Anti-Money Laundering
Improved Communication Could Enhance the Support FinCEN Provides to Law Enforcement Gao ID: GAO-10-141 December 14, 2009Financial investigations are used to combat money laundering and terrorism financing, crimes that can destabilize national economies and threaten global security. The Financial Crimes Enforcement Network (FinCEN) within the Department of the Treasury supports law enforcement agencies (LEAs) in their efforts to investigate financial crimes by providing them with services and products, such as access to financial data, analysis, and case support. As requested, GAO examined the extent to which the law enforcement community finds FinCEN's support useful in its efforts to investigate and prosecute financial crimes. GAO analyzed statutes governing FinCEN's mission and documentation describing the support it provides to LEAs, such as annual reports. Using FinCEN data, GAO selected a sample of 29 LEAs, including primary users of FinCEN's services and products, and obtained their opinions through a survey and interviews. While the results of the survey and interviews are not generalizable, they provide insights about the usefulness of FinCEN's support.
The majority of LEAs GAO surveyed reported finding FinCEN's support useful in their efforts to investigate and prosecute financial crimes, but FinCEN could enhance its support by better informing LEAs about its services and products and actively soliciting their input. Of the 20 LEAs that responded to a question GAO posed about which FinCEN services they found most useful, 16 LEAs cited direct access to Bank Secrecy Act data--records of financial transactions possibly indicative of money laundering that FinCEN collects--as the most valuable service FinCEN provides. Additionally, 11 federal LEAs cited a tool that allows federal LEAs to reach out, through FinCEN, to financial institutions nationwide to locate financial information related to ongoing investigations as a key service offered by FinCEN. To further enhance the value and relevance of its analytic work to LEAs, FinCEN has sought to increase development of complex analytic products, such as reports identifying trends and patterns in money laundering. Sixteen law enforcement agencies GAO surveyed reported that they generally found these complex analytic products useful. However, three of five LEAs that FinCEN identified as its primary federal customers reported that FinCEN does not provide detailed information about the various types of products it can provide. They also stated that they would like more information about when completed products become available. Communicating more detailed information to LEAs could help FinCEN ensure that it is effectively carrying out its mission to support the investigation and prosecution of financial crimes. Moreover, two of these LEAs reported that FinCEN does not communicate to LEAs why it accepts some requests for support and rejects others. Furthermore, FinCEN does not actively seek LEAs' input about ongoing or planned analytic work, though doing so could improve the quality and relevance of its products to its LEA customers. Actively soliciting stakeholder input and providing transparency with regard to decision making are GAO-identified best practices for effectively meeting stakeholder needs. Incorporating these best practices could help FinCEN maximize the usefulness of its support. In October 2009, senior officials in one of the divisions that provides support to LEAs reorganized the division in order to realign resources to better serve law enforcement. The division also developed a planning guide to improve communication with LEAs which includes general descriptions of the types of processes to be implemented. While the development of this guide is a step in the right direction, it does not include detailed information on the specific actions FinCEN plans to take to become more transparent to their law enforcement customers about the division's operations. Completing the plan, including identifying the specific actions FinCEN plans to take to better assess law enforcement's needs, could help FinCEN ensure that its operations are designed in a way so as to maximize their usefulness to its law enforcement customers.
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Director: Team: Phone:GAO-10-141, Anti-Money Laundering: Improved Communication Could Enhance the Support FinCEN Provides to Law Enforcement
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
December 2009:
Anti-Money Laundering:
Improved Communication Could Enhance the Support FinCEN Provides to Law
Enforcement:
GAO-10-141:
GAO Highlights:
Highlights of GAO-10-141, a report to congressional requesters.
Why GAO Did This Study:
Financial investigations are used to combat money laundering and
terrorism financing, crimes that can destabilize national economies and
threaten global security. The Financial Crimes Enforcement Network
(FinCEN) within the Department of the Treasury supports law enforcement
agencies (LEAs) in their efforts to investigate financial crimes by
providing them with services and products, such as access to financial
data, analysis, and case support. As requested, GAO examined the extent
to which the law enforcement community finds FinCEN‘s support useful in
its efforts to investigate and prosecute financial crimes. GAO analyzed
statutes governing FinCEN‘s mission and documentation describing the
support it provides to LEAs, such as annual reports. Using FinCEN data,
GAO selected a sample of 29 LEAs, including primary users of FinCEN‘s
services and products, and obtained their opinions through a survey and
interviews. While the results of the survey and interviews are not
generalizable, they provide insights about the usefulness of FinCEN‘s
support.
What GAO Found:
The majority of LEAs GAO surveyed reported finding FinCEN‘s support
useful in their efforts to investigate and prosecute financial crimes,
but FinCEN could enhance its support by better informing LEAs about its
services and products and actively soliciting their input. Of the 20
LEAs that responded to a question GAO posed about which FinCEN services
they found most useful, 16 LEAs cited direct access to Bank Secrecy Act
data”records of financial transactions possibly indicative of money
laundering that FinCEN collects”as the most valuable service FinCEN
provides. Additionally, 11 federal LEAs cited a tool that allows
federal LEAs to reach out, through FinCEN, to financial institutions
nationwide to locate financial information related to ongoing
investigations as a key service offered by FinCEN. To further enhance
the value and relevance of its analytic work to LEAs, FinCEN has sought
to increase development of complex analytic products, such as reports
identifying trends and patterns in money laundering. Sixteen law
enforcement agencies GAO surveyed reported that they generally found
these complex analytic products useful.
However, three of five LEAs that FinCEN identified as its primary
federal customers reported that FinCEN does not provide detailed
information about the various types of products it can provide. They
also stated that they would like more information about when completed
products become available. Communicating more detailed information to
LEAs could help FinCEN ensure that it is effectively carrying out its
mission to support the investigation and prosecution of financial
crimes. Moreover, two of these LEAs reported that FinCEN does not
communicate to LEAs why it accepts some requests for support and
rejects others. Furthermore, FinCEN does not actively seek LEAs‘ input
about ongoing or planned analytic work, though doing so could improve
the quality and relevance of its products to its LEA customers.
Actively soliciting stakeholder input and providing transparency with
regard to decision making are GAO-identified best practices for
effectively meeting stakeholder needs. Incorporating these best
practices could help FinCEN maximize the usefulness of its support. In
October 2009, senior officials in one of the divisions that provides
support to LEAs reorganized the division in order to realign resources
to better serve law enforcement. The division also developed a planning
guide to improve communication with LEAs which includes general
descriptions of the types of processes to be implemented. While the
development of this guide is a step in the right direction, it does not
include detailed information on the specific actions FinCEN plans to
take to become more transparent to their law enforcement customers
about the division‘s operations. Completing the plan, including
identifying the specific actions FinCEN plans to take to better assess
law enforcement‘s needs, could help FinCEN ensure that its operations
are designed in a way so as to maximize their usefulness to its law
enforcement customers.
What GAO Recommends:
Among other things, GAO recommends that FinCEN improve communication
with LEAs about the support it can provide, establish processes for
soliciting input and complete a plan outlining the actions FinCEN will
take to better meet LEAs needs. The FinCEN Director concurred with the
recommendations.
View GAO-10-141 or key components. For more information, contact Eileen
Larence at (202) 512-8777 or larencee@gao.gov.
[End of section]
Contents:
Letter:
Background:
Law Enforcement Finds a Number of FinCEN's Services and Products
Useful, but Would Like More Information about Select Products and
Opportunities to Provide FinCEN with Input about Some Types of Support:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: List of Agencies GAO Surveyed:
Appendix II: Comments from the Department of the Treasury:
Appendix III: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Abbreviations:
ALD: FinCEN's Analysis and Liaison Division:
APA: Administrative Procedure Act:
BSA: Bank Secrecy Act:
CBRS: Currency Banking and Retrieval System:
DEA: Drug Enforcement Administration:
DHS: Department of Homeland Security:
DOJ: Department of Justice:
FBI: Federal Bureau of Investigation:
FinCEN: Financial Crimes Enforcement Network:
FLETC: Federal Law Enforcement Training Center:
FTE: Full-Time Equivalent:
HIFCA: High Intensity Financial Crime Area:
ICE: Immigration and Customs Enforcement:
IPD: FinCEN's International Programs Division:
IRS: Internal Revenue Service:
IRS-CI: Internal Revenue Service-Criminal Investigation:
LEAs: Law Enforcement Agencies:
MOU: Memorandum of Understanding:
NPRM: Notice of Proposed Rulemaking:
PRA: Paperwork Reduction Act:
RPPD: FinCEN's Regulatory Policy and Programs Division:
SAR: Suspicious Activity Report:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
December 14, 2009:
The Honorable Barney Frank:
Chairman:
The Honorable Spencer Bachus:
Ranking Member:
Committee on Financial Services:
House of Representatives:
The Honorable Stephen F. Lynch:
House of Representatives:
Successful investigations into financial crimes can support the
prosecution of money laundering, drug trafficking, and terrorist
financing--crimes that have the potential to destabilize national
economies and threaten global security. The Bank Secrecy Act
(BSA),[Footnote 1] enacted in 1970, authorized the Secretary of the
Treasury to establish anti-money laundering record keeping and
reporting requirements for domestic financial institutions to help
prevent abuse of the nation's financial system.[Footnote 2] The
Department of the Treasury's Financial Crimes Enforcement Network
(FinCEN), established in 1990 to oversee the administration of the BSA,
helps to prevent financial crime by serving as a governmentwide,
service-oriented, financial information-sharing agency in support of
more than 275 federal and state law enforcement agencies. Specifically,
the BSA authorizes FinCEN to require financial institutions to make
reports and maintain records that have a high degree of usefulness in
criminal, tax, or regulatory investigations or proceedings, or in the
conduct of intelligence or counterintelligence activities, including
analysis to protect against international terrorism. In addition, the
BSA authorizes FinCEN to require financial institutions to establish
anti-money laundering programs.[Footnote 3] Pursuant to its authority,
FinCEN collects, maintains, analyzes, and disseminates financial
information to law enforcement agencies in support of their
investigation and prosecution of financial crimes. This information is
maintained in a central database and is commonly referred to as BSA
data.[Footnote 4] Among other things, the support FinCEN provides to
domestic law enforcement agencies, in their efforts to investigate and
prosecute financial crimes, includes a variety of services and products
such as providing access to the BSA data, responding to requests from
law enforcement agencies for information pertaining to specific
investigations, and producing analytic products covering a range of
issues related to financial crimes.[Footnote 5]
While FinCEN's general mission is to help safeguard the U.S. financial
system from such crimes, its specific roles and responsibilities have
grown and evolved over time. For example, in the wake of post-9/11
concerns about the threat that terrorist financing can pose to national
security, the enactment of the Uniting and Strengthening America By
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act) expanded FinCEN's role to
include a focus on terrorism financing as well as money laundering.
[Footnote 6] In light of FinCEN's expanded mission, Congress has raised
questions about FinCEN's ability to meet the growing demands of its
various roles and responsibilities, including the support it provides
to law enforcement agencies' efforts to investigate and prosecute
financial crimes. This report, as part of a larger body of GAO work
that addresses various aspects of FinCEN's role as the administrator of
the BSA, addresses FinCEN's role in supporting law enforcement efforts
to investigate and prosecute financial crimes, such as money laundering
and terrorism financing. Specifically, in response to your request,
this report examines the extent to which the law enforcement community
finds FinCEN's support useful in their efforts to address such crimes.
To answer this question, we first identified the support FinCEN is
required to provide to domestic law enforcement agencies as defined by
statutes governing FinCEN's mission, including the BSA and the USA
PATRIOT Act. We also reviewed and analyzed documentation, such as
annual reports and strategic plans, as well as FinCEN's responses to
our information requests detailing the support it has provided to law
enforcement agencies. In addition, we obtained data about those
services and products provided since the enactment of the USA PATRIOT
Act in 2001 through 2007 to determine trends in these services and
products over that time period. To assess the reliability of these
data, we interviewed knowledgeable agency officials about the sources
of the data and the controls FinCEN had in place to maintain the
integrity of the data and determined that the data were sufficiently
reliable for purposes of our report. In addition, we interviewed senior
FinCEN management officials regarding FinCEN's mission and
responsibilities and how they have changed over time, including how
managers characterize the impact that statutory and technological
changes have had on FinCEN's organizational structure, culture, and
practices as it relates to serving law enforcement. Furthermore, we
interviewed officials in FinCEN's Analysis and Liaison Division (ALD),
the division primarily responsible for providing support to law
enforcement agencies, regarding its current responsibilities and how
FinCEN's services and products have changed over time.[Footnote 7]
We also surveyed a nonprobability sample of 29 federal and state law
enforcement agencies that included the primary users of FinCEN's
services and products in fiscal years 2001 through 2007 about the
extent to which they found FinCEN's services and products useful.
[Footnote 8] We conducted our survey in late 2008. To select our
sample, we reviewed FinCEN data to identify federal and state law
enforcement agencies that were the primary users of one or more of
FinCEN's services and products during these 7 fiscal years.[Footnote 9]
We identified 22 agencies to be the primary users of FinCEN's services
and products--13 federal agencies and 9 state agencies. The federal
agencies we selected were the most frequent users of at least two of
FinCEN's services or products, and the state agencies we selected were
the most frequent users of at least one of FinCEN's services or
products. We also included 2 federal law enforcement agencies with a
significant financial crimes or anti-money laundering mission that were
not among FinCEN's primary customers but may potentially benefit from
FinCEN's services and products. As each of these 24 agencies could have
had multiple agents receiving services and products from FinCEN and
thus multiple people providing answers to the questionnaire, we
requested that the responses reflect each agency's official position
about FinCEN.[Footnote 10] Additionally, we included five of the six
High Intensity Financial Crime Areas (HIFCAs) where FinCEN had located
liaisons.[Footnote 11] As these HIFCAs could have had representatives
from multiple law enforcement agencies receiving services and products
from FinCEN and thus multiple people providing input to answering the
questionnaire, we also requested that their responses reflect each
HIFCA's official position about FinCEN. For a complete list of the
agencies that received GAO's questionnaire, please see appendix I. We
did not receive usable questionnaires from four of the five HIFCAs, as
representatives from each indicated that they could not provide a
single questionnaire that reflected the HIFCA's official position. In
total, we received usable questionnaires from 25 of the 29 agencies we
surveyed. To assess the reliability of the data we used to select these
agencies, we interviewed knowledgeable FinCEN officials about the
source of these data and the controls FinCEN had in place to maintain
the integrity of the data. We determined that the data were
sufficiently reliable for purposes of our report.
We also interviewed officials from 8 of the 25 federal and state law
enforcement agencies responding to our questionnaire, including the
agencies that FinCEN has identified as its top five federal law
enforcement customers. These included two Department of Justice (DOJ)
component agencies--the Drug Enforcement Administration (DEA) and the
Federal Bureau of Investigation (FBI); two Department of Homeland
Security (DHS) component agencies--Immigration and Customs Enforcement
(ICE) and the U.S. Secret Service; and one Treasury agency--the
Internal Revenue Services' Criminal Investigation Division (IRS-CI). We
interviewed the FinCEN liaisons from each of these agencies about the
support each agency has received from FinCEN and the extent to which
this support has contributed to their investigations of money
laundering, terrorist financing, and other financial crimes. Our
analysis of FinCEN data verified that these five law enforcement
agencies represent FinCEN's federal law enforcement customers with an
anti-money laundering mission that are among the top users of BSA data
as well as among the top requestors of FinCEN's analytic products.
While responses to the survey and interviews cannot be generalized to
reflect the views of all of FinCEN's law enforcement customers, we
believe that they provide essential perspectives about the usefulness
of FinCEN's services and products.
In addition, we reviewed documentation, such as internal planning
reports, provided by FinCEN and interviewed senior ALD officials
regarding how the agency plans and prioritizes its services and
products in support of law enforcement, including how ALD incorporates
law enforcement input and feedback into its operations. Furthermore, we
interviewed FinCEN officials about their existing policies and
practices for planning and prioritizing the support they provide to law
enforcement, as well as their practices for incorporating stakeholder
input. We compared these efforts with federal best practices for
effectively meeting stakeholder needs identified in prior GAO work to
determine how FinCEN's processes may differ from or reflect the use of
these recommended practices.[Footnote 12] We also reviewed an internal
ALD assessment of the support the division provides to its domestic law
enforcement customers. Our analysis included reviewing the methodology,
criteria, and assumptions of the study, and discussing the study's
scope, assumptions, and conclusions with FinCEN. As a result of our
review and analysis, we determined that the study and its results were
reasonable for use in our report. We conducted this performance audit
from February 2008 through November 2009 in accordance with generally
accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence provides a
reasonable basis for our findings based on our audit objectives.
Background:
As part of its mission, one of FinCEN's primary objectives is to
provide services and products that enable enhanced detection and
deterrence of financial crimes. Specifically, according to FinCEN, part
of this objective includes expanding communications with its law
enforcement customers to ensure that FinCEN's services and products
support and enhance law enforcement operations. FinCEN does not carry
out any financial crimes investigations on its own; rather, by serving
as a central source for financial intelligence information and
analysis, FinCEN supports the investigative and prosecutive efforts of
a network of more than 275 law enforcement agencies that includes
federal agencies, United States Attorney's offices, state and local law
enforcement agencies, and state attorneys general as well as local
district attorneys.
In supporting law enforcement agencies, FinCEN administers the largest
financial transaction reporting system in the world, which is based on
recordkeeping and reporting requirements mandated or authorized under
the BSA. This act authorizes the Secretary of the Treasury to issue
regulations requiring financial institutions to retain records and file
reports when doing so would have a high degree of usefulness in
criminal, tax, and regulatory investigations or proceedings, or in the
conduct of intelligence or counterintelligence activities, including
analysis, to protect against international terrorism. For example,
suspicious activity reports (SARs) are filed by financial institutions
to inform the federal government of any suspicious transaction related
to a possible violation of law or regulation.[Footnote 13] The BSA
regulatory framework establishes record keeping and reporting
requirements for financial institutions in order to create a paper
trail of financial transactions that federal agencies can use to detect
illegal activity, such as money laundering or terrorist financing, and
to apprehend criminals. Under the BSA framework, primary responsibility
rests with the financial institutions in gathering information and
passing it to federal officials. In 2001, the USA PATRIOT Act added the
authority of the Secretary of the Treasury to issue regulations
requiring financial institutions to retain records and file reports
when doing so would have a high degree of usefulness in the conduct of
intelligence or counterintelligence activities, including analysis, to
protect against international terrorism.[Footnote 14]
In 1994, the Secretary of the Treasury delegated overall authority for
enforcement of, and compliance with, the BSA and its implementing
regulations to the Director of FinCEN. To fulfill this role of BSA
administration, FinCEN develops policy and provides guidance to other
agencies, analyzes BSA data for trends and patterns, and enforces
compliance when warranted. For example, FinCEN works with other
agencies, such as the Internal Revenue Service (IRS) and federal
financial regulatory agencies, to ensure financial institutions'
compliance with BSA requirements, such as having an anti-money
laundering program and processes in place to report suspicious activity
and certain other financial transactions. FinCEN also collects and
stores the reported information.
In fiscal year 2009, FinCEN had a budget of approximately $91.5 million
and, since fiscal year 2002, the number of full-time staff rose from
222 to 324, representing an increase of 46 percent over the last 7
years.[Footnote 15] FinCEN is organized functionally into the Office of
the Director and five operational divisions.[Footnote 16] Among these,
FinCEN's ALD is responsible for the majority of services and products
provided in support of domestic law enforcement agencies, though the
Regulatory Policy and Programs Division and International Programs
Division also provide some support. Since fiscal year 2005, ALD's full-
time staff has risen from 60 to 77, representing an increase of 28
percent over the last 4 years.[Footnote 17] ALD analyzes BSA data in
conjunction with publicly available information to produce its analytic
products. ALD also has access to a variety of other databases that it
can use in its analyses, such as information to locate individuals;
determine asset ownership; and establish links among individuals,
businesses, and assets.[Footnote 18] In addition, ALD serves as
FinCEN's liaison with domestic law enforcement agencies and manages
their access to BSA data.
Specific examples of the analytic support ALD provides to law
enforcement agencies include the following:
* Basic analytic support: This generally involves routine checks of the
BSA database and other databases using names of suspects and other
information provided by the requesting law enforcement agency that
generally can be completed in 1 or 2 days by a single analyst. FinCEN
also initiates its own routine checks of BSA data, such as regular
reviews of those data with a potential terrorism connection, which the
agency then aggregates and refers to relevant law enforcement agencies.
FinCEN completed 409 basic analytic products in fiscal year 2007.
* Complex analytic products: FinCEN also provides a range of complex
analytic products in support of the efforts of law enforcement agencies
that can take anywhere from several months to several years to
complete. FinCEN reported completing 37 complex analytic products in
fiscal year 2007. FinCEN's complex analytic products can include the
following:
- Complex tactical case support involves large-scale, in-depth BSA data
analysis related to specific law enforcement investigations, which can
include preparation of graphic interpretations of BSA data, such as
charts that demonstrate the financial links between various entities or
organizations, as well as narrative summarizing relevant observations,
findings, and recommendations provided by FinCEN analysts.
- Strategic analysis projects or trend analyses generally represent a
range of products that are designed to provide law enforcement
officials with intelligence analyses and reports on longer-term or more
broadly scoped topics, such as emerging trends, patterns, and issues
associated with money laundering and other financial crimes. For
example, FinCEN has produced strategic reports examining the processes
and actors, both licit and illicit, involved in the flow of currency
between the United States and neighboring countries along various
regions of the U.S. borders.[Footnote 19] Strategic analysis projects
can also include assessments of threats posed by large-scale money
laundering and terrorist financing activities. These projects may be
initiated by FinCEN or undertaken as joint projects in collaboration
with law enforcement.
- Technical reference manuals are intended to provide technical
information on a variety of issues, including how particular financial
transfer or payment mechanisms may be used to launder money.
- Policy-level strategic projects are high-level analyses intended to
shape the development of national policies relating to the regulation
of the nation's financial industries, allocation of law enforcement
resources to anti-money laundering programs and initiatives, and
development of global anti-money laundering and terrorist financing
standards, policies, and activities. For example, in 2005 FinCEN
participated in the development of the U.S. Money Laundering Threat
Assessment, an interagency effort intended to explain how major money
laundering methods operate and highlight areas that require further
attention. FinCEN provided or participated in the development of these
types of products four times in fiscal year 2007.
FinCEN also provides law enforcement agencies with other types of
support including the following:
* In-house assistance: FinCEN (1) provides office space for law
enforcement agencies to locate full-time liaisons at FinCEN's
headquarters in Vienna, Virginia to facilitate their agencies' access
to FinCEN's services and products; (2) enables law enforcement
personnel who do not have direct access to BSA data to conduct their
own research and analysis on-site with FinCEN and provides them office
space and database access; and (3) provides FinCEN analysts on location
in support of the work of HIFCAs in various regions of the country.
* Training: FinCEN offers training, such as how to access BSA data and
use it in support of financial crimes investigations, through a variety
of methods, including online training, ad hoc sessions scheduled upon
request, and employee participation in related conferences. In
addition, two FinCEN specialists located at the Federal Law Enforcement
Training Center (FLETC) in Glynco, Georgia, are available to offer
training regarding the tools available to agents who conduct financial
investigations.
* Separate from the above services and products, FinCEN's Regulatory
Policy and Programs Division (RPPD) and International Programs Division
(IPD) also work with law enforcement to accomplish other agency
objectives. For example, RPPD is responsible for the administration of
BSA compliance in the financial industry and, as such, indirectly works
to support law enforcement by developing and implementing regulatory
standards so that law enforcement agencies have accurate and relevant
information for conducting financial crimes investigations.[Footnote
20] This division also produces strategic analyses that it initiates or
conducts at the request of regulatory agencies on specific cases of BSA
noncompliance or on trends and patterns in the financial industry that
at times are made available to law enforcement agencies. FinCEN also
serves as the Financial Intelligence Unit for the United States. As
such, it is responsible for receiving, requesting, analyzing, and
disseminating financial information to support domestic law
enforcement. FinCEN's International Programs Division serves as the
conduit for sharing financial information between domestic law
enforcement and foreign financial intelligence units. The International
Programs Division also liaises with foreign financial intelligence
units to support law enforcement and other U.S. government agencies.
Over the last several years, domestic law enforcement has increased its
requests to FinCEN for information from foreign financial intelligence
units to combat international money laundering, terrorist financing,
and other financial crimes.
Law Enforcement Finds a Number of FinCEN's Services and Products
Useful, but Would Like More Information about Select Products and
Opportunities to Provide FinCEN with Input about Some Types of Support:
Law enforcement agencies we surveyed generally reported finding
FinCEN's services and products useful, citing direct access to BSA
data, on-site liaisons, and access to financial information on people
or organizations suspected of being involved in significant money
laundering or terrorism financing activities--known as the 314(a)
process--as those that are among the most useful.[Footnote 21] As more
law enforcement agencies have gained direct access to the financial
data FinCEN manages, the agency has sought to increase production of
more complex analytic products, such as those identifying money
laundering trends and patterns. While law enforcement agencies reported
that they generally found these complex analytic products useful, they
also reported that actively soliciting law enforcement input in the
development of products as well as improved communication about how
FinCEN develops, selects, and disseminates these products could enhance
the value of FinCEN's support. While FinCEN has recently taken initial
steps to more actively solicit input on proposed regulatory actions,
FinCEN has no mechanism to collect comments that may include law
enforcement sensitive information in a nonpublic rulemaking record, the
inclusion of which could be pertinent to making decisions regarding
proposed changes.[Footnote 22]
Law Enforcement Agencies Cite a Number of FinCEN's Services as Useful,
and FinCEN Has Sought to Increase the Production of Complex Analytic
Products:
Law Enforcement Agencies Cited Direct Access to BSA Data, the 314(a)
Process, and On-site Liaisons as the Most Useful Services FinCEN
Provides:
In both interviews and in response to our survey, law enforcement
agencies generally reported finding FinCEN's services and products
useful, and cited direct access to BSA data, the 314(a) process, and on-
site liaisons as among the three most useful services or products
FinCEN provides. Title III of the USA PATRIOT Act expanded the role of
relevant federal financial agencies in the prevention, detection, and
prosecution of financial crimes by, in part, increasing the number of
financial institutions and organizations subject to the BSA. The USA
PATRIOT Act amended certain reporting requirements and anti-money
laundering provisions of the BSA, and as a result, FinCEN issued
regulations adding BSA requirements and provisions to institutions not
previously covered, such as securities and futures firms and money
services businesses. As a result, FinCEN now provides law enforcement
agencies with access to these expanded BSA data. In response to our
survey, most law enforcement agencies responding (16 out of 20) cited
direct access to BSA data as most useful and 19 out of 22 agencies
responding indicated that BSA data was the FinCEN service they used
most often.[Footnote 23] Liaisons from three of FinCEN's top five
federal law enforcement customers noted that direct access to the BSA
database provides law enforcement a means to access these data in order
to help identify, deter, and detect money laundering or other potential
financial crimes related to a range of criminal activity.
Over the last several years, improvements in technological capabilities
have also enabled FinCEN to provide an increasing number of law
enforcement agencies with direct access to the BSA database. Rather
than relying on FinCEN analysts to conduct queries of BSA data on their
behalf, federal, state, and local law enforcement agencies can now
access the data directly through a secure Web connection after an
agency has entered into a memorandum of understanding (MOU) with FinCEN
outlining the parameters of BSA data access, security, and sharing.
[Footnote 24] An MOU typically allows multiple users at each law
enforcement agency to access the BSA data. FinCEN provides training and
technical support on accessing the data and monitors use to help ensure
that the BSA information is properly used, disseminated, and secured.
[Footnote 25] Since 2002, the number of MOUs FinCEN had established
with law enforcement agencies to govern their access to the BSA
database rose from 90 to 278, representing an increase of more than 200
percent over 7 years. Similarly, since 2002 the overall number of BSA
data users rose from 903 to 3,535, representing an increase of nearly
300 percent in user accounts over 7 years. Additionally, four of
FinCEN's top five federal law enforcement customers--DEA, the FBI, ICE,
and the Secret Service--now receive access to larger BSA datasets via
bulk a data download link that FinCEN provides to them each month
through FinCEN's secure Web site[Footnote 26]. According to FinCEN
officials, direct access to BSA data enables federal and state law
enforcement customers to more readily obtain and use the data in their
investigations of financial crimes. In many cases, law enforcement is
now capable of conducting even more sophisticated BSA analysis,
including identifying links in the BSA data and integrating the data
with commercially available as well as agency-specific databases (i.e.,
investigative records).
As a result of the USA PATRIOT Act, FinCEN also introduced a new tool
to further assist federal law enforcement agencies in their
investigations of financial crimes. In response to Section 314(a) of
the USA PATRIOT Act, FinCEN established a process that enables federal
law enforcement agencies to reach out, through FinCEN, to more than
45,000 points of contact at more than 27,000 financial institutions
across the country for potential information related to financial
crimes investigations.[Footnote 27] FinCEN facilitates the 314(a)
process, which was initiated in November 2002, through the use of a
secure communications system that allows law enforcement to quickly
locate financial data, such as open accounts and financial transactions
related to ongoing investigations of persons, entities, or
organizations suspected of being involved in significant money
laundering or terrorism financing activities. Specifically, FinCEN
receives requests from federal law enforcement and, upon review,
forwards these requests for financial data to designated contacts
within domestic financial institutions once every 2 weeks.[Footnote 28]
The financial institutions must query their records for data matches,
including accounts maintained by the named subject during the preceding
12 months and transactions or transmittals conducted within the last 6
months that are required under law or regulation to be recorded by the
financial institution or are recorded and maintained electronically by
the institution. Financial institutions have 2 weeks from the
transmission date of the request to respond.
Federal law enforcement agencies reported that the 314(a) process is a
key service offered by FinCEN that provides case-specific and timely
information to support ongoing law enforcement investigations.
Specifically, all 11 federal agencies we surveyed that had a basis to
judge the 314(a) process responded that it was either very or extremely
helpful. Similarly, 10 of these 11 federal agencies reported being very
satisfied with FinCEN's ability to respond to 314(a) requests in a
timely manner. Further, in an interview, a liaison from one of FinCEN's
top five law enforcement customers elaborated on the benefits of this
process, stating that it enables law enforcement agencies to access
financial information that might not be recorded in the available BSA
data and is one of the most efficient tools FinCEN provides.
Finally, law enforcement agencies reported that being able to maintain
agency liaisons on-site at FinCEN is another valuable service FinCEN
provides, facilitating law enforcement agency access to FinCEN's
services and products. In responding to our questionnaire, all nine of
the federal law enforcement agencies that indicated they had on-site
liaisons reported that it was extremely helpful. For example, in
response to a question on agencies' experience with having on-site
liaisons, an official from one federal law enforcement agency reported
that this facilitates the agency's access to timely financial
information in support of financial crimes investigations. Similarly,
in an interview, an official from one of FinCEN's top five federal law
enforcement customers stated that having a liaison on-site also
provides opportunities for collaboration with other liaisons from
different law enforcement agencies.
FinCEN Has Sought to Increase Production of More Complex Analytic
Products, Which Law Enforcement Agencies Report Are Helpful in
Financial Crimes Investigations:
As more law enforcement agencies gained the ability to directly access
the BSA data and conduct their own searches, their reliance on FinCEN
to conduct basic queries on their behalf has decreased. From 2004
through 2007, requests to FinCEN to conduct such queries have decreased
80 percent from 2,048 to 409.[Footnote 29] As a result, FinCEN has
identified a need to redefine its role in supporting law enforcement
agencies and enhance the value and relevance of its analytic work. As
part of this effort, in recent years FinCEN has sought to increase its
production of more sophisticated complex analytic products. These
products range from complex tactical case support requiring large-scale
BSA data analysis, to a variety of strategic projects, studies, and
trend analyses intended to identify and explain money laundering
methodologies or assess threats posed by large-scale money laundering
and terrorist financing activities. For example, in 2007 FinCEN
provided a study to one law enforcement agency that identified currency
flows between the United States and another country which helped this
agency to identify potential patterns in drug trafficking. These
strategic analysis projects and trend analyses may be the result of
work that FinCEN self-initiates, performs at the request of a law
enforcement agency, or jointly undertakes in conjunction with other law
enforcement agencies.
Based on responses to our survey and interviews, law enforcement
agencies reported general satisfaction with FinCEN's analytic products.
For example, of the 16 agencies that indicated they used FinCEN's
strategic analysis products, 8 reported the products to be very or
extremely helpful, and 8 reported that they were moderately helpful.
Similarly, when asked why they requested analytic support from FinCEN,
15 out of 17 agencies that indicated they had made such requests
reported that they did so because they believed FinCEN has unique
expertise related to analyzing the BSA data.[Footnote 30] For example,
one law enforcement agency noted that FinCEN's ability to conduct large-
scale data analysis in support of specific law enforcement
investigations is very useful. Similarly, among the 19 law enforcement
agencies that indicated in the questionnaire they had used FinCEN's
technical reference manuals, 17 reported that they believed the manuals
were either very or extremely helpful. Furthermore, in interviews, the
liaisons from all of FinCEN's top five federal law enforcement
customers specifically highlighted reference manuals as one of the most
useful complex analytic products FinCEN produces. Among the 7 law
enforcement agencies that provided additional information about the
usefulness of these manuals, officials from all 7 agencies noted that
the manuals helped agents to better understand the particular types of
financial transactions that may be used in financial crimes. These
officials reported that their agencies use the reference manuals both
for training purposes and as reference guides in the course of specific
investigations. A liaison from one of FinCEN's top five federal law
enforcement customers noted that the reference manuals that the
liaison's agency posts on its intranet site receive many hits, and
manuals covering topics such as Internet payment mechanisms and wire
transfers have been particularly helpful to agents in the field.
Similarly, according to a senior official from another of these federal
law enforcement customers, reference manuals that cover emerging
issues, such as technologies that are impacting money laundering,
including mobile wire transfers, are particularly helpful for
informational and training purposes.
FinCEN Could Enhance Its Support of Financial Crimes Investigations by
Better Informing Law Enforcement about Its Products and Actively
Soliciting Their Input on Proposed Products and Regulatory Changes:
Better Informing Law Enforcement about the Types of Complex Analytic
Products FinCEN Can Provide and the Availability of Completed Products
Could Help Law Enforcement Utilize the Full Range of FinCEN Products:
While law enforcement agencies we surveyed reported general
satisfaction with FinCEN's complex analytic products, FinCEN could
better inform law enforcement about the types of products it can
produce and the availability of completed analytic products. According
to liaisons from three of FinCEN's top five federal law enforcement
customers, FinCEN does not provide detailed information about each type
of product that would help law enforcement agencies to understand the
types of support FinCEN can provide.[Footnote 31] Moreover, FinCEN's
Web site states that the agency provides "support of complex
investigations" and "strategic analysis," but does not provide further
information, such as detailed descriptions or examples of the various
complex analytic products it can produce, or information on services
and products to better inform stakeholders about available support.
Senior ALD officials also acknowledged that they could clarify and
better communicate to their law enforcement customers the various types
of complex analytic products FinCEN can provide.
In addition, in both interviews and in response to open-ended survey
questions, officials from 7 of the 25 law enforcement agencies we
surveyed, including three of FinCEN's top five federal law enforcement
customers, also indicated that they would like more information about
when completed products become available.[Footnote 32] An official from
one of FinCEN's top five federal law enforcement customers noted that,
in some cases, analyses FinCEN conducts for one customer might also be
useful to the investigations of other financial crimes. While FinCEN
officials acknowledged that its customers would like more information
about when completed products become available, they stated that their
approach to distribution varies from product to product. FinCEN
officials said that they inform stakeholders about available products
in working groups, conferences, and task forces, but noted they do not
have a process to distribute completed analytic products or identify
which law enforcement agencies should receive them.[Footnote 33] In
those cases where FinCEN may decide to more widely distribute a report
initiated in response to a request from a single agency, it first asks
the requesting agency for its permission to do so after removing any
sensitive or agency-specific information as necessary. For example, in
2006, FinCEN completed a study of limited liability companies at the
request of a single law enforcement agency but recognized that this
report would also be useful to a wider audience. Therefore, the agency
subsequently decided to expand the report and made it publicly
available on its Web site so that other law enforcement agencies,
regulators, and interested parties could have access to the report.
FinCEN officials stated that they may also sometimes notify users on
the Secure Outreach system about the availability of some analytic
reports, but acknowledged that not all law enforcement agents use
Secure Outreach on a regular basis so they may not be aware of when
such notifications are posted on the system.[Footnote 34]
However, based on responses to several questions about the availability
of analytic products, the majority of the agencies we surveyed had
limited knowledge of what strategic analysis products FinCEN had
completed that may be useful to them. Specifically, 9 of the 25
agencies noted that they had not received any of the strategic analysis
products FinCEN has issued since 2004, and another 5 indicated that
they had only received one of these products. Similarly, liaisons from
three of FinCEN's top five federal law enforcement customers with whom
we spoke reported that FinCEN does not actively communicate with them
about when completed products become available, and as a result, it is
difficult for these agencies to be aware of all of FinCEN's products
that could be useful in their investigations of financial crimes.
According to FinCEN officials, some of FinCEN's completed analytic
products are suitable for dissemination to a broad law enforcement
audience, while others are targeted to a specific law enforcement
customer or may contain sensitive information and as a result are only
suitable for dissemination to a limited law enforcement audience.
However, a liaison from one of FinCEN's top five federal law
enforcement customers with whom we spoke noted that it is unclear when
and under what circumstances FinCEN decides it can or will attempt to
share those products that other law enforcement agencies may also find
useful. In addition, in an internal report generated by ALD staff in
August 2008, ALD officials acknowledged that law enforcement liaisons
reported that they would like FinCEN to provide clear guidance on the
dissemination of its products.[Footnote 35] FinCEN's mission is to
provide a financial intelligence and analysis network to support the
detection, investigation, and prosecution of domestic and international
money laundering and other financial crimes. By clarifying what
products and services it can provide to its law enforcement customers,
and establishing a process for informing them about the availability of
completed products that may be of use in their investigations, FinCEN
could better ensure that it is effectively carrying out its mission to
support the investigation and prosecution of financial crimes.
Defining the Types of Requests for Complex Analytic Support That FinCEN
Will Accept Could Help Law Enforcement Better Utilize FinCEN's
Expertise in Analyzing the BSA Data:
While FinCEN has informed law enforcement that it is now focusing the
support it provides predominantly on those requests that it considers
to be for complex analytic support, it could better inform law
enforcement about its decision-making process regarding what requests
it will accept or reject so that law enforcement can determine which
requests may warrant FinCEN's involvement. Law enforcement agencies may
submit requests for complex analysis in support of specific
investigations;[Footnote 36] however, in interviews with officials from
FinCEN's top five federal law enforcement customers, liaisons from two
of these agencies stated that they did not fully understand what types
of cases FinCEN is willing and able to support.[Footnote 37] For
example, one of these liaisons stated that he understands that the
agency wants to focus its support on requests that it considers to be
for complex investigative support or strategic analysis. However, he
reported that when his agency tried to seek assistance with a complex
investigation, FinCEN responded that the request involved so much data
that it was unable to handle the volume and complexity of the request.
As a result, he said that his agency needs FinCEN's assistance in
better understanding what size cases the agency's analysts are willing
and able to handle.
Furthermore, in response to an open-ended survey question on FinCEN's
analytic support, officials from two other law enforcement agencies
reported that they do not fully understand FinCEN's decision-making
process for accepting or rejecting requests for support. These agencies
indicated that while they understand that FinCEN has limited staff and
resources to dedicate to analytic support, FinCEN has not been
consistent in responding to their requests for support and does not
always provide explanations why specific requests were rejected. In
addition, in the internal report generated by ALD staff in August 2008,
ALD officials acknowledged confusion among law enforcement customers
about the types of requests FinCEN will accept, as well as law
enforcement agencies' concern that FinCEN does not sufficiently explain
the reasons for declining specific requests for support. The report
stated that FinCEN needs to establish a process for the receipt,
review, and selection of proposals for complex analytic products as
well as to communicate FinCEN's decisions for rejecting requests to law
enforcement.
According to FinCEN officials, the agency has established criteria it
uses to decide whether to accept a request for case support.[Footnote
38] However, while senior FinCEN officials told us that they have
shared the criteria with law enforcement, these officials acknowledged
that the criteria are not precise and are open to interpretation.
Furthermore, they noted that they have not sufficiently explained the
criteria to law enforcement, discussed how they apply the criteria to
individual requests for support, or used them to create guidelines that
would allow law enforcement agencies to easily understand what types of
requests for support FinCEN will accept. ALD's 2008 internal report
also acknowledged that FinCEN has not incorporated its internal
criteria into established standard operating procedures, or documented
them in a way that its customers may access or readily understand. We
have previously reported that using an open and clearly defined
decision-making process is essential for effectively meeting
stakeholder needs.[Footnote 39] Senior officials acknowledged the
report's findings and as a first step, reorganized ALD in October 2009
in order to realign resources to better meet law enforcement's needs.
For example, FinCEN officials reported that they created a new office
within ALD that is responsible for providing proactive analysis of BSA
data and communicating regularly with law enforcement agents in the
field. Officials noted that the goal of the office will be to develop
products and information on BSA data trends and patterns in order to
help inform law enforcement investigations of financial crimes. ALD
also identified the development and implementation of processes to
improve communication with its law enforcement customers as a 2010
priority. ALD created a planning guide for improving communication with
law enforcement that includes a general description of the types of
processes to be implemented, the office responsible for implementing
these processes, identification of the relevant goal or strategic
objective, and quarterly milestones for implementing components of the
plan. While the development of this guide is a step in the right
direction, the guide does not include detailed information on the
specific actions FinCEN plans to take to better assess law
enforcement's needs and to become more transparent to their law
enforcement customers about the division's operations. Identifying the
specific actions FinCEN plans to take to improve communication with law
enforcement will help FinCEN ensure that its operations are designed in
a way as to maximize its usefulness to its law enforcement customers.
Actively Soliciting Input on the Development of Complex Analytic
Products Could Help FinCEN Enhance Their Value to Law Enforcement
Agencies:
While FinCEN communicates with its law enforcement customers about a
variety of issues, the agency could enhance the value of its complex
analytic products by more actively soliciting law enforcement's input
about ongoing or planned analytic work. According to FinCEN officials,
the agency primarily relies on ad hoc communication with law
enforcement agencies, such as talking with law enforcement
representatives located on-site, with law enforcement representatives
at conferences, or with individual agents in the field, to discuss a
variety of issues including its current analytic work. In interviews
with officials from FinCEN's top five federal law enforcement
customers, liaisons from all five agencies reported that FinCEN does
not consistently seek their input about ongoing or planned analytic
work. Four of the liaisons stated that, as a result, they do not have
regular opportunities to provide FinCEN with meaningful input about
what types of products would be useful to them, potentially creating a
gap between the products the agency generates and the products that its
law enforcement customers need and want. For example, a liaison from
one of these four agencies reported that he and other law enforcement
liaisons have asked FinCEN to focus more on completing analyses of
certain BSA activities by geographic area because most law enforcement
agencies do not have the capability to do that kind of analysis in-
house and because it would provide them with a valuable tool in
interpreting what may constitute unusual activity related to an
investigation. However, this official reported that FinCEN has not been
responsive to his agency's suggestions for the types of analytic
products to pursue. Similarly, three other law enforcement liaisons
noted that FinCEN does not provide them with regular opportunities to
make proposals regarding the types of complex analytic products FinCEN
should undertake.
Beyond ad hoc communication with law enforcement agencies, FinCEN does
not have a systematic process for soliciting input from law enforcement
agencies on the development of its complex analytic products. While
FinCEN holds a series of bimonthly meetings with some federal law
enforcement representatives, known as the law enforcement roundtable,
the agency uses it primarily for general information sharing, such as
discussing the current missions of participating agencies and the
offices and divisions within FinCEN or providing updates about the
314(a) process.[Footnote 40] According to FinCEN officials, the agency
does not use the roundtable to discuss ongoing investigations or to
solicit input from law enforcement about the development and
prioritization of its complex analytic products. According to liaisons
from four of FinCEN's top five federal law enforcement customers,
FinCEN could improve the quality and relevance of its products by more
actively soliciting input from law enforcement during the development
of complex analytic products. For example, one of these liaisons noted
that FinCEN does not consistently seek input from those federal law
enforcement agencies with experience in specific issue areas that may
be able to provide subject matter expertise and help inform FinCEN's
analytic work. Furthermore, in their August 2008 internal report, ALD
officials acknowledged the concerns of its law enforcement customers
regarding their lack of opportunities to provide input on FinCEN's
planned complex analytic products, and that FinCEN does not always
solicit or incorporate law enforcement input in the selection of
complex analytic projects. As a solution, the internal report
recommended that the law enforcement roundtable be used as a forum to
discuss proposals for analytic products with FinCEN's law enforcement
customers. While this is a productive step, relying solely on the
roundtable may not allow opportunities for some of FinCEN's other law
enforcement stakeholders to provide input because the roundtable is
typically only attended by federal law enforcement customers and, even
then, not all of these customers are able to regularly attend these
meetings.
FinCEN does use annual surveys and feedback forms to obtain feedback
from law enforcement on the usefulness of some completed products,
although these surveys and forms are not designed to obtain detailed
information on the full range of services and products FinCEN provides.
FinCEN's annual survey is provided to those domestic law enforcement
customers that requested or received case support from FinCEN in the
prior fiscal year. The surveys are designed to obtain feedback on
various aspects of the specific product received, such as the
relevancy, thoroughness, timeliness, and usefulness of the product.
FinCEN also attaches one-page feedback forms to analytic products that
are distributed to law enforcement customers. The feedback forms
contain five questions intended to capture "Yes" or "No" answers on
whether and how the product was useful in an investigation, whether the
product was received in a timely way, if networking with another law
enforcement agency was involved, and if the customer was satisfied
overall with FinCEN's service. However, according to FinCEN officials,
neither the annual survey nor the feedback forms are designed to obtain
detailed information from law enforcement customers on FinCEN's full
range of analytic products. For example, the annual surveys do not
cover other analytic products such as FinCEN's strategic analysis
reports or its technical reference guides. Furthermore, these officials
noted that FinCEN does not survey all of its law enforcement customers
about their satisfaction with FinCEN's services and products; rather,
these surveys are provided only to those law enforcement customers that
requested or received support in the previous year.
Moreover, senior FinCEN officials noted that both the annual survey and
the feedback forms have typically had very low response rates and
FinCEN officials reported that law enforcement does not consistently
complete and return the feedback forms and noted that the forms are not
a source of significant or meaningful feedback from law enforcement.
[Footnote 41] In discussing the limitations of the feedback forms, some
law enforcement officials told us that, in many cases, agents in the
field do not complete them because the type of feedback that can be
provided to FinCEN immediately after receiving the support is very
limited. These officials stated that while law enforcement can
speculate that tactical case support provided by FinCEN will eventually
be helpful in their case, until the case progresses there is no
immediate way for law enforcement to respond to the specific questions
in the feedback form regarding how the information was used and if it
was useful in expanding the investigation or moving toward an
indictment.
Soliciting stakeholder input and involving stakeholders early and
throughout the decision-making process are core principles that we have
previously identified as best practices for effectively meeting
stakeholder needs.[Footnote 42] In addition, Standards for Internal
Control in the Federal Government states that it is essential to ensure
effective communication with external stakeholders that may have a
significant impact on the agency achieving its goals.[Footnote 43]
While FinCEN's annual survey and feedback forms provide law enforcement
agencies with an opportunity to give FinCEN feedback about completed
products, FinCEN does not actively solicit law enforcement input about
ongoing or planned analytic work. FinCEN officials emphasized that law
enforcement also has a responsibility to provide constructive input on
FinCEN's services and products. While we recognize that communication
between FinCEN and its law enforcement customers is a shared
responsibility, actively soliciting stakeholder input will allow FinCEN
to capture stakeholder interests and better incorporate law enforcement
perspectives into the development of complex analytic products. This
will in turn increase the usefulness of these products to a wider law
enforcement audience and maximize the resources spent on these
products. Furthermore, soliciting input from law enforcement agencies
about planned work would provide these agencies with opportunities to
share relevant information from their own investigations and experience
that could make these products of greater use to a broader range of law
enforcement customers.
FinCEN Has Taken Initial Steps to More Actively Solicit Law Enforcement
Input on Proposed Regulatory Actions, but Lacks a Mechanism for
Collecting Sensitive Information:
While FinCEN has recently taken initial steps to more actively solicit
input on proposed regulatory actions, FinCEN has no mechanism to
collect law enforcement sensitive information in a nonpublic rulemaking
docket that could be pertinent to making decisions regarding proposed
changes. Regulatory changes instituted by FinCEN can affect the content
or structure of BSA data used in law enforcement investigations as well
as law enforcement's efforts to indict and prosecute financial crimes.
For example, in 2008 FinCEN developed a proposal to renumber the
portion of Title 31 of the Code of Federal Regulations which
encompasses the regulations promulgated under the BSA and the USA
PATRIOT Act related to financial recordkeeping and reporting of
currency and foreign transactions. In discussing the potential impact
of this proposal, an official from one federal law enforcement agency
with a mission that includes a focus on anti-money laundering stated
that renumbering the regulations would have a detrimental effect on his
agency's day-to-day operations. Because the agency's ongoing
indictments and prosecutions of financial crimes are directly linked to
very specific regulatory language outlined in the Title 31 regulations,
he stated that renumbering these regulations would affect how his
office and other federal law enforcement agencies document and track
existing investigations. While FinCEN did communicate with some law
enforcement customers about the proposed regulatory change, liaisons
from two of FinCEN's top five federal law enforcement customers told us
that FinCEN did not solicit their input about the potential impact of
the change to the Title 31 regulations on their operations before
proceeding with plans to implement the regulatory change. Additionally,
liaisons from four of FinCEN's top five federal law enforcement
customers reported concerns that their agencies do not have sufficient
opportunities to provide input when FinCEN is considering proposed
regulatory changes.
In February 2009, we reported on similar concerns regarding law
enforcement's opportunities to provide input to FinCEN on proposed
revisions to Suspicious Activity Report (SAR) forms that institutions
file with FinCEN when they detect known or suspected violations of laws
or regulations.[Footnote 44] Specifically, we found that
representatives from law enforcement agencies with liaisons located at
FinCEN reported that they were not involved in identifying issues or
concerns that could be addressed through revisions to the form for
filing SAR data. The report noted that the SAR form contains
information that is critical for investigations of money laundering,
terrorist financing, and other financial crimes, so it is important
that changes to this form be designed to collect the information that
is most useful for law enforcement.[Footnote 45] In this report, we
recommended that FinCEN further develop and document its strategy to
fully incorporate best practices to help enhance and sustain
collaboration among federal agencies in the form change process and
distribute that documentation to all stakeholders. FinCEN officials
noted that while the agency had taken steps to revise the forms change
process, it generally agreed with GAO's recommendation to further
document and communicate the recently revised process in order to
strengthen collaboration among all stakeholders.
The internal report ALD generated in August 2008 recognized that
changes to BSA regulations have the potential to alter the kind of
information that financial institutions report as well as federal law
enforcement agencies' concerns that FinCEN does not generally engage
them in the identification and resolution of regulatory issues that
might influence law enforcement operations. The report further
acknowledged law enforcement's views that FinCEN typically reported
planned regulatory changes to them after the changes were to be
implemented rather than first seeking their input on the need for the
changes or other possible solutions. Similarly, senior FinCEN officials
told us that the agency recognizes the need to do a better job of
obtaining law enforcement input on proposed regulatory changes in the
future.
In one recent case, FinCEN took steps to more actively solicit input
from law enforcement on a proposed regulatory change. Specifically, in
developing regulations in 2009 related to stored value cards such as
prepaid debit cards and gifts cards, in addition to using the law
enforcement roundtable to inform agencies about planned regulatory
changes, FinCEN held multiple meetings with representatives from its
top five federal law enforcement customers specifically designed to
obtain their input and provide recommendations on developing the
proposed regulation.[Footnote 46] FinCEN documented this input,
provided law enforcement agencies with the opportunity to ensure that
it had accurately captured their concerns, and asked them to further
elaborate on issues identified as critical to address in developing the
proposed regulation. FinCEN officials noted that a number of factors
helped to facilitate its efforts to more effectively coordinate with
law enforcement in this case. Specifically, legislation requires them
to work in consultation with the Secretary of Homeland Security, to
issue regulations implementing the BSA, regarding the sale, issuance,
redemption, or international transport of stored value, including
stored value cards.[Footnote 47] Similarly, FinCEN officials noted that
they were able to coordinate their efforts with previously established
working groups on stored value cards within the law enforcement
community. FinCEN's efforts to actively solicit law enforcement input
in this case are encouraging, and continuing such efforts would help
ensure that law enforcement input is considered before regulatory
changes are made.
Once FinCEN has decided to move forward with a proposed regulatory
change, it follows the process laid out in the Administrative Procedure
Act (APA) for obtaining official comments on the proposal from
interested stakeholders including regulators, financial institutions,
and law enforcement agencies. The act establishes three basic
requirements for notice and comment rulemaking: (1) publication of a
general notice of the proposed rule in the Federal Register, referred
to as the notice of proposed rulemaking (NPRM); (2) solicitation and
acceptance of data and other information from the public in response to
the NPRM; and (3) publication of the final rule.[Footnote 48] However,
liaisons from four of FinCEN's top five federal law enforcement
customers reported that the public record is not always the most
appropriate venue for providing comments on proposed regulatory changes
because their comments often contain law enforcement sensitive
information. According to these officials, raising these concerns in a
public forum may compromise key investigative techniques or strategies
used in ongoing investigations. While agencies generally publish a
rulemaking docket that includes all relevant information and public
comments pertaining to the development of the rule, some agencies have
a process to exclude nonpublic information from this docket.[Footnote
49] This information can include, but is not limited to, law
enforcement sensitive material that would disclose techniques or
procedures for law enforcement investigations or prosecutions.[Footnote
50] According to FinCEN officials, FinCEN does not currently have a
systematic process for soliciting law enforcement-sensitive comments on
proposed regulatory changes in a nonpublic docket. The importance of
stakeholder input in the process of proposing regulatory changes is
well established--it is the basis for the public comment period in the
NPRM process. Establishing a mechanism to solicit law enforcement
sensitive information as a part of this comment period could improve
FinCEN's efforts to receive important information necessary to making
decisions about proposed regulatory changes.
Conclusions:
As technology has evolved and increasing numbers of law enforcement
customers have gained direct access to BSA data, FinCEN has recognized
the need to increase the production of more sophisticated complex
analytic products. However, to maximize the benefits of this
transition, FinCEN needs to have a clear understanding of what complex
analytic products its law enforcement customers may need, as well as to
keep them informed about key information regarding its process for
selecting and developing these products. By providing clarification to
law enforcement agencies about the various types of complex analytic
products it can provide and establishing a process for informing law
enforcement agencies about the availability of these products, FinCEN
could help ensure that law enforcement agencies better understand and
more fully utilize FinCEN's products in support of their
investigations, in order to better fulfill its mission. Moreover,
FinCEN's efforts to realign resources to better meet law enforcement's
needs through the reorganization of ALD and the development of a
planning guide to improve communication with its law enforcement
customers are positive steps. However, identifying the specific actions
FinCEN plans to take in order to better assess law enforcement's needs
and to become more transparent to its law enforcement customers about
the division's operations will help FinCEN ensure that going forward,
its operations are designed in such a way as to maximize the usefulness
of its support to its law enforcement customers.
While FinCEN's annual survey and feedback forms provide law enforcement
with opportunities to give FinCEN feedback on some completed products,
FinCEN could also benefit from soliciting input from law enforcement
agencies regarding its selection or development of ongoing and planned
complex analytic products. By actively working with its law enforcement
customers to identify ways to improve communication, FinCEN could help
ensure that as it continues to emphasize the production of these
products, it is maximizing the relevance of these products to its law
enforcement customers. ALD's August 2008 internal report recognizes the
potential benefits of soliciting input from stakeholders in its law
enforcement roundtable meetings on how FinCEN develops its analytic
products. However, doing so before work is initiated and throughout the
development process could help ensure that FinCEN is not only better
informed of law enforcement agencies' needs but is better able to take
advantage of its law enforcement customers' subject matter expertise in
conducting its work. Finally, developing a mechanism to solicit law
enforcement sensitive information as part of the public comment period
for proposed regulatory changes could improve FinCEN's efforts to
receive important information necessary to make decisions about the
implementation of these changes.
Recommendations for Executive Action:
To help ensure that FinCEN maximizes the relevance and usefulness of
the support it provides, we recommend that the Director of FinCEN work
in conjunction with its law enforcement customers to take the following
four actions:
* Clarify and communicate to law enforcement agencies the various types
of complex analytic products FinCEN can provide and establish a process
for informing law enforcement agencies about the availability of these
products.
* Complete a plan, including identifying the specific actions FinCEN
will take, to better assess law enforcement needs, and make the
division's operations more transparent to FinCEN's law enforcement
customers. This plan should include a mechanism for FinCEN to
communicate to law enforcement agencies its decision-making process for
selecting complex analytic products to pursue and why FinCEN rejects a
request.
* Establish a systematic process for actively soliciting input from law
enforcement agencies and incorporating this input into the selection
and development of its analytic products.
* Develop a mechanism to collect law enforcement sensitive information
from law enforcement agencies during the public comment period of the
NPRM process.
Agency Comments and Our Evaluation:
We provided a draft of this report to the heads of the Departments of
Defense, Justice, Homeland Security, and the Treasury. On November 20,
2009, we received written comments from FinCEN, which are summarized
below and reprinted in appendix II. The Department of Defense and the
Department of Justice provided technical comments, which we
incorporated into this report, where appropriate. On November 17, 2009,
the audit liaison for the Department of Homeland Security stated that
the department had no comments. In written comments on this report, the
FinCEN Director stated that FinCEN concurred with GAO's recommendations
to improve communications and support to the law enforcement community.
After receiving a copy of our draft report for comment, FinCEN provided
us with additional information documenting that it had reorganized ALD
in order to realign resources to better meet law enforcement's needs.
The FinCEN Director noted that the realignment better positions the
bureau to move forward with actions identified in the ALD internal
report, along with the recommendations outlined in our report. As a
result, we modified the recommendation language in our draft report to
reflect the work that FinCEN had already done.
With regard to our recommendation that FinCEN establish a process to
inform law enforcement about the availability of completed products,
FinCEN officials noted that they typically observe the "third-party
rule" on dissemination of information obtained from the requesting
agency and, in some cases, this may limit their ability to share
products that are completed in response to a request from a single
customer. The rule generally provides that information properly
released by one agency to another agency cannot be released by the
recipient agency to a third agency without prior knowledge and consent
of the agency that originally provided the information. The third-party
rule applies to all data and information FinCEN receives from the
agencies with which it works on a specific project. However, officials
further stated that they are committed to looking for ways to better
publicize FinCEN's analytic work and will continue to do so within the
framework of adequately protecting the information provided to them.
While we recognize the need for FinCEN to protect sensitive
information, we believe that establishing a process to clarify and
communicate to law enforcement when and under what circumstances FinCEN
can or will attempt to share analytic products with other law
enforcement customers will help ensure that it is effectively carrying
out its mission to support the investigation and prosecution of
financial crimes.
We are sending copies of this report to interested congressional
committees, the Secretary of the Treasury, the Director of FinCEN, and
any other interested parties. In addition, this report also is
available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-8777, or larencee@gao.gov. Contact points for
our Office of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report are
listed in appendix VI.
Signed by:
Eileen Regen Larence:
Director, Homeland Security and Justice Issues:
[End of section]
Appendix I: List of Agencies GAO Surveyed:
1; U.S. Immigration and Customs Enforcement;
Federal agency: [Check];
One of FinCEN's top five federal law enforcement customers: [Check].
2; Drug Enforcement Administration;
Federal agency: [Check];
One of FinCEN's top five federal law enforcement customers: [Check].
3; Federal Bureau of Investigation;
Federal agency: [Check];
One of FinCEN's top five federal law enforcement customers: [Check].
4; Internal Revenue Service--Criminal Investigation Division;
Federal agency: [Check];
One of FinCEN's top five federal law enforcement customers: [Check].
5; U.S. Secret Service;
Federal agency: [Check];
One of FinCEN's top five federal law enforcement customers: [Check].
6; Bureau of Alcohol, Tobacco, Firearms, and Explosives;
Federal agency: [Check].
7; U.S. Postal Inspection Service;
Federal agency: [Check].
8; U.S. Customs and Border Protection;
Federal agency: [Check].
9; Army Criminal Investigations Division;
Federal agency: [Check].
10; U.S. Attorneys Office--Eastern District of New York;
Federal agency: [Check].
11; Department of Justice--Asset Forfeiture and Money Laundering
Section;
Federal agency: [Check].
12; U.S. Marshals Service;
Federal agency: [Check].
13; U.S. Air Force Office of Special Investigations;
Federal agency: [Check].
14; Defense Criminal Investigative Service;
Federal agency: [Check].
15; Naval Criminal Investigative Service;
Federal agency: [Check].
16; Ohio Bureau of Criminal Identification & Investigation;
State agency: [Check].
17; Arizona Department of Public Safety;
State agency: [Check].
18; California Department of Justice;
State agency: [Check].
19; Florida Department of Law Enforcement;
State agency: [Check].
20; Illinois State Police;
State agency: [Check].
21; Texas Department of Public Safety;
State agency: [Check].
22; New Jersey Division of Criminal Justice;
State agency: [Check].
23; Virginia State Police;
State agency: [Check].
24; New York District Attorney;
State agency: [Check].
25; San Francisco High-Intensity Financial Crime Area (HIFCA).
26; Chicago HIFCA.
27; Los Angeles HIFCA.
28; New York HIFCA.
29; Puerto Rico HIFCA.
Source: GAO.
[End of table]
[End of section]
Appendix II: Comments from the Department of the Treasury:
Department Of The Treasury:
Director:
Financial Crimes Enforcement Network:
[hyperlink, http://www.fincen.gov]
November 20, 2009:
Ms. Eileen Larence:
Director, Homeland Security and Justice:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, D.C. 20515:
Dear Ms. Larence:
Thank you for the opportunity to review and comment on the Government
Accountability Office (GAO) draft report entitled, Anti-Money
Laundering: Improved Communication Could Enhance the Support FinCEN
Provides to Law Enforcement. We appreciate GAO's efforts to review the
products and services developed by the Financial Crimes Enforcement
Network (FinCEN) in support of law enforcement agencies, and are
pleased that the report recognizes the value of FinCEN's efforts and
the unique expertise it provides related to the analysis of Bank
Secrecy Act (BSA) information. FinCEN's ability to provide unique
expertise for the analysis of BSA information stems from our
relationships with all involved in deterring and detecting financial
crimes, which includes not only law enforcement agencies, but also
federal and state regulators, financial institutions from seven
different industries, and over 100 foreign countries and jurisdictions.
As your report illustrates, FinCEN plays an important role in
supporting law enforcement agencies' prosecution of financial crimes.
As FinCEN Director, I have personally engaged with the leadership of
each of the five major federal law enforcement agencies, and FinCEN
analysts and liaisons engage with federal, state, and local law
enforcement representatives on a daily basis. Balancing the needs and
interests of more than 300 federal, state, and local law enforcement
agencies with differing authorities and jurisdictions requires
continual assessment and adjustment.
FinCEN concurs with GAO's recommendations to improve communications and
support to the law enforcement community. Our internal assessment,
referenced in GAO's report, reinforces FinCEN's commitment to better
serve law enforcement agencies. We are pleased to report that the
realignment of FinCEN's analytic resources is complete. This
realignment better positions the bureau to move forward with actions
identified in our internal report, along with the recommendations
outlined in the GAO report.
We would like to emphasize one important issue with regards to the
GAO's recommendations to better inform law enforcement about our
products' availability and for accepting their law enforcement
sensitive input on proposed regulatory changes. As noted in the GAO
report, the information contained within our analytical products
oftentimes contains sensitive information provided by the requesting
agency. In these cases, we observe the "third party rule" on
dissemination of information obtained from the requesting agency and,
in some cases, this may limit our abilities to share products that are
completed in response to a request from one of our customers. With that
said, we are committed to constantly looking for ways to better
publicize our analytical work and will continue to do so within the
framework of our duty to adequately protect the information we are
entrusted with. With regards to receiving law enforcement sensitive
comments on regulatory proposals and including these comments in a non-
public rulemaking docket, this is a concept we are looking into, and
will pursue if it is legally and technically possible to do so while
still meeting the overriding need to protect this sensitive
information.
Again, we appreciate GAO's efforts to review FinCEN's efforts to
support law enforcement agencies, and look forward to updating you at a
later date on the plans and progress towards the report's
recommendations. If you have any questions, please feel free to contact
Nicholas Colucci, Associate Director, Analysis and Liaison Division, at
703905-5175.
Sincerely,
Signed by:
James H. Freis, Jr.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Eileen Larence, (202) 512-8777 or larencee@gao.gov:
Acknowledgments:
In addition to the contact named above, Kirk Kiester, Assistant
Director; Samantha Carter; Miriam Hill; and Hugh Paquette made
significant contributions to the work. David Alexander and George
Quinn, Jr., assisted with design, methodology, and data analysis. Billy
Commons and Jan Montgomery provided legal support. Linda Miller and
Sally Williamson provided assistance in report preparation.
[End of section]
Related GAO Products:
Bank Secrecy Act: Suspicious Activity Report Use Is Increasing, but
FinCEN Needs to Further Develop and Document Its Form Revision Process.
[hyperlink, http://www.gao.gov/products/GAO-09-226]. Washington, D.C.:
February 27, 2009.
Bank Secrecy Act: Federal Agencies Should Take Action to Further
Improve Coordination and Information-Sharing Efforts. [hyperlink,
http://www.gao.gov/products/GAO-09-227]. Washington, D.C.: February 12,
2009.
Information Security: Further Actions Needed to Address Risks to Bank
Secrecy Act Data. [hyperlink, http://www.gao.gov/products/GAO-09-195].
Washington, D.C.: January 30, 2009.
USA Patriot Act: Better Interagency Coordination and Implementing
Guidance for Section 311 Could Improve U.S. Anti-Money Laundering
Efforts. [hyperlink, http://www.gao.gov/products/GAO-08-1058].
Washington, D.C.: September 30, 2008.
Bank Secrecy Act: Increased Use of Exemption Provisions Could Reduce
Currency Transaction Reporting While Maintaining Usefulness to Law
Enforcement Efforts. [hyperlink,
http://www.gao.gov/products/GAO-08-355]. Washington, D.C.: February 21,
2008.
Bank Secrecy Act: Surveys of Financial Institutions and CTR Users, an E-
supplement to GAO-08-355. [hyperlink,
http://www.gao.gov/products/GAO-08-385SP]. Washington, D.C.: February
21, 2008.
Telecommunications: FCC Should Take Steps to Ensure Equal Access to
Rulemaking Information. [hyperlink,
http://www.gao.gov/products/GAO-07-1046]. Washington, D.C.: September
6, 2007.
Bank Secrecy Act: FinCEN and IRS Need to Improve and Better Coordinate
Compliance and Data Management Efforts. [hyperlink,
http://www.gao.gov/products/GAO-07-212]. Washington, D.C.: December 15,
2006.
International Financial Crime: Treasury's Roles and Responsibilities
Relating to Selected Provisions of the USA Patriot Act. [hyperlink,
http://www.gao.gov/products/GAO-06-483]. Washington, D.C.: May 12,
2006.
Bank Secrecy Act: Opportunities Exist for FinCEN and the Banking
Regulators to Further Strengthen the Framework for Consistent BSA
Oversight. [hyperlink, http://www.gao.gov/products/GAO-06-386].
Washington, D.C.: April 28, 2006.
Fisheries Management: Core Principles and a Strategic Approach Would
Enhance Stakeholder Participation in Developing Quota-Based Programs.
[hyperlink, http://www.gao.gov/products/GAO-06-289]. Washington, D.C.:
February 23, 2006.
Federal Rulemaking: Past Reviews and Emerging Trends Suggest Issues
That Merit Congressional Attention. [hyperlink,
http://www.gao.gov/products/GAO-06-228T]. Washington, D.C. November 1,
2005.
USA Patriot Act: Additional Guidance Could Improve Implementation of
Regulations Related to Customer Identification and Information Sharing
Procedures. [hyperlink, http://www.gao.gov/products/GAO-05-412].
Washington, D.C.: May 6, 2005.
Standards for Internal Control in the Federal Government. [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. Washington, D.C.:
November 1, 1999.
Money Laundering: FinCEN's Law Enforcement Support Role Is Evolving.
[hyperlink, http://www.gao.gov/products/GAO/GGD-98-117]. Washington,
D.C.: June 19, 1998.
[End of section]
Footnotes:
[1] The BSA has three main objectives: create an investigative audit
trail through regulatory reporting standards; impose civil and criminal
penalties for noncompliance; and improve the detection of criminal,
tax, and regulatory violations.
[2] Bank Secrecy Act, titles I and II of Pub. L. No. 91-508, 84 Stat.
1114 (1970) (codified as amended in 12 U.S.C. §§ 1829b, 1951-1959; 31
U.S.C. §§ 5311-5332). The BSA requires financial institutions to
maintain records on financial transactions including suspicious
activity that may be related to money laundering or other financial
crimes.
[3] The Secretary of the Treasury has the authority to administer the
BSA and its implementing regulations. This authority has been delegated
to the Director of FinCEN. Therefore, we refer to the authority of the
Secretary of the Treasury under the BSA synonymously with that of the
Director of FinCEN.
[4] BSA data reported by financial institutions are processed and
warehoused by the Internal Revenue Service's Detroit Computing Center
in the Currency Banking and Retrieval System (CBRS), more generally
known as the BSA database. The BSA database can be accessed through a
Web-based interface called WebCBRS. The majority of law enforcement
users currently access the BSA database through FinCEN's Gateway/Secure
Outreach computer system, which functions as a portal through FinCEN's
information technology infrastructure to the BSA database. For more
information, see GAO, Information Security: Further Actions Needed to
Address Risks to Bank Secrecy Act Data, GAO-09-195 (Washington, D.C.:
Jan. 30, 2009).
[5] FinCEN also collaborates with international counterparts in other
countries to facilitate sharing of financial information between
domestic and international law enforcement agencies. For more
information, see GAO, International Financial Crime: Treasury's Roles
and Responsibilities Relating to Selected Provisions of the USA PATRIOT
Act, [hyperlink, http://www.gao.gov/products/GAO-06-483] (Washington,
D.C.: May 12, 2006).
[6] Pub. L. No. 107-56, 115 Stat. 272 (2001).
[7] ALD consists of the Offices of Intelligence Support, Law
Enforcement Support, Liaison Services, and Special Programs
Development.
[8] Nonprobability sampling is a method of sampling when nonstatistical
judgment is used to select members of the sample, using specific
characteristics of the population as criteria. Results from
nonprobability samples cannot be used to make inferences about a
population, because in a nonprobability sample some elements of the
population being studied have no chance or an unknown chance of being
selected as part of the sample.
[9] Fiscal year 2007 was the last full year for which data were
available at the time we were selecting our sample.
[10] We conducted pretests with two agencies to refine our questions,
develop new questions, clarify any ambiguous portions of the
questionnaire, and identify any potential biased questions. Because we
surveyed a nonprobability sample of law enforcement agencies, there are
no sampling errors. There are, however, practical difficulties
associated with conducting any survey that may introduce errors,
commonly referred to as nonsampling errors. For example, differences in
how a particular question is interpreted or the information sources
available to respondents can introduce unwanted variability into the
survey results. We attempted to minimize these nonsampling errors
through careful construction of the questionnaire and the pretests
mentioned above.
[11] HIFCAs are high-risk areas established under the Money Laundering
and Financial Crimes Strategy Act of 1998, Pub. L. No. 105-310, 112
Stat. 2941, as a means of concentrating and coordinating law
enforcement efforts at the federal, state, and local levels to combat
money laundering or related financial crime in regions designated as
high-intensity money laundering zones. There is a money-laundering
action team associated with each HIFCA region composed of relevant
federal, state, and local enforcement authorities, prosecutors, and
financial regulators. For these purposes of our survey, we considered
each HIFCA to be an agency.
[12] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November. 1999) and GAO, Fisheries Management: Core
Principles and a Strategic Approach Would Enhance Stakeholder
Participation in Developing Quota-Based Programs, [hyperlink,
http://www.gao.gov/products/GAO-06-289] (Washington, D.C.: Feb. 23,
2006).
[13] Under the regulations administered by FinCEN, a SAR is generally
required when a transaction is conducted or attempted by, at, or
through a financial institution that involves or aggregates at least
$5,000 in funds or other assets and the institution knows, suspects, or
has reason to suspect that the transaction: involves funds derived from
illegal activities; is intended or conducted in order to hide or
disguise funds or assets derived from illegal activities as part of a
plan to violate or evade any federal law or regulation or to avoid any
transaction reporting requirement under federal law or regulation; is
designed to evade any reporting requirement under federal law or other
BSA requirement; has no business or apparent lawful purpose; or the
transaction is not the sort in which the customer would normally be
expected to engage and there is no reasonable explanation known for the
transaction; or involves use of the institution to facilitate criminal
activity. See 31 C.F.R. §§ 103.15-.21.
[14] Pub. L. No. 107-56, § 358, 115 Stat. 272, 326 (2001).
[15] These additional resources were primarily allocated to FinCEN's
regulatory and international functions to meet demand associated with
expansion of these mission areas.
[16] The five divisions are ALD, the International Programs Division,
the Management Programs Division, the Regulatory Policy and Programs
Division, and the Technology Solutions and Services Division.
[17] ALD was formed in late fiscal year 2004; therefore, full-time
equivalent (FTE) data are not available before fiscal year 2005.
Additionally, for comparative purposes, ALD FTE data for fiscal year
2005 does not include FTEs in the Office of Global Support, which was
moved to the International Programs Division in fiscal year 2009. Among
the 77 employees currently in ALD, 43 are analysts, 7 of whom perform
management or administrative functions, and 7 more of which are
stationed outside of FinCEN.
[18] FinCEN also has access to other databases, including LexisNexis,
Dun and Bradstreet, as well as a variety of other financial and law
enforcement databases.
[19] The flow of currency is the introduction of U.S. dollar banknotes
into a foreign country and their repatriation to the United States.
[20] RPPD consists of the Office of Regulatory Policy, Office of
Compliance, Office of Enforcement, Office of Regulatory Analysis, and
Office of Outreach Resources. RPPD develops, modifies, and interprets
regulations and regularly responds to requests for clarification of
these regulations from state and federal regulatory agencies and the
financial industry. It also promotes financial institutions' compliance
with BSA regulations by overseeing those federal regulators with
delegated BSA responsibilities in various financial sectors, taking
appropriate enforcement action against financial institutions that
violate the BSA, and promoting improved consistency in BSA compliance
examinations through development of an examiners' manual. For more
information on our larger body of work on FinCEN and its administration
of BSA data, see GAO, Bank Secrecy Act: Federal Agencies Should Take
Action to Further Improve Coordination and Information-Sharing Efforts,
[hyperlink, http://www.gao.gov/products/GAO-09-227] (Washington, D.C.:
Feb. 12, 2009).
[21] Section 314(a) of the USA PATRIOT Act required the Secretary of
the Treasury to issue regulations to encourage further cooperation
among financial institutions, financial regulatory authorities, and law
enforcement authorities to promote sharing information regarding
individuals, entities, and organizations engaged in or reasonably
suspected of engaging in terrorist acts or money laundering activities,
and to permit the sharing of information by law enforcement and
regulatory authorities with financial institutions regarding persons
reasonably suspected of engaging in terrorist acts or money laundering
activity. 31 U.S.C. § 5311 note (Cooperative Efforts to Deter Money
Laundering). See also 31 C.F.R. § 103.100.
[22] Comments submitted on proposed regulatory changes are generally
made in a public record referred to as a public rulemaking docket which
serves as the official repository for documents or information related
to an agency's rulemaking activities and may include any public
comments received and other information used by agency decision makers.
[23] Although a total of 25 law enforcement agencies responded to our
questionnaire, all 25 agencies did not provide responses to each
question. For example, a total of 20 agencies responded to the question
regarding which FinCEN service or product they found to be most useful,
and 22 agencies responded to the question regarding which FinCEN
service they use most often.
[24] FinCEN provides agencies with user access credentials and access
to the data through a portal that FinCEN operates, controls, and
monitors.
[25] A GAO report issued in January 2009 found that FinCEN and the IRS
must act to better secure BSA data and systems. The report states that
although these Treasury agencies have enacted numerous related
controls, significant weaknesses existed that impaired their ability to
ensure the confidentiality, integrity, and availability of these
information and systems. See [hyperlink,
http://www.gao.gov/products/GAO-09-195].
[26] Because the BSA data are housed at IRS's Detroit Computing Center,
IRS officials can access the data directly through their agency's
intranet site.
[27] The 314(a) process is not currently made available to state law
enforcement agencies. 31 C.F.R. § 103.100.
[28] To ensure that Section 314(a) inquiries are being used only for
appropriate cases, FinCEN's Section 314(a) process requires federal law
enforcement to provide assurances that the request has been subject to
appropriate scrutiny at the agency level and that the matter under
investigation satisfies FinCEN's standards for processing a formal
Section 314(a) inquiry. As such, FinCEN requires each requester to
submit a form--which FinCEN reviews before forwarding the request to
financial institutions--certifying that the investigation is based on
credible evidence of terrorist financing or money laundering.
[29] FinCEN did not track the number of basic queries requested by law
enforcement agencies before fiscal year 2004, so FinCEN was unable to
provide us these data for fiscal years 2001 through 2003.
[30] Law enforcement agencies were asked about their reasons for
requesting any type of analytic support from FinCEN, including requests
for both basic and complex analytic products.
[31] Our interviews with law enforcement agencies including interviews
with the liaisons of the five federal agencies that use the most FinCEN
services and products involved aspects of each agency's experiences
working with FinCEN. As a consequence, we did not ask the same
questions of all liaisons in these interviews. Officials with these
agencies volunteered this information; therefore, we do not know the
extent to which the other agencies had concerns regarding outreach.
[32] Because officials volunteered this information in both interviews
and in response to open-ended survey questions, we do not know the
extent to which other agencies had similar concerns.
[33] For example, FinCEN reported that, in fiscal year 2009, ALD staff
attended 19 conferences to deliver presentations about specific
technical reference manuals and attended 17 conferences to do the same
for their services and products in general.
[34] The majority of users access BSA data through FinCEN's Secure
Outreach system, which functions as a portal through FinCEN's
information technology infrastructure to BSA data. Law enforcement
agents typically only log into Secure Outreach when conducting queries
of the BSA data during open or ongoing investigations.
[35] In 2008, ALD conducted an internal assessment of the support the
division provides to its domestic law enforcement customers. The
resulting internal report, provided to senior FinCEN management in
August 2008, assesses the division's efforts to measure the
requirements of FinCEN's law enforcement customers and align the
resources and efforts of ALD personnel to satisfy those requirements.
This report outlined several recommendations designed to enhance FinCEN
support and better meet the needs of its law enforcement customers.
[36] As noted earlier, this type of support may involve large-scale, in-
depth BSA data analysis related to specific law enforcement
investigations.
[37] Because officials volunteered information about their concerns
during interviews, we do not know the extent to which the other three
agencies may have similar concerns.
[38] FinCEN officials informed us that ALD applies the following
internal criteria in determining whether or not to accept a request for
case support: (1) the BSA data available that relates to the case must
enable FinCEN to do substantive analysis that FinCEN officials believe
will have an impact on the case (although, according to FinCEN, there
is not currently a requirement for a minimum or maximum number of
records); (2) the requesting law enforcement agency must be willing to
brief FinCEN analysts so that FinCEN can better focus its efforts in
support of the request; (3) the potential complexity of the case and
the BSA data involved are considerable--FinCEN prefers to accept cases
in which it will analyze the data in unique ways that the law
enforcement agency would not be able to accomplish with its own
software and/or expertise; and (4) the requested case support should
benefit FinCEN and enhance FinCEN's knowledge--FinCEN chooses cases
that will help it in targeting its proactive analyses or allow it to
demonstrate to Congress that it is working on current issues of
interest.
[39] [hyperlink, http://www.gao.gov/products/GAO-06-289].
[40] The law enforcement roundtable is typically attended by those
federal law enforcement agencies that have liaisons located at FinCEN,
though law enforcement agencies that do not have on-site liaisons may
also attend the meetings. FinCEN officials acknowledged that not all
federal law enforcement agencies attend the meetings and that state and
local law enforcement agencies rarely, if ever, attend.
[41] FinCEN reported that the overall response rates were 54 and 40
percent, respectively, for the investigative case report and target
report surveys distributed in 2007.
[42] [hyperlink, http://www.gao.gov/products/GAO-06-28].
[43] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[44] For more information, see GAO, Bank Secrecy Act: Suspicious
Activity Report Use Is Increasing, but FinCEN Needs to Further Develop
and Document Its Form Revision Process, [hyperlink,
http://www.gao.gov/products/GAO-09-226] (Washington, D.C.: Feb. 27,
2009).
[45] GAO reported that FinCEN had developed a new process for revising
forms but, as it is currently outlined, the process may not achieve
some potential benefits that could come from closer adherence to
practices that can help enhance and sustain collaboration, such as
greater consensus from all stakeholders on proposed SAR form revisions,
and fuller documentation of the process. For more information, see
[hyperlink, http://www.gao.gov/products/GAO-09-226].
[46] Stored value cards are prepaid debit cards that use magnetic
stripe technology to store information about funds that have been
prepaid to the card. Payroll cards, government benefit cards, gift
cards, and telephone cards are examples of stored value cards. Stored
value cards often allow holders to transfer money values anonymously
without being subject to the same controls required of institutions
that deal with credit and debit cards. While there are many forms and
uses of stored value cards in the marketplace, there are two main
categories: (1) single-purpose or "closed-loop" cards, such as gift
cards, which can only be used to purchase goods at particular
retailers, or prepaid telephone cards, which can only be used to make
telephone calls, and (2) multipurpose or "open-loop" cards, which can
be used to make debit transactions at a wide variety of retail
locations, as well as for other purposes, such as receiving direct
deposits and withdrawing cash from ATMs.
[47] Credit Card Accountability Responsibility and Disclosure Act of
2009, Pub. L. No. 111-24, § 503, 123 Stat. 1734, 1756 (2009).
[48] Generally, the APA is the principal law governing how agencies
make rules. The APA prescribes uniform standards for rulemaking and
most federal rules are promulgated using the APA-established informal
rulemaking process, also known as "notice and comment" rulemaking.
Generally, a notice of proposed rulemaking (NPRM) is published in the
Federal Register announcing an agency's intent to promulgate a rule to
the public. The APA requires that the NPRM include a statement of the
time, place, and nature of the public rulemaking proceedings, reference
to the legal authority under which the rule is proposed, and the terms
or substance of the proposed rule or a description of the subjects and
issues involved. The NPRM also generally includes the timing and manner
in which the public may comment on the proposed rule. E.O. 12866 states
that most rulemakings should include a comment period of 60 days, and
most agencies do provide a 60-day or longer comment period for complex
or controversial rules. After issuance of the NPRM, agencies are
generally required to place public comments as well as other supporting
materials in a rulemaking docket which must be available for public
inspection.
[49] Some agencies have a specific regulatory provision that allows
them to exclude from the public docket submitted information not
subject to mandatory disclosure under the Freedom of Information Act. 5
U.S.C. § 552(b). (For example, 28 C.F.R. § 50.17 (d) (Department of
Justice)).
[50] Other information that is exempt from mandatory disclosure under
the Freedom of Information Act includes, but is not limited to, certain
trade secrets and commercial or financial information; personnel and
medical files and similar files, the disclosure of which would
constitute a clearly unwarranted invasion of personal privacy; certain
records or information compiled for law enforcement purposes; and
geological and geophysical information and data concerning wells.
[End of section]
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