Money Laundering

Pursuant to a legislative requirement, GAO reported on: (1) the extent to which federal agencies use cash transaction reports (CTR) for law enforcement purposes; (2) the number of cases in which a criminal penalty has been sought for willfully failing to file cash transaction reports; and (3) any changes in the effectiveness of the penalty by reason of legislation enacted in 1990 that reclassified the offense from a misdemeanor to a felony.

GAO found that: (1) during the year ended April 1991, federal law enforcement agencies accessed more than 15,000 CTR filed with the Internal Revenue Service (IRS); (2) federal law enforcement agencies use information included in CTR to identify suspicious transactions, support ongoing criminal investigations, and seize illegally purchased goods; (3) although law enforcement agencies failed to systematically collect information on the effect of CTR on law enforcement investigations, law enforcement officials said that the reports were extremely useful; (4) in the 18-month period ended in March 1991, IRS recommended 3,880 penalties for failing to file CTR or providing false or incomplete information, of which all but 80 penalties were civil; (5) in November 1990, new legislation required IRS to classify willful CTR filing failures as a felony, but the reclassification did not affect the maximum sentences for the offense; (6) GAO could not determine what impact the reclassification had on the penalties' effectiveness, since such information was unavailable; (7) IRS believed that it may have recommended the penalty more for a felony offense; (8) IRS believes that the increase in the number of CTR filed each month was primarily due to a substantial increase in the enforcement effort; and (9) IRS believed that the reclassification did not have a significant effect on improving reporting requirement compliance.