Money Laundering

U.S. Efforts To Fight It Are Threatened By Currency Smuggling Gao ID: GGD-94-73 March 9, 1994

U.S. banking and tax laws require the filing of reports on currency transactions exceeding $10,000. People disguising illicit income are sidestepping U.S. reporting rules by smuggling cash out of the country--apparently with relative ease. Once the funds are deposited in a foreign financial institution, they are much harder to trace and can be spent or transferred back to the United States with less risk of exposure. Treasury Department and U.S. Customs Service officials have no way to estimate the amount of currency being smuggled, although law enforcement officials GAO spoke with believe that the amount is substantial--potentially billions of dollars each year. In addition to discussing the extent of currency smuggling, this report describes the techniques used to smuggle currency and U.S. efforts to curtail it.

GAO found that: (1) the amount of currency being smuggled out of the country cannot be determined, but the amount is substantial; (2) law enforcement experts believe that the illegal drug trade accounts for $5 billion smuggled out of the United States annually; (3) smugglers use land, sea, and air bulk shipments, couriers, and U.S and commercial mail companies, but commercial airlines are the preferred method; (4) smuggling currency out of the country is relatively easy because of the thousands of miles of unguarded borders and Customs' lesser emphasis on inspecting outbound cargo and passengers; (5) Customs has only one program specifically aimed at outbound inspections, and only 85 of 338 Customs ports perform outbound inspections routinely; (6) resource allocation to outbound inspections is constrained by the need to maintain adequate inbound inspections; (7) Customs does not collect nationwide data on resources used for inbound and outbound inspections; (8) although Customs has interdicted substantial amounts of currency, seizures represent only a fraction of money laundering; (9) outbound inspections are more difficult to perform than inbound inspections; and (10) Customs is increasing its oversight of and emphasis on interdicting currency smuggling by establishing uniform procedures for currency smuggling inspections, testing the use of specially trained dogs to detect U.S. currency, and targeting certain geographic areas and means of conveyance.

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