Money Laundering

The Financial Crimes Enforcement Network (FinCEN) was established in 1990 to support law enforcement agencies by analyzing and coordinating financial intelligence information to combat money laundering. FinCEN has issued fewer analytical products in recent years. A primary reason that FinCEN officials gave for this change is that FinCEN's staffing levels have remained fairly constant, while its overall mission has expanded. Also, FinCEN has been encouraging and training other federal, state, and local law enforcement agencies to assess and analyze source data directly either through FinCEN resources or their own. Federal and state officials generally seemed satisfied with FinCEN's products and service. However, FinCEN needs to better communicate its regulatory priorities and time lines, particularly concerning regulations authorized or required by the Money Laundering Suppression Act of 1994. FinCEN did not meet any of the three statutory deadlines imposed by the act, and final regulations for several of the act's provisions are still pending. In 1992, GAO reported that the Treasury Department was taking about 21 months, on average, to process civil penalty referrals for Bank Secrecy Act violations. Since then, the average has grown to about three years, according to FinCEN data. GAO is working with FinCEN to identify reasons for the increase in processing times. GAO summarized this report in testimony before Congress; see: Money Laundering: FinCEN's Law Enforcement Support, Regulatory, and International Roles, by Norman J. Rabkin, Director of Administration of Justice Issues, before the Subcommittee on General Oversight and Investigations, House Committee on Banking and Financial Services. GAO/T-GGD-98-83, Apr. 1 (40 pages).

GAO noted that: (1) FinCEN's process for developing and issuing regulations generally consisted of determining what regulations were required or needed, establishing priorities for which regulations it would promulgate first, and then promulgating the regulations within the context of applicable statutory and executive branch guidance; (2) overall, FinCEN's regulatory process was designed to reflect the Administrative Procedure Act (APA) standardized procedures that federal agencies are to follow when developing and issuing regulations; (3) moreover, FinCEN follows a partnership strategy, which emphasizes frequent consultations with representatives of the law enforcement, regulatory, and financial services communities; (4) regarding the status of FinCEN's efforts to develop and issue regulations, as of December 1997, more than 3 years since passage of the Money Laundering Suppression Act (MLSA), FinCEN had not promulgated final regulations for five of eight regulatory initiatives related to the 1994 BSA amendments; (5) FinCEN has issued final regulations for three initiatives, has proposed regulations for four initiatives, and has not yet taken regulatory action on one initiative; (6) generally, until final regulations are promulgated, many of the intended benefits of the MLSA cannot be fully achieved; (7) FinCEN officials said that they recognized that the emphasis on issuing quality regulations has the effect of extending the time needed to develop and issue regulations; (8) thus, FinCEN followed a regulation-development process that emphasized quality over timeliness; (9) a majority of the members of the BSA Advisory Group with whom GAO spoke generally concurred with this characterization of FinCEN's regulatory process; (10) GAO believes that FinCEN could better inform appropriate congressional committees of its rulemaking plans, especially when those plans will result in FinCEN's failing to meet statutory completion dates; (11) although GAO found that FinCEN had presented its fiscal year regulatory priorities in annual plans, which were published in the Federal Register, these plans did not provide stakeholders with FinCEN's estimated dates for issuing final rules for all MLSA-related amendments to the BSA; (12) FinCEN communicated the agency's regulatory plans to Congress by various means, including testimony at congressional hearings; and (13) congressional committees were not in a good position to assess FinCEN's regulatory initiatives, the time lines for issuing final regulations, and the allocation of resources necessary for completing these initiatives.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: