Use of Currency and Foreign Account Reports To Detect Narcotics Traffickers

To facilitate Federal financial investigations of drug trafficking, tax evasion, and other illegal activities, the Congress enacted the Bank Secrecy Act in October 1970. The Act requires individuals and financial institutions to report financial transactions that might be useful to Federal agencies in carrying out their investigative responsibilities. It was felt that the Act's financial reporting requirements would help in investigating illicit money transactions or help to reveal instances of persons using foreign bank accounts to conceal profits from drug activity. However, the reports required by the Bank Secrecy Act have not been as useful as the Congress expected. In April 1979 GAO reported on the need for the Treasury Department and the Internal Revenue Service to make more effective use of the currency reports required by the Bank Secrecy Act. GAO made recommendations to improve centralization of the processing of currency reports within the Treasury Department's enforcement communications system. It was suggested that the Treasury Department should monitor the use of currency reports to determine how much they are used and whether their value has increased. It was pointed out that the Treasury Department should monitor the use of the foreign bank account information. The basic question that needs to be determined is whether the currency and foreign bank account reports can be effective in detecting and deterring various criminal activities. If a person fails to comply with the reporting requirements or takes steps to avoid them, the reports have little value unless information developed through other means reveals noncompliance. It is recognized that the effectiveness of the reporting requirements are limited because it is questionable whether a person bent on violating the law would risk detection by engaging in a reportable currency transaction or by voluntarily complying with a reporting requirement.