Money Laundering

Money laundering involves disguising or concealing illicit income so as to make it appear legitimate. Banks, savings and loans, and credit unions are in a unique position to help identify money launderers by reporting suspicious transactions to federal and state law enforcement authorities. Financial institutions report tens of thousands of suspicious transactions each year. The reports have led to investigations into various criminal activities. However, because there is no overall control or coordination of the reports, there is no way of ensuring that the information is being fully used. Financial institutions report suspicious transactions on various forms to provide different types of information that are filed with different law enforcement and regulatory agencies. The Treasury Department, the financial regulatory agencies, and the Internal Revenue Service have agreed to substantial changes in how suspicious transactions are to be reported and how the information is to be used. These proposals, which were made with input from the financial community, have the potential for significantly improving the contribution that suspicious transaction reports make to law enforcement.

GAO found that: (1) financial institutions file reports of suspicious transactions each year on various forms to various agencies, leading to the initiation of major investigations into various types of criminal activity; (2) there is no way of ensuring that the information is being used to its full potential, since there is no overall control or coordination of the reports; (3) the form that is filed most frequently is filed with the Internal Revenue Service (IRS) and kept on a centralized database, but the form is only useful in providing additional information on an investigation that has already been initiated; (4) other forms used to report suspicious transactions contain more useful information but, since they are filed with six different agencies and are not kept on a centralized database, they cannot be used on a reactive basis; (5) IRS has not developed agencywide procedures for managing suspicious transaction reports, resulting in varied use of the reports among 35 district offices; (6) 9 of the 15 states that receive copies of suspicious transaction reports use the information to initiate criminal investigations; and (7) the Department of the Treasury and IRS have agreed to substantial changes regarding how suspicious transactions are to be reported, how the information is to be used, and how to improve the reports' contributions at both the federal and state levels.