not unusual for North End realty companies to collect rent and mortgage payments in question," Brown said.

"Without question, that decision represented an exercise of bad judgment," Brown added. But, he said, the bank's own investigation "has revealed absolutely no basis for believing" that the bank manager's action "was motivated by any desire for personal gain or other improper purpose."

Several senators said yesterday they hoped the attention given to the Bank of Boston case would prompt other banks to take further steps to aid law enforcement officials, including reporting potentially suspicious transactions. Sen. Alfonse M. D'Amato (R-N.Y.) said he believed that Congress should stiffen the law.

"While I do not believe in burying banks in massive regulations, I do not think it is too much to ask that they follow simple instructions," said Sen. William V. Roth Jr. (R-Del.), who chaired the hearings. "I do not think it is too much to ask that they inquire when customers are bringing grocery bags full of small bills through the front door."