Investigating Money Laundering And Terrorist Financing
Federal Law Enforcement Agencies Face Continuing Coordination Challenges Gao ID: GAO-04-710T May 11, 2004Money laundering provides the fuel for terrorists, drug dealers, arms traffickers, and other criminals to operate and expand their activities. GAO focused on two issues. The first is whether the nation's annual National Money Laundering Strategy has served as a useful mechanism for guiding federal law enforcement efforts to combat money laundering and terrorist financing. Unless reauthorized by the Congress, the annual requirement ended with the 2003 strategy. The second issue is the implementation status of a May 2003 Memorandum of Agreement, signed by the Attorney General and the Secretary of Homeland Security, that was designed to enhance the coordination of terrorist financing investigations conducted by the Federal Bureau of Investigation (FBI) and the U.S. Immigration and Customs Enforcement (ICE).
GAO's September 2003 report noted that the annual strategy generally has not served as a useful mechanism for guiding the coordination of federal law enforcement agencies' efforts to combat money laundering and terrorist financing. For example, although expected to have a central role in coordinating law enforcement efforts, interagency task forces created specifically to address money laundering and related financial crimes generally had not yet been structured and operating as intended and had not reached their expectations for leveraging investigative resources or creating investigative synergies. Also, while the Departments of the Treasury and Justice had made progress on some strategy initiatives designed to enhance interagency coordination of money laundering investigations, most initiatives had not met expectations. Moreover, even though adjusted in 2002 to reflect a new federal priority--combating terrorist financing--the strategy did not address agency and task force roles and interagency coordination procedures for investigating terrorist financing, which contributed to duplication of efforts and disagreements over which agency should lead investigations. GAO's February 2004 report noted that the FBI and ICE had implemented or taken concrete steps to implement most of the key provisions in the May 2003 Memorandum of Agreement on terrorist financing investigations. For instance, the agencies had developed collaborative procedures to determine whether applicable ICE investigations or financial crimes leads may be related to terrorism or terrorist financing--and, if so, determine whether these investigations or leads should thereafter be pursued under the auspices of the FBI. However, as of May 2, 2004, the FBI and ICE had not yet issued a joint report on the implementation status of the Agreement, which was required 4 months from its effective date. Also, GAO noted that the FBI and ICE have confronted and will continue to confront a number of operational and organizational challenges, such as ensuring that the financial crimes expertise and other investigative competencies of both agencies are appropriately and effectively utilized.
GAO-04-710T, Investigating Money Laundering And Terrorist Financing: Federal Law Enforcement Agencies Face Continuing Coordination Challenges
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Testimony:
Before the Subcommittee on Criminal Justice, Drug Policy, and Human
Resources, Committee on Government Reform, House of Representatives:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Tuesday, May 11, 2004:
Investigating Money Laundering and Terrorist Financing:
Federal Law Enforcement Agencies Face Continuing Coordination
Challenges:
Statement of Richard M. Stana, Director
Homeland Security and Justice Issues:
GAO-04-710T:
GAO Highlights:
Highlights of GAO-04-710T, a testimony before the Subcommittee on
Criminal Justice, Drug Policy, and Human Resources, Committee on
Government Reform, House of Representative
Why GAO Did This Study:
Money laundering provides the fuel for terrorists, drug dealers, arms
traffickers, and other criminals to operate and expand their
activities. GAO focused on two issues. The first is whether the
nation‘s annual National Money Laundering Strategy has served as a
useful mechanism for guiding federal law enforcement efforts to combat
money laundering and terrorist financing. Unless reauthorized by the
Congress, the annual requirement ended with the 2003 strategy. The
second issue is the implementation status of a May 2003 Memorandum of
Agreement, signed by the Attorney General and the Secretary of Homeland
Security, that was designed to enhance the coordination of terrorist
financing investigations conducted by the Federal Bureau of
Investigation (FBI) and the U.S. Immigration and Customs Enforcement
(ICE).
What GAO Found:
GAO‘s September 2003 report noted that the annual strategy generally
has not served as a useful mechanism for guiding the coordination of
federal law enforcement agencies‘ efforts to combat money laundering
and terrorist financing. For example, although expected to have a
central role in coordinating law enforcement efforts, interagency task
forces created specifically to address money laundering and related
financial crimes generally had not yet been structured and operating as
intended and had not reached their expectations for leveraging
investigative resources or creating investigative synergies. Also,
while the Departments of the Treasury and Justice had made progress on
some strategy initiatives designed to enhance interagency coordination
of money laundering investigations, most initiatives had not met
expectations. Moreover, even though adjusted in 2002 to reflect a new
federal priority”combating terrorist financing”the strategy did not
address agency and task force roles and interagency coordination
procedures for investigating terrorist financing, which contributed to
duplication of efforts and disagreements over which agency should lead
investigations.
GAO‘s February 2004 report noted that the FBI and ICE had implemented
or taken concrete steps to implement most of the key provisions in the
May 2003 Memorandum of Agreement on terrorist financing investigations.
For instance, the agencies had developed collaborative procedures to
determine whether applicable ICE investigations or financial crimes
leads may be related to terrorism or terrorist financing”and, if so,
determine whether these investigations or leads should thereafter be
pursued under the auspices of the FBI. However, as of May 2, 2004, the
FBI and ICE had not yet issued a joint report on the implementation
status of the Agreement, which was required 4 months from its effective
date. Also, GAO noted that the FBI and ICE have confronted and will
continue to confront a number of operational and organizational
challenges, such as ensuring that the financial crimes expertise and
other investigative competencies of both agencies are appropriately and
effectively utilized.
What GAO Recommends:
GAO‘s September 2003 report recommended that, if the requirement for a
national strategy is reauthorized, the Secretaries of the Treasury and
Homeland Security and the Attorney General strengthen the leadership
structure for strategy development and implementation, require
processes to ensure key priorities are identified, and establish
accountability mechanisms. The departments generally concurred with
GAO‘s report.
www.gao.gov/cgi-bin/getrpt?GAO-04-710T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Richard M. Stana at (202)
512-8777 or stanar@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss federal law enforcement
agencies' efforts to cooperatively investigate money laundering and
terrorist financing. Money laundering--the process of disguising or
concealing illicit funds to make them appear legitimate--is a serious
crime, with an estimated $500 billion to $1 trillion laundered
worldwide annually, according to the United Nations Office of Drug
Control and Prevention. Money laundering provides the fuel for
terrorists, drug dealers, arms traffickers, and other criminals to
operate and expand their activities, which can have devastating social
and economic consequences. Terrorist financing is generally
characterized by different motives than money laundering, and the funds
often originate from legitimate sources. However, investigations of
money laundering and investigations of terrorist financing often
involve similar approaches or techniques because the methods used for
hiding the movement of funds also involve similarities.
As requested, my testimony will focus on recent strategic plans and
organizational changes designed to improve the interagency coordination
of money laundering and terrorist financing investigations.
Specifically, I will discuss two important issues:
* The first issue is whether the nation's annual National Money
Laundering Strategy (NMLS), required by 1998 federal legislation, has
served as a useful mechanism for guiding the coordination of federal
law enforcement agencies' efforts to combat money laundering and
terrorist financing. Unless reauthorized by the Congress, the
requirement for an annual NMLS ended with the 2003 strategy, which was
issued on November 18, 2003.[Footnote 1]
* The second issue is the implementation status of a May 2003
Memorandum of Agreement on terrorist financing investigations. The
Agreement, signed by the Attorney General and the Secretary of Homeland
Security, contained various provisions designed to enhance interagency
coordination of terrorist financing investigations conducted by two of
the nation's law enforcement agencies--the Federal Bureau of
Investigation (FBI) and the U.S. Immigration and Customs Enforcement
(ICE), a component of the Department of Homeland Security.
My statement today is based on two reports we have provided to the
Congress on these issues--that is, our September 2003 report on
implementation of the annual NMLS[Footnote 2] and our February 2004
report on implementation of the Memorandum of Agreement.[Footnote 3]
Summary:
Our September 2003 report noted that the annual NMLS generally has not
served as a useful mechanism for guiding the coordination of federal
law enforcement agencies' efforts to combat money laundering and
terrorist financing. For example, although expected to have a central
role in coordinating law enforcement efforts, interagency task forces
created specifically to address money laundering and related financial
crimes generally had not yet been structured and operating as intended
and had not reached their expectations for leveraging investigative
resources or creating investigative synergies. Also, while the
Departments of the Treasury and Justice had made progress on some
strategy initiatives designed to enhance interagency coordination of
money laundering investigations, most initiatives had not achieved the
expectations called for in the annual strategies. Moreover, even though
adjusted in 2002 to reflect a new federal priority--combating terrorist
financing--the NMLS did not address agency and task force roles and
interagency coordination procedures for investigating terrorist
financing. Law enforcement officials told us that the lack of clearly
defined roles and coordination procedures contributed to duplication of
efforts and disagreements over which agency should lead investigations.
Our February 2004 report noted that the FBI and ICE had implemented or
taken concrete steps to implement most of the key provisions in the May
2003 Memorandum of Agreement on terrorist financing investigations. For
instance, the agencies had developed collaborative procedures to
determine whether applicable ICE investigations or financial crimes
leads may be related to terrorism or terrorist financing--and, if so,
determine whether these investigations or leads should be pursued under
the auspices of the FBI. However, as of May 2, 2004, the FBI and ICE
had not yet issued a joint report on the implementation status of the
Agreement, which was required 4 months from its effective date. Also,
we noted that the FBI and ICE have confronted and will continue to
confront a number of operational and organizational challenges, such as
establishing and maintaining effective interagency relationships and
ensuring that the financial crimes expertise and other investigative
competencies of both agencies are appropriately and effectively
utilized.
To enhance strategic planning, our September 2003 report recommended
that, if the requirement for a national strategy is reauthorized, the
Secretaries of the Treasury and Homeland Security and the Attorney
General (1) strengthen the leadership structure for strategy
development and implementation, (2) require processes to ensure key
priorities are identified, and (3) establish accountability mechanisms.
In commenting on a draft of the September 2003 report, Treasury said
that our recommendations are important, should the Congress reauthorize
the legislation requiring future strategies; Justice said that our
observations and conclusions will be helpful in assessing the role that
the strategy process has played in the federal government's efforts to
combat money laundering; and Homeland Security said that it agreed with
our recommendations.
Background:
The Money Laundering and Financial Crimes Strategy Act of 1998
(Strategy Act) required the President--acting through the Secretary of
the Treasury and in consultation with the Attorney General and other
relevant federal, state, and local law enforcement and regulatory
officials--to develop and submit an annual NMLS to the Congress by
February 1 of each year from 1999 through 2003.[Footnote 4] The goal of
the Strategy Act was to increase coordination and cooperation among the
various law enforcement and regulatory agencies and to effectively
distribute resources to combat money laundering and related financial
crimes. The 1998 Strategy Act required that each NMLS define
comprehensive, research-based goals, objectives, and priorities for
reducing money laundering and related financial crimes in the United
States. The annual NMLS generally has included multiple priorities to
combat money laundering to guide federal agencies' activities.[Footnote
5]
Another provision of the Strategy Act authorized the Secretary of the
Treasury to designate High Intensity Money Laundering and Related
Financial Crime Areas (HIFCA), in which federal, state, and local law
enforcement would work cooperatively to develop a focused and
comprehensive approach to targeting money-laundering
activity.[Footnote 6] As envisioned by the Strategy Act, HIFCAs were to
represent a major NMLS initiative and were expected to have a flagship
role in the U.S. government's efforts to disrupt and dismantle large-
scale money laundering operations. They were intended to improve the
coordination and quality of federal money laundering investigations by
concentrating the investigative expertise of federal, state, and local
agencies in unified task forces, thereby leveraging resources and
creating investigative synergies.
The former U.S. Customs Service, which is now part of ICE, and the FBI
both have a long history of investigating money laundering and other
financial crimes. In response to the terrorist attacks of September 11,
Treasury and Justice both established multiagency task forces dedicated
to combating terrorist financing. Treasury established Operation Green
Quest, led by Customs, to augment existing counterterrorist efforts by
targeting current terrorist funding sources and identifying possible
future sources. In addition to targeting individuals and organizations,
Operation Green Quest was designed to attack the financial systems that
may be used by terrorists to raise and move funds, such as fraudulent
charities and the shipment of bulk currency. In January 2003, Customs
expanded Operation Green Quest by doubling the personnel commitment to
a total of approximately 300 agents and analysts nationwide to work
solely on terrorist financing matters. In March 2003, Operation Green
Quest was transferred to ICE, within the Department of Homeland
Security.
On September 13, 2001, the FBI formed a multiagency task force--which
is now known as the Terrorist Financing Operations Section (TFOS)--to
combat terrorist financing. The mission of TFOS has evolved into a
broad role to identify, investigate, prosecute, disrupt, and dismantle
all terrorist-related financial and fundraising activities. The FBI
also took action to expand the antiterrorist financing focus of its
Joint Terrorism Task Forces (JTTF)--teams of local and state law
enforcement officials, FBI agents, and other federal agents and
personnel whose mission is to investigate and prevent acts of
terrorism.[Footnote 7] In 2002, the FBI created a national JTTF in
Washington, D.C., to collect terrorism information and intelligence and
funnel it to the field JTTFs, various terrorism units within the FBI,
and partner agencies.
The attacks of September 11 emphasized the need for federal agencies to
wage a coordinated campaign against sources of terrorist financing.
Following September 11, representatives of the FBI and Operation Green
Quest met on several occasions to attempt to delineate antiterrorist
financing roles and responsibilities. However, such efforts were
largely unsuccessful until May 2003, when the Attorney General and the
Secretary of Homeland Security signed a Memorandum of Agreement that
contained a number of provisions designed to resolve jurisdictional
issues and enhance interagency coordination of terrorist financing
investigations. According to the Agreement, the FBI is to lead
terrorist financing investigations and operations, using the
intergovernmental and intra-agency national JTTF at FBI headquarters
and the JTTFs in the field. The Agreement also specified that, through
TFOS, the FBI is to provide overall operational command to the national
JTTF and the field JTTFs. Further, to increase information sharing and
coordination of terrorist financing investigations, the Agreement
required the FBI and ICE to (1) detail appropriate personnel to each
other's agency and (2) develop specific collaborative procedures to
determine whether applicable ICE investigations or financial crimes
leads may be related to terrorism or terrorist financing. Also, the
Agreement required the FBI and ICE to produce a joint written report on
the status of the implementation of the Agreement 4 months from its
effective date.
Opportunities Exist to Improve the National Money Laundering Strategy:
In September 2003, we reported that, as a mechanism for guiding the
coordination of federal law enforcement agencies' efforts to combat
money laundering and related financial crimes, the NMLS has had mixed
results but generally has not been as useful as envisioned by the
Strategy Act. For example, we reported that HIFCA task forces were
expected to have a central role in coordinating law enforcement
agencies' efforts to combat money laundering but generally had not yet
been structured and operating as intended and had not reached their
expectations for leveraging investigative resources or creating
investigative synergies. The NMLS called for each HIFCA to include
participation from all relevant federal, state, and local agencies.
However, in some cases, federal law enforcement agencies had not
provided the levels of commitment and staffing to the task forces
called for by the strategy. We found, for instance, that most of the
HIFCAs did not have FBI or Drug Enforcement Administration (DEA) agents
assigned full time to the task forces. FBI officials cited resource
constraints as the primary reason why the bureau did not fully
participate. A DEA official told us that, because of differences in
agencies' guidelines for conducting undercover money laundering
investigations, DEA would not dedicate staff to HIFCA task force
investigative units but would support intelligence-related activities.
Also, we noted that four of the five operating HIFCAs had little or no
participation from state and local law enforcement agencies. Various
task force officials mentioned lack of funding to compensate or
reimburse participating state and local law enforcement agencies as a
barrier to their participation in HIFCA operations. While recognizing
that law enforcement agencies have resource constraints and competing
priorities, we noted that HIFCA task forces were expected to make more
effective use of existing resources or of such additional resources as
may be available. As called for in the 2002 NMLS, Treasury and Justice
are in the process of reviewing the HIFCA task forces to enhance their
potential and remove obstacles to their effective operation. The
results of this review could provide useful input for an evaluation
report on the HIFCA program, which the Strategy Act requires Treasury
to submit to the Congress in 2004.
We further reported that, while Treasury and Justice had made progress
on some NMLS initiatives designed to enhance interagency coordination
of money laundering investigations, most had not achieved the
expectations called for in the annual strategies, including plans to
(1) use a centralized system to coordinate investigations and (2)
develop uniform guidelines for undercover investigations. Headquarters
officials cited differences in the various agencies' anti-money
laundering priorities as a primary reason why initiatives had not
achieved their expectations.
In our September 2003 report, we noted that our work in reviewing
national strategies for various crosscutting issues has identified
several critical components needed for their development and
implementation, including effective leadership, clear priorities, and
accountability mechanisms. For a variety of reasons, these critical
components generally have not been fully reflected in the development
and implementation of the annual NMLS. For example, the joint Treasury-
Justice leadership structure that was established to oversee NMLS-
related activities generally has not resulted in (1) reaching agreement
on the appropriate scope of the strategy; (2) ensuring that target
dates for completing strategy initiatives were met; and (3) issuing the
annual NMLS by February 1 of each year, as required by the Strategy
Act.
Also, although Treasury generally took the lead role in strategy-
related activities, it had no incentives or authority to get other
departments and agencies to provide necessary resources or compel their
participation. And, the annual strategies have not identified and
prioritized issues that required the most immediate attention. Each
strategy contained more priorities than could be realistically
achieved, the priorities have not been ranked in order of importance,
and no priority has been explicitly linked to a threat and risk
assessment. Further, although the 2001 and 2002 strategies contained
initiatives to measure program performance, none had been used to
ensure accountability for results. Officials attributed this to the
difficulty in establishing such measures for combating money
laundering. In addition, we noted that Treasury had not provided annual
reports to the Congress on the effectiveness of policies to combat
money laundering and related financial crimes, as required by the
Strategy Act.
As mentioned previously, unless reauthorized by the Congress, the
requirement for an annual NMLS ended with the issuance of the 2003
strategy. To assist in congressional deliberations on whether there is
a continuing need for an annual NMLS, we reviewed the development and
implementation of the 1999 through 2002 strategies. Our September 2003
report recommended that--if the Congress reauthorizes the requirement
for an annual NMLS--the Secretary of the Treasury, working with the
Attorney General and the Secretary of Homeland Security, should take
appropriate steps to:
* strengthen the leadership structure responsible for strategy
development and implementation by establishing a mechanism that would
have the ability to marshal resources to ensure that the strategy's
vision is achieved, resolve disputes between agencies, and ensure
accountability for strategy implementation;
* link the strategy to periodic assessments of threats and risks, which
would provide a basis for ensuring that clear priorities are
established and focused on the areas of greatest need; and:
* establish accountability mechanisms, such as (1) requiring the
principal agencies to develop outcome oriented performance measures
that must be linked to the NMLS's goals and objectives and that also
must be reflected in the agencies' annual performance plans and (2)
providing the Congress with periodic reports on the strategy's results.
In commenting on a draft of the September 2003 report, Treasury said
that our recommendations are important, should the Congress reauthorize
the legislation requiring future strategies; Justice said that our
observations and conclusions will be helpful in assessing the role that
the strategy process has played in the federal government's efforts to
combat money laundering; and Homeland Security said that it agreed with
our recommendations.
Our review of the development and implementation of the annual
strategies did not cover the 2003 NMLS, which was issued in November
2003, about 2 months after our September 2003 report. While we have not
assessed the 2003 NMLS in detail, we note that it emphasized that "the
broad fight against money laundering is integral to the war against
terrorism" and that money laundering and terrorist financing "share
many of the same methods to hide and move proceeds." In this regard,
one of the major goals of the 2003 strategy is to "cut off access to
the international financial system by money launderers and terrorist
financiers more effectively." Under this goal, the strategy stated that
the United States will continue to focus on specific financing
mechanisms--including charities, bulk cash smuggling, trade-based
schemes, and alternative remittance systems--that are particularly
vulnerable or attractive to money launderers and terrorist financiers.
Most Key Memorandum of Agreement Provisions Have Been Implemented, but
Terrorist Financing Investigations Still Present Operational and
Organizational Challenges:
As mentioned previously, the NMLS was adjusted in 2002 to reflect new
federal priorities in the aftermath of the September 11 attacks,
including a goal to combat terrorist financing. However, due to
difficulties in reaching agreement over which agency should lead
investigations, the 2002 NMLS did not address agency and task force
roles and interagency coordination procedures for investigating
terrorist financing. Law enforcement officials told us that the lack of
clearly defined roles and coordination procedures contributed to
duplication of efforts and disagreements over which agency should lead
investigations. To help resolve these long-standing jurisdictional
issues, in May 2003, the Attorney General and the Secretary of Homeland
Security signed a Memorandum of Agreement regarding roles and
responsibilities in investigating terrorist financing.
In our February 2004 report, we noted that most of the key Memorandum
of Agreement provisions had been implemented or were in the process of
being implemented. For example, in accordance with the Agreement, the
FBI and ICE have cross detailed key management personnel at the
headquarters level, with an ICE manager serving as Deputy Section Chief
of TFOS and an FBI manager detailed to ICE's financial crimes division.
Also, the FBI and ICE have developed collaborative procedures to
determine whether appropriate ICE money laundering investigations or
financial crime leads may be related to terrorism or terrorist
financing.
Further, as an integral aspect of the collaborative procedures, ICE
created a joint vetting unit, in which ICE and FBI personnel--who have
full access to ICE and FBI databases--are to conduct reviews to
determine whether a potential nexus to terrorism or terrorist financing
exists in applicable ICE investigations or financial crimes leads. If
so, the matter is to be referred to TFOS, where the FBI Section Chief
is to provide the ICE Deputy Section Chief with information
demonstrating the terrorism nexus, as well as the stage and development
of the corresponding FBI investigation. Then, the Section Chief and the
ICE Deputy Section Chief are to discuss the elements of the terrorism
nexus, ICE's equity or commitment of resources to date in the
investigation, violations being pursued by ICE before the Memorandum of
Agreement, and the direction of the investigation. After this
collaborative consultation, the FBI and ICE are to decide (1) whether
the ICE investigation will be conducted under the auspices of a JTTF
and (2) agency roles in pursuing related investigations. Specific
investigative strategies generally are to be developed at the field
level by FBI, ICE, and U.S. Attorneys Office personnel. The Terrorist
Financing Unit of the Counterterrorism Section in Justice's Criminal
Division is involved in coordinating and prosecuting matters and cases
involving terrorist financing, which are investigated by both the FBI
and ICE.
Another Agreement provision--requiring ICE to detail a significant
number of appropriate personnel to the national JTTF and JTTFs in the
field--is being handled on a location-specific, case-by-case basis. In
response to our inquiries, FBI and ICE officials said that this
provision was not intended to refer to a specific number of personnel
and certainly was not intended to imply that all former Operation Green
Quest agents were to be detailed to JTTFs. According to ICE officials,
as of February 2004, a total of 277 ICE personnel (from various legacy
agencies) were assigned full time to JTTFs--a total that consisted of
161 former Immigration and Naturalization Service agents, 59 Federal
Air Marshals, 32 former Customs Service agents, and 25 Federal
Protective Service agents. ICE officials said that this total does not
include ICE agents who will be assigned to JTTFs in consonance with
vetted cases being transitioned to JTTFs, nor does it include ICE
investigators who participate part time on JTTFs.
Another provision in the May 2003 Memorandum of Agreement required that
the FBI and ICE jointly report to the Attorney General, the Secretary
of Homeland Security, and the Assistant to the President for Homeland
Security on the implementation status of the Agreement 4 months from
its effective date. As of May 2, 2004, the FBI and ICE had not yet
produced the required joint report on the implementation status.
The Memorandum of Agreement, by granting the FBI the lead role in
investigating terrorist financing, altered ICE's role in investigating
terrorism-related financial crimes. However, while the Agreement
specified that the FBI has primary investigative jurisdiction over
confirmed terrorism-related financial crimes, the Agreement does not
preclude ICE from investigating suspicious financial activities that
have a potential (unconfirmed) nexus to terrorism--which was the
primary role of the former Operation Green Quest. Moreover, the
Agreement generally has not affected ICE's mission or role in
investigating other financial crimes. Specifically, the Agreement did
not affect ICE's statutory authorities to conduct investigations of
money laundering and other traditional financial crimes. ICE
investigations can still cover the wide range of financial systems--
including banking systems, money services businesses, bulk cash
smuggling, trade-based money laundering systems, illicit insurance
schemes, and illicit charity schemes--that could be exploited by money
launderers and other criminals. According to ICE headquarters
officials, ICE is investigating the same types of financial systems as
before the Memorandum of Agreement.
Further, our February 2004 report noted that--while the Memorandum of
Agreement represents a partnering commitment by the FBI and ICE--
continued progress in implementing the Agreement will depend largely on
the ability of these law enforcement agencies to meet various
operational and organizational challenges. For instance, the FBI and
ICE face challenges in ensuring that the implementation of the
Agreement does not create a disincentive for ICE agents to initiate or
support terrorist financing investigations. That is, ICE agents may
perceive the Agreement as minimizing their role in terrorist financing
investigations. Additional challenges involve ensuring that the
financial crimes expertise and other investigative competencies of the
FBI and ICE are effectively utilized and that the full range of the
agencies' collective authorities--intelligence gathering and analysis
as well as law enforcement actions, such as executing search warrants
and seizing cash and other assets--are effectively coordinated.
Inherently, efforts to meet these challenges will be an ongoing
process. Our interviews with FBI and ICE officials at headquarters and
three field locations indicated that long-standing jurisdictional and
operational disputes regarding terrorist financing investigations may
have strained interagency relationships to some degree and could pose
an obstacle in fully integrating investigative efforts.
Concluding Observations:
From a strategic perspective, the annual NMLS has had mixed results in
guiding the efforts of law enforcement in the fight against money
laundering and, more recently, terrorist financing. Although expected
to have a flagship role in the U.S. government's efforts to disrupt and
dismantle large-scale money laundering operations, HIFCA task forces
generally are not yet structured and operating as intended. Treasury
and Justice are in the process of reviewing the HIFCA task forces,
which ultimately could result in program improvements. Also, most of
the NMLS initiatives designed to enhance interagency coordination of
money laundering investigations have not yet achieved their
expectations. While the annual NMLS has fallen short of expectations,
federal law enforcement agencies recognize that they must continue to
develop and use interagency coordination mechanisms to leverage
existing resources to investigate money laundering and terrorist
financing.
Through our work in reviewing national strategies, we identified
critical components needed for successful strategy development and
implementation, but, to date, these components have not been well
reflected in the annual NMLS. The requirement for an annual NMLS ended
with the issuance of the 2003 strategy. If the Congress reauthorizes
the requirement for an annual NMLS, we continue to believe that
incorporating these critical components into the strategy--a
strengthened leadership structure, the identification of key
priorities, and the establishment of accountability mechanisms--could
help resolve or mitigate the deficiencies we identified.
Also, regarding investigative efforts against sources of terrorist
financing, the May 2003 Memorandum of Agreement signed by the Attorney
General and the Secretary of Homeland Security represents a partnering
commitment by two of the nation's law enforcement agencies, the FBI and
ICE. In the 12 months since the Agreement was signed, progress has been
made in waging a coordinated campaign against sources of terrorist
financing. Continued progress will depend largely on the agencies'
ability to establish and maintain effective interagency relationships
and meet various other operational and organizational challenges.
Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions that you or Members of the Subcommittee may
have.
[End of section]
Appendix I: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
For further information about this testimony, please contact
Richard M. Stana at (202) 512-8777. Other key contributors to this
statement were Danny R. Burton and R. Eric Erdman.
FOOTNOTES
[1] In November 2003, Senator Charles Grassley introduced a bill (S.
1837, the "Combating Money Laundering and Terrorist Financing Act of
2003") that, among other purposes, would extend the requirement for an
annual NMLS to 2006.
[2] U.S. General Accounting Office, Combating Money Laundering:
Opportunities Exist to Improve the National Strategy, GAO-03-813
(Washington, D.C.: Sept. 26, 2003).
[3] U.S. General Accounting Office, Investigations of Terrorist
Financing, Money Laundering, and Other Financial Crimes, GAO-04-464R
(Washington, D.C.: Feb. 20, 2004).
[4] Pub. L. No. 105-310, 112 Stat. 2941 codified as 31 U.S.C. §§ 5340-
42, 5351-55 (1998).
[5] Also, in the aftermath of the September 11 attacks, the NMLS was
adjusted in 2002 to reflect a new federal priority--combating terrorist
financing.
[6] Such an "area" could be a geographic area, financial system,
industry sector, or financial institution.
[7] According to the FBI, the first JTTF came into being in 1980, and
the total number of task forces has nearly doubled since September 11,
2001. Today, there is a JTTF in each of the FBI's 56 main field
offices, and additional task forces are located in smaller FBI offices.
