Federal examiners found shortcomings in Riggs Bank's anti-money-laundering compliance as far back as 1997 but did little to remedy them until years later, a top federal bank regulator said yesterday.

Daniel P. Stipano, deputy chief counsel of the Office of the Comptroller of the Currency (OCC), told a House subcommittee yesterday that "there were errors of judgment" by the OCC with respect to Riggs's compliance with the Bank Secrecy Act (BSA), the law that forces banks to monitor and report on suspicious customer activity.

Riggs was fined $25 million last month after a year-long OCC investigation found that numerous multimillion-dollar transactions in the bank's embassy banking group should have been reported to law enforcement agencies as suspicious, but were not. The Senate and House banking committees have called hearings on Bank Secrecy Act enforcement and have criticized regulators for failing to catch Riggs's problems sooner. Of particular concern, said Rep. Sue W. Kelly (R-N.Y.), is whether bank regulators are making sure that banks are on the lookout for possible terrorist financing.

"We find a regulator that was slow to act, even after the September 11th terrorist attacks inside our borders made the threat posed by terror funding networks all too clear," said Kelly, who heads the subcommittee on oversight and investigations, which held yesterday's hearing.

"In retrospect, as we review our BSA compliance supervision of Riggs during this period, we should have been more aggressive in our insistence on remedial steps at an earlier time," Stipano said. "We should have done more extensive probing."

Stipano said the OCC has begun a wide-ranging review of its oversight of Riggs and has called for bank examiners to be more vigilant. However, he defended his agency's oversight of BSA compliance at banks and said Riggs was an anomaly. "It would be very difficult to duplicate or improve the job the OCC does on Bank Secrecy Act compliance," he said.

The subcommittee's ranking Democrat, Rep. Luis V. Gutierrez (Ill.), questioned that assessment. "I think you were too trusting of Riggs, and didn't verify," he said. "What are the cases in which you are trusting today?"

Stipano said the OCC first recognized the need for Riggs to improve compliance in 1997 and told the bank's board and management that training, internal controls and other technical features were inadequate. The deficiencies were not grave enough to warrant enforcement action, Stipano said, and "we trusted management to get these problems fixed." In hindsight, he said, the OCC gave Riggs management "too much slack." He also said the agency was too late to recognize potential risk in Riggs embassy accounts, where Riggs's most egregious compliance issues were found and which didn't get thorough scrutiny until the fall of 2002.

Under OCC pressure, Riggs last year found transactions involving the embassies of Saudi Arabia and Equatorial Guinea that should have triggered suspicious-activity reports to bank regulators. Riggs is getting out of most of its international and embassy banking business. Last week Riggs also said it was considering selling the company.

Mark Hendrix, a Riggs spokesman, declined to comment.