Combating Illicit Financing
Treasury's Office of Terrorism and Financial Intelligence Could Manage More Effectively to Achieve Its Mission Gao ID: GAO-09-794 September 24, 2009In 2004, Congress combined preexisting and newly created units to form the Office of Terrorism and Financial Intelligence (TFI) within the Department of the Treasury (Treasury). TFI's mission is to integrate intelligence and enforcement functions to (1) safeguard the financial system against illicit use and (2) combat rogue nations, terrorist facilitators, and other national security threats. In the 5 years since TFI's creation, questioned have been raised about how TFI is managed and allocates its resources. As a result, GAO was asked to analyze how TFI (1) implements its functions, particularly in collaboration with interagency partners, (2) conducts strategic resource planning, and (3) measures its performance. To conduct this analysis, GAO reviewed Treasury and TFI planning documents, performance reports, and workforce data, and interviewed officials from Treasury and its key interagency partners.
TFI undertakes five functions, each implemented by a TFI component, in order to achieve its mission. TFI officials cite the analysis of financial intelligence as a critical part of TFI's efforts because it underlies TFI's ability to utilize many of its tools. They said that the creation of OIA was critical to Treasury's ability to effectively identify illicit financial networks. To achieve its mission, TFI's five components often work with each other, other U.S. government agencies, the private sector, or foreign governments. Officials from TFI and its interagency partners cited strong collaboration in many areas, such as effective information sharing between FinCEN and the Justice Department (Justice). Officials differed, however, about the quality of interagency collaboration involving international forums. Treasury officials who led this collaboration stated that it runs smoothly and that they were unaware of any significant concerns, while Justice and State officials reported declining collaboration and unclear mechanisms to enhance or sustain it. While TFI and some of its components have conducted selected strategic resource planning activities, TFI as a unit has not fully adopted key practices that enhance such efforts. For example, TFI and its components have produced multiple strategic planning documents in recent years, but the objectives in some of these documents are not clearly aligned with resources needed to achieve them. As a result, it may be unclear whether TFI has sufficient resources to address its objectives. Also, though TFI has undertaken some workforce planning activities, it lacks a process for performing comprehensive strategic workforce planning. Thus, it is unclear whether TFI is able to effectively address persistent workforce challenges. Also, TFI has not yet developed appropriate performance measures, changing their number and substance each year. Though TFI's current measures fully address many attributes of effective performance measures, they do not cover all TFI core program activities. TFI officials acknowledge the need for improvement and have worked since 2007 to develop one overall performance measure to assess TFI. Yet questions remain about when TFI will implement its new measure and whether it will effectively gauge TFI's performance.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-794, Combating Illicit Financing: Treasury's Office of Terrorism and Financial Intelligence Could Manage More Effectively to Achieve Its Mission
This is the accessible text file for GAO report number GAO-09-794
entitled 'Combating Illicit Financing: Treasury's Office of Terrorism
and Financial Intelligence Could Manage More Effectively to Achieve Its
Mission' which was released on October 26, 2009.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to the Committee on Finance, United States Senate:
United States Government Accountability Office:
GAO:
September 2009:
Combating Illicit Financing:
Treasury's Office of Terrorism and Financial Intelligence Could Manage
More Effectively to Achieve Its Mission:
GAO-09-794:
GAO Highlights:
Highlights of GAO-09-794, a report to the Committee on Finance, United
States Senate.
Why GAO Did This Study:
In 2004, Congress combined preexisting and newly created units to form
the Office of Terrorism and Financial Intelligence (TFI) within the
Department of the Treasury (Treasury). TFI‘s mission is to integrate
intelligence and enforcement functions to (1) safeguard the financial
system against illicit use and (2) combat rogue nations, terrorist
facilitators, and other national security threats. In the 5 years since
TFI‘s creation, questioned have been raised about how TFI is managed
and allocates its resources. As a result, GAO was asked to analyze how
TFI (1) implements its functions, particularly in collaboration with
interagency partners, (2) conducts strategic resource planning, and (3)
measures its performance. To conduct this analysis, GAO reviewed
Treasury and TFI planning documents, performance reports, and workforce
data, and interviewed officials from Treasury and its key interagency
partners.
What GAO Found:
TFI undertakes five functions, each implemented by a TFI component, in
order to achieve its mission, as shown in the following table.
Table: TFI Components and Functions:
Main function: Build international coalitions;
TFI component: Office of Terrorist Financing and Financial Crime;
Year formed: 2004.
Main function: Analyze financial intelligence;
TFI component: Office of Intelligence and Analysis (OIA);
Year formed: 2004.
Main function: Administer and enforce the Bank Secrecy Act;
TFI component: Financial Crimes Enforcement Network (FinCEN);
Year formed: 1990.
Main function: Administer and enforce sanctions;
TFI component: Office of Foreign Assets Control;
Year formed: 1950.
Main function: Administer forfeited funds;
TFI component: Treasury Executive Office for Asset Forfeiture;
Year formed: 1992.
Source: Treasury.
[End of table]
TFI officials cite the analysis of financial intelligence as a critical
part of TFI‘s efforts because it underlies TFI‘s ability to utilize
many of its tools. They said that the creation of OIA was critical to
Treasury‘s ability to effectively identify illicit financial networks.
To achieve its mission, TFI‘s five components often work with each
other, other U.S. government agencies, the private sector, or foreign
governments. Officials from TFI and its interagency partners cited
strong collaboration in many areas, such as effective information
sharing between FinCEN and the Justice Department (Justice). Officials
differed, however, about the quality of interagency collaboration
involving international forums. Treasury officials who led this
collaboration stated that it runs smoothly and that they were unaware
of any significant concerns, while Justice and State officials reported
declining collaboration and unclear mechanisms to enhance or sustain
it.
While TFI and some of its components have conducted selected strategic
resource planning activities, TFI as a unit has not fully adopted key
practices that enhance such efforts. For example, TFI and its
components have produced multiple strategic planning documents in
recent years, but the objectives in some of these documents are not
clearly aligned with resources needed to achieve them. As a result, it
may be unclear whether TFI has sufficient resources to address its
objectives. Also, though TFI has undertaken some workforce planning
activities, it lacks a process for performing comprehensive strategic
workforce planning. Thus, it is unclear whether TFI is able to
effectively address persistent workforce challenges.
Also, TFI has not yet developed appropriate performance measures,
changing their number and substance each year. Though TFI‘s current
measures fully address many attributes of effective performance
measures, they do not cover all TFI core program activities. TFI
officials acknowledge the need for improvement and have worked since
2007 to develop one overall performance measure to assess TFI. Yet
questions remain about when TFI will implement its new measure and
whether it will effectively gauge TFI‘s performance.
What GAO Recommends:
GAO recommends, among other things, that the Secretary of the Treasury
direct TFI to develop and implement (1) mechanisms to improve
interagency collaborative efforts, (2) a process to improve strategic
resource planning, and (3) performance measures that exhibit the key
attributes of successful performance measures. Treasury commented that
it plans to redouble some current efforts and undertake some new
efforts that address GAO‘s recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-09-794] or key
components. For more information, contact Loren Yager at (202) 512-4347
or YagerL@gao.gov.
[End of section]
Contents:
Letter:
Background:
TFI Performs Five Functions to Fulfill Its Mission, but Agencies Differ
about the Quality of Some Interagency Collaboration:
TFI Has Not Clearly Aligned Its Resources with Priorities or Performed
Comprehensive Workforce Planning:
TFI Has Not Yet Developed an Appropriate Set of Performance Measures,
but Continues to Work to Improve Its Efforts:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Current U.S. Sanctions Programs:
Appendix III: GAO Assessment of TFI's Fiscal Year 2008 Performance
Measures:
Appendix IV: Comments from the Department of the Treasury:
Appendix V: GAO Contact and Staff Acknowledgments:
Table:
Table 1: GAO's Key Attributes of Successful Performance Measures:
Figures:
Figure 1: TFI Organizational Chart:
Figure 2: TFI Staffing Levels, Fiscal Years 2005-2008:
Figure 3: TFI Funding Levels, Fiscal Years 2005-2008:
Figure 4: Changes in TFI Performance Measures, Fiscal Years 2005 to
2008:
Figure 5: TFI's Fiscal Year 2008 Performance Measures Relative to the
Key Attributes of Successful Performance Measures:
Abbreviations:
BSA: Bank Secrecy Act:
FATF: Financial Action Task Force:
FSRB: FATF-Style Regional Body:
FTE: full-time equivalent:
OFAC: Office of Foreign Assets Control:
OIA: Office of Intelligence and Analysis:
OMB: Office of Management and Budget:
OSPPM: Office of Strategic Planning and Performance Management:
OTA: Office of Technical Assistance:
PART: Program Assessment Rating Tool:
SAR: suspicious activity report:
TEOAF: Treasury Executive Office for Asset Forfeiture:
TFFC: Office of Terrorist Financing and Financial Crimes:
TFI: Office of Terrorism and Financial Intelligence:
USA PATRIOT: Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism:
WMD: weapons of mass destruction:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 24, 2009:
The Honorable Max Baucus:
Chairman:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
While the globalization of finance and trade has the potential to
enhance economic prosperity and stability across the world, some
individuals, organizations, and countries that pose a threat to U.S.
national security have exploited worldwide financial channels.
Governmentwide strategies, such as the 2006 National Strategy for
Combating Terrorism and the 2007 National Money Laundering Strategy
acknowledge the threats posed by the illicit use of the international
financial system by terrorist organizations, weapons of mass
destruction (WMD) proliferators, drug kingpins, and other national
security threats. In 2004 Congress established the Office of Terrorism
and Financial Intelligence (TFI) to provide policy, strategic, and
operational direction to the Department of the Treasury's (Treasury)
efforts to address issues such as terrorism financing, financial
crimes, and intelligence analysis.[Footnote 1]
Based on your interest in TFI, this report assesses how TFI (1)
implements functions to fulfill its mission, particularly in
collaboration with interagency partners; (2) conducts strategic
resource planning; and (3) measures its performance.
To meet these objectives, we reviewed documents and interviewed
officials from Treasury and its key interagency partners. To analyze
TFI's implementation of its functions, we reviewed Treasury reports and
documents related to its efforts since 2004. We also interviewed
officials from Treasury and its key interagency partners, the
Departments of State (State) and Justice (Justice), to review
interagency collaboration efforts. To analyze TFI's efforts to conduct
strategic resource planning, we reviewed documentation relating to
TFI's strategies (notably strategic plans), analyzed data on TFI
resources for 2005 through 2008, and interviewed TFI officials involved
in resource planning, including the Under Secretary for Terrorism and
Financial Intelligence. To analyze how TFI measures its performance, we
reviewed Treasury's performance measures included in its performance
and accountability reports for 2005-2008 and interviewed officials from
TFI and Treasury's Office of Strategic Planning and Performance
Management. We conducted this performance audit from July 2008 to
September 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 obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
See appendix I for additional details regarding our scope and
methodology.
Background:
After the September 11, 2001, terrorist attacks, Congress passed the
Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001,
[Footnote 2] which amended and broadened the scope of the Bank Secrecy
Act (BSA)[Footnote 3] to include additional financial industry sectors
and a focus on the financing of terrorism. Subsequently, Congress
passed the Intelligence Authorization Act for 2004,[Footnote 4] which
established Treasury's Office of Intelligence and Analysis (OIA). OIA
is a member of the Intelligence Community, as defined under Executive
Order 12333, as amended. The Intelligence Reform and Terrorism
Prevention Act of 2004[Footnote 5] identified the Secretary of the
Treasury or his or her designee as the lead U.S. government official to
the Financial Action Task Force (FATF),[Footnote 6] to continue to
convene an interagency working group on FATF issues. TFI's mission is
to marshal Treasury's policy, enforcement, regulatory, and intelligence
functions in order to safeguard the U.S. financial system from abuse
and sever the lines of financial support to international terrorists,
WMD proliferators, narcotics traffickers, money launderers, and other
threats to U.S. national security.
The formation of TFI combined both existing and new units of Treasury.
Five key components are included under the umbrella of TFI:
* Office of Foreign Assets Control (OFAC), formed in 1950, administers
and enforces sanctions.
* Financial Crimes Enforcement Network (FinCEN), formed in 1990,
administers and enforces the BSA and serves as the United States'
financial intelligence unit (FIU).[Footnote 7]
* Treasury Executive Office for Asset Forfeiture (TEOAF), formed in
1992, administers the Treasury Forfeiture Fund--the receipt account for
the deposit of non-tax forfeitures made by member agencies.
* Office of Terrorist Financing and Financial Crimes (TFFC),
established in 2004, serves as TFI's policy and outreach arm.
* OIA, also established in 2004, performs Treasury's intelligence
functions, integrating Treasury into the larger Intelligence Community,
and providing intelligence support to Treasury leadership.
FinCEN is a Treasury bureau; [Footnote 8] the other four components are
offices within TFI, which is a part of Treasury's structure of
departmental offices. Figure 1 shows TFI's current organizational
structure.
Figure 1: TFI Organizational Chart:
[Refer to PDF for image: organizational chart]
Top level:
Office of Terrorism and Financial Intelligence:
Second level:
* Financial Crimes Enforcement Network;
* Office of Terrorist Financing and Financial Crimes;
* Office of Intelligence and Analysis;
* Treasury Executive Office for Asset Forfeiture;
* Office of Foreign Assets Control.
Source: GAO analysis of Treasury documents.
[End of figure]
To achieve its mission, TFI components often work with the following:
* Other U.S. government agencies. For instance, OFAC works with State
and Justice, among others, to designate individuals and organizations
under 21 separate sanctions programs.[Footnote 9] TFFC also works with
State, Justice, and other agencies in developing and advocating a U.S.
position in international forums related to money laundering and
illicit financing. In addition, TEOAF works with State and Justice to
administer sharing of large case forfeiture proceeds with foreign
governments, pursuant to international treaties, whose law enforcement
personnel cooperated with U.S. federal investigations.
* Other TFI components. For example, OIA provides information to OFAC
to assist in making decisions regarding whether to pursue designations
of individuals and organizations. For completed designations, OIA also
works with OFAC to declassify intelligence information for public
dissemination.
* Private sector. For example, in its role as the Secretary's delegated
administrator of the BSA, FinCEN regularly interacts with the private
sector, including the financial sector. One such mechanism for
maintaining formal ties to the private sector is Treasury's BSA
Advisory Group. FinCEN also conducts informal consultations with
financial institutions regarding their individual financial
intelligence efforts.
* Foreign governments and international organizations. Treasury heads
the U.S. delegation to the FATF, an international body that develops
and implements multilateral standards relating to anti-money laundering
and counterterrorist financing. TFFC leads this effort on behalf of
Treasury. Similarly, FinCEN works with foreign governments to develop
and strengthen capabilities of their FIUs as well as to respond to
requests for assistance from foreign FIUs, which totaled more than
1,000 in fiscal year 2008.
As shown in figure 2, the size of TFI's staff has grown from
approximately 500 in fiscal year 2005 to approximately 650 in fiscal
year 2008. FinCEN, with 299 full-time equivalents (FTE) in fiscal year
2008, is TFI's largest component, and OIA gained the most staff--90--
from fiscal years 2005 through 2008.
Figure 2: TFI Staffing Levels, Fiscal Years 2005-2008:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal Year: 2005;
FinCen: $291 million;
OFAC: $132 million;
OIA: $45 million;
TFFC: $19 million;
TEOAF: $20 million;
Total: $507 million.
Fiscal Year: 2006;
FinCen: $299 million;
OFAC: $125 million;
OIA: $91 million;
TFFC: $28 million;
TEOAF: $21 million;
Total: $564 million.
Fiscal Year: 2007;
FinCen: $290 million;
OFAC: $139 million;
OIA: $105 million;
TFFC: $30 million;
TEOAF: $21 million;
Total: $585 million.
Fiscal Year: 2008;
FinCen: $299 million;
OFAC: $155.5 million;
OIA: $135 million;
TFFC: $34 million;
TEOAF: $22 million;
Total: $645.5 million.
Source: GAO analysis of TFI data.
[End of figure]
As shown in figure 3, TFI's budget has grown from approximately $110
million in fiscal year 2005 to approximately $140 million in fiscal
year 2008. With a budget of approximately $86 million, FinCEN has the
largest budget of any TFI component. In addition, OIA's budget has
grown at the greatest rate, from about $9 million in fiscal year 2005
to about $20 million in fiscal year 2008.
Figure 3: TFI Funding Levels, Fiscal Years 2005-2008:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal Year: 2005;
FinCen: $71.9 million;
OFAC: $24.5 million;
OIA: $8.9 million;
TFFC: $3.6 million;
Total: $108.9 million.
Fiscal Year: 2006;
FinCen: $72.9 million;
OFAC: $21.8 million;
OIA: $11.6 million;
TFFC: $4.1 million;
Total: $110.4 million.
Fiscal Year: 2007;
FinCen: $73.2 million;
OFAC: $23.8 million;
OIA: $13.3 million;
TFFC: $4.6 million;
Total: $114.9 million.
Fiscal Year: 2008;
FinCen: $85.8 million;
OFAC: $28.8 million;
OIA: $19.7 million;
TFFC: $5.4 million;
Total: $139.7 million.
Source: GAO analysis of TFI data.
Note: TEOAF's budget is not congressionally appropriated. It is derived
from the Treasury Forfeiture Fund.
[End of figure]
TFI Performs Five Functions to Fulfill Its Mission, but Agencies Differ
about the Quality of Some Interagency Collaboration:
According to TFI, it undertakes five functions in order to achieve its
mission. Officials from TFI and its interagency partners cited strong
collaboration with TFI in several areas, but differ about the quality
of collaboration regarding U.S. participation in some international
forums.
TFI Performs Five Functions to Fulfill Its Mission:
According to TFI, it undertakes five functions to safeguard the
financial system from illicit use and to combat rogue nations,
terrorist supporters, WMD proliferators, money launderers, drug
kingpins, and other national security threats. These functions are (1)
building international coalitions, (2) analyzing financial
intelligence, (3) administering and enforcing the BSA, (4)
administering and enforcing sanctions, and (5) administering forfeited
funds.
Building International Coalitions:
TFI employs two primary means to build international coalitions to
support U.S. national security interests. These are deepening
engagement in international forums and improving international
partners' capacity.
* Deepening engagement in international forums. TFI and other U.S.
agencies participate in several international organizations intended to
strengthen the international financial system so that it cannot be
exploited by criminal networks. Two examples are the FATF and the
Egmont Group.[Footnote 10] TFFC leads the U.S. delegation to the FATF,
while FinCEN leads U.S. participation in the Egmont Group. According to
TFI officials, U.S. participation in such organizations provides a
unique opportunity to engage with international counterparts in the
effort to develop international standards and a framework for countries
to implement legal regimes that protect the international financial
system from abuse.
TFI also uses international forums to advance the U.S. agenda in areas
such as nonproliferation. For example, according to TFI, it has been
working closely with other G-7 countries to determine what steps can be
taken to isolate proliferators from the international financial system
through multilateral action.[Footnote 11] For instance, according to
TFI officials, they are working with State to encourage the more than
85 countries that participate in the Proliferation Security Initiative
to use financial measures to combat proliferation support networks.
[Footnote 12]
In addition to playing a leadership role in these organizations and
forums, TFI officials report that they are also working to expand these
organizations' membership so as to broaden the reach of international
financial standards. For example, as of March 2009, FinCEN was
sponsoring 12 countries' membership in the Egmont Group, including
Afghanistan, Saudi Arabia, Pakistan, and Yemen. According to FinCEN
officials, the addition of such new members will greatly strengthen
FinCEN's ability to obtain valuable information related to the
activities of illicit financial networks.
* Improving international partners' capacity. As part of TFI, FinCEN
has made engagement with foreign FIUs in the detection and deterrence
of crime one of its strategic objectives. To accomplish this objective,
FinCEN has undertaken a variety of efforts to strengthen the global
network of FIUs. For example, according to FinCEN officials, they
engage in a variety of cooperative efforts with other FIUs aimed at
fostering productive working relationships and best practices. In
addition, according to TFI officials, they participate in mutual
evaluation studies, as part of its participation in the FATF, to
identify measures to improve other FATF members' regulatory regimes
related to combating money laundering and terrorist financing.[Footnote
13] For example, in fiscal year 2008, the FATF performed six mutual
evaluations; the United States delegation, led by TFFC, sent
representatives to serve as assessors for four of these mutual
evaluations.
Analyzing Financial Intelligence:
TFI officials cite OIA's analysis of financial intelligence as a
critical part of TFI's efforts because it underlies TFI's ability to
utilize many of its tools. The first step in disrupting and dismantling
illicit financial networks is identifying those networks, according to
TFI officials. They said that the creation of OIA was critical to TFI's
ability to effectively identify these illicit financial networks. As a
member of the broader intelligence community, OIA performs analysis of
intelligence information related to national security threats with a
view toward potential action and utilization of tools available to TFI.
Staff in other TFI components and TFI management then use this
intelligence analysis to draft papers to implement such strategies or
actions.
In addition, TFI utilizes intelligence analysis to assess the impact of
the actions it takes. For example, according to the Under Secretary for
TFI, intelligence analysts have assessed the impact of previous
financial actions taken to address the national security threat posed
by North Korea. Those assessments were then used to shape the U.S.
policy response to the most recent missile and nuclear tests by North
Korea.
Administering and Enforcing the BSA:
According to TFI officials, FinCEN's administration of the BSA plays a
key role in TFI's ability to achieve its mission. The BSA includes a
variety of reporting and record-keeping requirements that provide
useful information to law enforcement and regulatory agencies. For
example, pursuant to the BSA, Treasury (FinCEN) requires financial
institutions to report suspicious financial activities relevant to a
possible violation of law. Such suspicious activity reports (SAR) are
then analyzed by FinCEN and made available to the law enforcement and
regulatory communities.[Footnote 14] In 2007, financial institutions
filed nearly 1.3 million SARs, which federal, state, and local law
enforcement agencies use in their investigations of money laundering,
terrorist financing, and other financial crimes.
The BSA, as amended by the USA PATRIOT Act, also grants Treasury
additional authorities, which are delegated to FinCEN, to combat money
laundering and terrorist financing. For example, Section 311 of the USA
PATRIOT Act amended the BSA to provide an additional tool to safeguard
the U.S. financial system from illicit foreign financial institutions
and networks.[Footnote 15] According to TFI officials, Section 311 is
an important and extraordinarily powerful tool, as it authorizes
Treasury to find a foreign jurisdiction, foreign financial institution,
type of account, or class of transaction as being of "primary money
laundering concern." Such a finding enables Treasury to impose a range
of special measures that U.S. financial institutions must take to
protect against illicit financing risks posed by the target. These
special measures range from enhanced record-keeping and reporting
requirements up to prohibiting U.S. financial institutions from
maintaining certain accounts for foreign banks if they involve foreign
jurisdictions or institutions found to be of primary money laundering
concern.
Administering and Enforcing Sanctions:
The imposition of economic sanctions has been a long-standing tool for
addressing a range of national security threats. OFAC currently
maintains primary responsibility for administering more than 20
separate sanctions programs. (See appendix II for a list of current
U.S. sanctions programs.) These sanctions programs fall into two
categories: (1) country-based programs that apply sanctions to an
entire country--such as Cuba, Iran, or Sudan--and (2) targeted, list-
based programs that address individuals or entities engaged in specific
types of activities such as terrorism, WMD proliferation, or narcotics
trafficking. For example, according to TFI officials, they use the
authorities under the International Emergency Economic Powers Act and
Executive Order 13224 to designate those who provide support to
terrorists, freezing any assets they have under U.S. jurisdiction and
preventing U.S. persons from doing business with them. From fiscal
years 2004 through 2008, Treasury designated or supported the
designation of more than 1,900 individuals and organizations under
various sanctions programs.
To help ensure compliance with U.S. sanctions programs, Treasury also
has the authority to impose civil penalties on individuals and
organizations that violate U.S. sanctions. From 2004 through 2008, OFAC
imposed more than 1,500 civil penalties related to violations of its
sanctions programs. As a result, OFAC assessed nearly $15 million in
penalties.
Administering Forfeited Funds:
According to TEOAF, an important tool in the U.S. fight against money
laundering is asset forfeiture.[Footnote 16] Forfeiture assists in the
achievement of TFI's mission in two ways. First, asset forfeiture
strips away the profit from illegal activity, thus making it less
attractive. According to TEOAF, in fiscal year 2008 it received more
than $500 million in total forfeiture revenue; the majority, after net
expenses, came from forfeitures processed by Immigration and Customs
Enforcement and the Internal Revenue Service-Criminal Investigation.
Second, according to the Director of TEOAF, the revenue derived from
such forfeited assets can be used to fund federal law enforcement
activities, including initiatives directed at further combating illicit
financing networks. For example, in fiscal year 2008, TEOAF provided
approximately $1 million in funding to Immigration and Customs
Enforcement to provide training to international partners.
Specifically, the funding was provided to allow the expansion of
existing training activities to assist in combating bulk cash smuggling
by terrorist groups and other criminal networks.
Despite General Approval of Interagency Collaboration with TFI,
Agencies Differ on Quality of Collaboration for International Forums:
Collaborating with interagency partners is important to TFI's ability
to perform effectively. Many of the tools TFI utilizes to combat
national security threats involve multiple agencies reviewing the
proposed action. For example, according to Treasury officials, they
consult with officials from State, Justice, and the Department of
Homeland Security on decisions to designate individuals or
organizations that support terrorism. In addition, other tools, such as
advocating actions to strengthen the international financial system
through the FATF, benefit from the expertise and input from
collaboration with a variety of agencies, including State, Justice, the
Securities and Exchange Commission, the Department of Homeland
Security, and others. Prior GAO work has identified several practices
that can enhance and sustain such interagency collaboration.[Footnote
17] One such practice is establishing compatible policies, procedures,
and other means to operate across agency boundaries. Another practice
is developing a mechanism for monitoring, evaluating, and reporting on
the results of collaborative efforts.[Footnote 18]
Officials at TFI and other agencies said that they generally are
satisfied with the quality of interagency collaboration. TFI's
interagency partners report close, collaborative relationships in many
situations. For example, State officials told us that they have strong
working relationships with officials in almost all TFI components. They
highlighted their collaboration with TFI during the designation process
and suggested that it is generally effective. These officials commented
that if State has information from its embassies abroad that indicates
that a specific designation would be particularly damaging to U.S.
foreign policy interests, they relay this information to Treasury and
discuss alternative approaches. State officials added that the
designation process operates effectively, even when agencies may have
disagreements over a particular designation, because the National
Security Council leads a process to coordinate terrorism designations.
It serves as an impartial arbiter that prevents any single agency from
exerting too much influence. In addition, Justice officials described a
strong working relationship with FinCEN regarding asset forfeiture and
money laundering issues. Specifically, they recounted effective
communication and information sharing. For example, Justice officials
told us that FinCEN has granted Justice access to BSA data, thus
allowing Justice to perform its own analyses for law enforcement
purposes. Additionally, Justice officials said that FinCEN has helped
them utilize its network of international contacts at other countries'
FIUs.
However, TFI's interagency partners have expressed concerns regarding
collaboration in other areas. For example, in September 2008, we
reported that State and Justice expressed concerns regarding Treasury's
consultations with them when implementing Section 311 of the USA
PATRIOT Act.[Footnote 19] In addition, TFI and other agencies'
officials differed about the effectiveness of interagency collaboration
for the function of building international coalitions, particularly
when participating in the international forums of the FATF and FATF-
Style Regional Bodies (FSRB). On the one hand, TFFC officials suggest
that interagency collaboration regarding the FATF and FSRBs has been
highly effective over the past 5 years and that Treasury's ability to
effectively lead the U.S. delegation has been greatly strengthened by
the participation of a wide variety of regulatory, law enforcement, and
other agencies.[Footnote 20] The Deputy Assistant Secretary for
Terrorist Financing and Financial Crimes added that during this time,
there have been no major disagreements between agencies regarding the
positions the United States should take in such international forums.
TFI officials also stated that interagency collaboration runs smoothly
and that they were unaware of any significant concerns regarding the
quality of interagency collaboration.
Officials from State and Justice, however, indicated that the quality
of interagency collaboration regarding the FATF and FSRBs has declined
substantially over the past 5 years. These officials expressed two
types of concerns regarding TFI's collaboration with other agencies
regarding participation in international forums: (1) the exclusion of
non-Treasury personnel in key situations and (2) the extent to which
TFI makes unilateral decisions regarding the U.S. government position.
With regard to TFI's exclusion of non-Treasury personnel in key
situations, TFI and other agencies differ. State and Justice officials
cited several examples of situations they believe undermined U.S.
effectiveness at combating illicit financing networks. For example,
according to State officials, a State official who has taken the
necessary training has not been allowed to participate as a member of
the U.S. team conducting FATF mutual evaluations. According to these
officials, this results in the exclusion of senior staff with
significant experience and expertise that could benefit the evaluation
teams. In response, TFFC officials indicated that they have included
other agencies in the mutual evaluation process. For example, they
indicated that officials from Justice and other agencies participated
in at least six mutual evaluations from 2004 through 2009. According to
TFI, it encourages and attempts to facilitate such participation by
other agency officials who have attended the necessary 1-week training
course and whose agencies will pay for their travel to foreign
countries to conduct and defend their evaluations.
Additionally, Justice officials stated that when TFI allows other
agencies to review and comment on U.S. policy proposals related to anti-
money laundering and counterterrorist financing, it consistently
provides too little time for review. Specifically, Justice officials
told us that TFI regularly provides agencies 24 hours to review and
provide comments on policy proposals, which may make it impossible for
agencies to conduct an appropriate review and effectively excludes them
from the process. According to TFI officials, they distribute materials
as soon as possible; for FATF materials this occurs within 24 hours of
receiving them, though they acknowledge that they often are provided
short deadlines by the FATF Secretariat. According to TFI officials,
they sometimes request an extension of the deadline or submit the U.S.
response late in order to obtain interagency views.
With regard to concerns about TFI's unilateral decision making, TFI and
other agencies also differed. State and Justice officials cited a
situation related to the U.S. position on how to treat the European
Union (as a single entity or as separate countries) for the purposes of
cash-smuggling regulations. According to State and Justice officials,
during interagency meetings prior to the FATF working group session at
which the issue was to be discussed, a consensus U.S. position was
developed. However, State and Justice officials said that at the FATF
plenary meetings, Treasury officials advocated a position that was
different from the consensus U.S. position agreed to in advance of the
meeting. A Treasury official told us that the agency did not deviate
from the consensus position agreed to before the meeting.
Justice, State, and Treasury officials said that there is no guidance
specifying how the interagency process should operate to develop U.S.
positions in advance of FATF meetings. Specifically, there is no
guidance regarding the process or time frames for circulating or
approving U.S. policy statements to be made at international meetings
to discuss anti-money laundering and counterterrorist financing issues.
In addition, there is no formal mechanism for monitoring, evaluating,
or reporting on the results of agencies' collaborative efforts.
According to State and Justice officials, the inconsistent quality of
interagency collaboration may undermine some efforts to combat illicit
financing networks through international forums. State officials
suggested that the exclusion of non-Treasury personnel may mean that
expertise available within the U.S. government is not effectively
utilized, thus potentially weakening the United States' ability to
influence international partners' actions. In addition, they suggested
that unilateral action by Treasury in international forums may cause
confusion among international partners regarding the nature of the U.S.
position on key issues. On the basis of comments they received from
foreign officials, Justice and State officials concluded that such
confusion might weaken the United States' ability to influence the
activities of international partners. TFFC responded that it has not
observed any confusion among its international partners in FATF
regarding the U.S. position on key issues.
Justice and State officials did not raise similar concerns concerning
FinCEN's collaboration when participating with them on issues related
to the Egmont Group. In contrast, Justice officials expressed some
criticisms of more recent collaboration with OFAC on issues such as
information sharing. OFAC responded that it has regular contact with
Justice with respect to enforcement matters and that the two agencies
have an ongoing dialogue regarding information sharing. OFAC also noted
that only a small subset of its enforcement cases involve the type of
knowing conduct that is appropriate for referral to criminal
authorities.
TFI Has Not Clearly Aligned Its Resources with Priorities or Performed
Comprehensive Workforce Planning:
While TFI has conducted strategic planning activities at different
levels within the organization, TFI as a unit has not fully adopted
certain key practices. In particular, TFI has not clearly aligned its
resources with its priorities. TFI's strategic planning documents do
not consistently integrate discussion of the resources needed to
achieve TFI's strategic objectives. In addition, TFI's resource levels
for each component cannot be clearly linked to its workload. Also,
while some TFI components have taken the initiative to conduct some
workforce planning activities, TFI management has not developed a
process for conducting comprehensive strategic workforce planning.
TFI Has Not Clearly Aligned Its Resources with Its Priorities:
Our review of TFI's and its components' strategic planning documents
and discussions with TFI officials showed that TFI has not clearly
aligned its resources with its priorities. TFI officials indicated that
priorities could be identified in TFI's strategic plan. TFI identified
four relevant strategic plans: one for TFI as a whole and one each for
FinCEN, OIA, and TEOAF.[Footnote 21]
Strategic plans are used to communicate what an organization seeks to
achieve in the upcoming years, according to Treasury instructions. The
goals and strategies presented in the plan provide a road map for both
the organization and its stakeholders. Strategic plans should guide the
formulation and execution of the budget as well as other decision
making that shapes and guides the organization. These plans are a tool
for setting priorities and allocating resources consistent with these
priorities, according to Treasury. Our previous work has shown that
strategic plans should clearly link goals and objectives to the
resources needed to achieve them and are especially important in those
cases where agencies submit a strategic plan for each of their major
components and a strategic overview that under the guidance is to show
the linkages among these plans.[Footnote 22] Government Performance and
Results Act guidance also establishes six key elements of successful
strategic plans, and Treasury's instructions suggest plan formats.
[Footnote 23]
However, we found that TFI's and its components' strategic plans do not
consistently integrate discussion of the resources necessary to achieve
TFI objectives. Specifically, we found that:
* FinCEN's[Footnote 24] and TEOAF's[Footnote 25] strategic plans
contain some discussion of the resources needed to achieve their
objectives.
* TFI's and OIA's[Footnote 26] strategic plans do not contain
discussion of the resources needed to achieve their objectives.
* OFAC and TFFC do not currently have strategic plans.
While TFI's strategic plan includes a mission statement; a list of
threats, goals, and objectives; and means and strategies, it does not
include any discussion or analysis of TFI's resource needs. Moreover,
TFI's strategic plan lists all four of its goals, and each of its means
and strategies under each goal as equivalent: it does not indicate any
prioritization among its various goals, means, and strategies.[Footnote
27]
The Under Secretary for TFI said that he uses the annual budget process
to align resources with priorities. However, two reasons suggest why
the results of the budget process do not necessarily reflect TFI's
strategic priorities. First, there are many other factors that affect
the budget process that are unrelated to TFI's priorities. The amount
of resources TFI seeks is integrated into a larger Treasury budget
request, which may entail modifying TFI's request. Congress, then, may
choose to provide more or less than the amount of resources to TFI that
Treasury requested. Second, the annual budget process reflects
priorities only for a given year, unlike strategic plans, which are
intended to be multiyear documents and thus reflect longer-term
priorities.
Further, the linkage between the resources allocated to each TFI
component and its workload is unclear. Estimated workload measures for
each of TFI's components show a growth in workload since 2005, but it
is unclear how this growth relates to resource increases. For example,
one measure of FinCEN's workload--the number of SARs it must analyze--
has increased 50 percent and the number of employees in FinCEN has
increased 3 percent.[Footnote 28] In addition, TEOAF has seen an 83
percent increase in the value of seized assets it manages and the
number of FTEs has grown 10 percent.[Footnote 29] Further, the number
of OFAC licensing actions increased 56 percent while the number of FTEs
grew 18 percent.[Footnote 30] Additionally, OIA experienced a more than
500 percent increase in intelligence taskings from 2006 to 2008 and has
received a 200 percent increase in FTEs.[Footnote 31] Finally, TFFC
estimates that its workload related to developing policy papers,
legislative and rulemaking papers, trips, and public outreach events
increased between 100 and 200 percent from 2005 to 2009; its FTEs grew
nearly 80 percent from 2005 to 2008.[Footnote 32]
According to TFI officials, their ability to allocate resources to
their highest priorities is constrained in some circumstances. The
Under Secretary and other TFI officials identified activities related
to Iran and North Korea as persistent priorities. However, OFAC
officials noted that in spite of the importance of Iran-and North Korea-
related activities, they must expend a significant amount of resources
on implementing the Cuba embargo. With regard to acting on specific
licensing requests for exports and travel to Cuba, according to OFAC
officials, they have little flexibility under the law.[Footnote 33]
OFAC is required to process all license applications that it receives.
For 2005 through 2008, this amounted to more than 200,000 licensing
actions--more than 95 percent of which related to the Cuba program. In
2008 alone, OFAC responded to nearly 60,000 licensing requests related
to the Cuba travel program. OFAC officials characterized this situation
as a resource burden.
In contrast, according to OFAC officials, they have some flexibility
regarding how they enforce the Cuba sanctions program, for example,
through the assessment of civil penalties for violations. According to
OFAC officials, for many years (through 2005), OFAC assessed a large
number of civil penalties related to the Cuba travel regulations. As
violations of these regulations have a relatively small financial
penalty associated with them, the average penalty amount was relatively
low. Since 2006, according to OFAC officials, they have consciously
utilized the flexibility they are allowed in order to dedicate their
enforcement resources to higher-value areas (e.g., those related to
trade with Cuba, Iran, and North Korea). As a result, the number of
penalties assessed annually related to the Cuba sanctions program has
dropped significantly, from 498 in 2005 to 46 in 2008. At the same
time, the average value of OFAC's civil penalties for violations of all
sanctions programs has increased significantly, from approximately
$2,400 in 2005 to nearly $31,000 in 2008.
TFI Has Not Taken a Comprehensive Approach to Strategic Workforce
Planning:
Despite efforts by some components, TFI management has not yet
conducted comprehensive activities to address the key principles of
strategic workforce planning. According to the Under Secretary, TFI's
workforce is its greatest asset, and ensuring that it is the right size
and includes the right skills is critical to TFI's future ability to
achieve its mission. Prior GAO work has identified key principles to
assist agencies in conducting strategic workforce planning.[Footnote
34] Among these principles are (1) involving top management, employees,
and other stakeholders in developing, communicating, and implementing
the strategic workforce plan, and (2) monitoring and evaluating the
agency's progress toward its human capital goals and the contribution
that human capital results have made toward achieving programmatic
results.[Footnote 35]
According to TFI officials, some TFI components have taken the
initiative individually to perform some strategic workforce planning
activities. Specifically, as a Treasury bureau, FinCEN has an internal
human resources group that, among other things, performs some strategic
workforce planning activities. For example, according to FinCEN
officials, they undertook an effort to identify mission critical
occupations, which resulted in designating three positions as mission
critical. As a result, FinCEN developed plans to address human capital
challenges related to these occupations and regularly reports to
Treasury's Office of the Deputy Assistant Secretary for Human Resources
and Chief Human Capital Officer on its progress. In addition, OIA has
taken a variety of steps to address human capital challenges. For
example, according to OIA officials, to address challenges in
recruiting and retaining intelligence analysts, OIA cataloged the human
capital flexibilities available to provide recruiting and retention
incentives. As a result, OIA officials indicated that they have
identified and are now able to utilize a variety of human capital
flexibilities, such as student loan repayment to attract and retain
staff and the Pat Roberts Intelligence Scholarship Program to pay for
the continuing educational needs of its analysts.
Nonetheless, TFI management has not yet conducted comprehensive
activities to address the key principles of strategic workforce
planning for TFI as a whole. TFI top management has not set the overall
direction and goals of workforce planning or evaluated progress toward
any human capital goals. The Under Secretary for TFI told us that since
the creation of TFI, growing OIA's human capital has been one workforce
planning priority. He also stated that he has conducted additional
targeted workforce planning in consultation with the heads of the
largest TFI components, such as FinCEN. However, neither TFI officials
nor Treasury human capital officials were aware of any explicit
workforce planning goals set by TFI management. In addition, TFI
officials were unaware of any formal reviews or reports that evaluated
the contribution of human capital results to achieving programmatic
goals.
Moreover, TFI currently lacks an effective process for conducting
comprehensive strategic workforce planning. According to the Under
Secretary for TFI, most workforce planning takes place as a part of the
annual budget process. TFI has not established a separate,
comprehensive strategic workforce planning process led by TFI
management. According to an official from Treasury's Office of the
Deputy Assistant Secretary for Human Resources and Chief Human Capital
Officer, the office has provided targeted workforce planning assistance
to OIA and, in spring 2009, began discussing how they could assist TFI
in broader workforce planning efforts. In particular, they cited the
need to conduct an overall workforce analysis and succession planning.
According to TFI's Senior Resource Manager, TFI's workforce planning
mainly occurs as a component of the annual budget preparation process.
As a part of this process, individual components can request additional
staff resources for priority initiatives they identify. TFI management
then evaluates these individual proposals and determines what will be
included in TFI's budget request.
Without the benefit of comprehensive strategic workforce planning to
assist in identifying solutions, it is unclear whether TFI will be able
to effectively address persistent workforce challenges. These include
the following:
* Lack of comprehensive training needs assessment. While some TFI
components have assessed the training needs of their staff, there has
been no similar TFI-wide effort. Without such an assessment, it is
unclear whether TFI staff are being prepared to address the challenges
posed by illicit financing in the future.
* Obstacles to hiring intelligence analysts. According to officials
from OIA and Treasury's Office of the Deputy Assistant Secretary for
Human Resources and Chief Human Capital Officer, OIA continues to be at
a competitive disadvantage relative to other agencies in the
Intelligence Community regarding recruiting. Specifically, according to
Treasury officials, most other agencies in the Intelligence Community
can hire intelligence analysts into the excepted service, thus
bypassing the need for competitive selection of candidates. In
addition, OIA lacks direct hire authority for its intelligence
analysts. According to OIA officials, these challenges make OIA's
hiring process more complicated and lengthier than those of other
agencies in the Intelligence Community.
TFI Has Not Yet Developed an Appropriate Set of Performance Measures,
but Continues to Work to Improve Its Efforts:
TFI has not yet developed an appropriate set of performance measures,
but continues to attempt to improve its efforts. Since TFI was formed,
its individual performance measures have varied substantially in number
and the extent to which they address attributes of successful
performance measures that GAO has identified. For fiscal year 2008, the
performance measures of TFI's components vary in the extent to which
they address attributes of successful performance measures identified
by GAO. TFI's performance measures address many, but not all, of these
attributes. According to Treasury officials, TFI recognizes the need to
improve its performance measures, and is developing a new set of
measures to assess its performance. However, our review of a draft
version of these revised measures suggests that some concerns would
remain if they are implemented as proposed.
Performance Measures Related to TFI Functions Have Varied over the
Years:
As shown in figure 4, since its formation in 2004, TFI's performance
measures have varied over time. TFI reported on 11 total measures in
fiscal year 2005, 9 measures in fiscal year 2006, 10 measures in fiscal
year 2007, and 20 measures in fiscal year 2008. The number and content
of performance measures have varied within components over time, as
well. For example, FinCEN had 6 measures in fiscal year 2007 and 16 in
fiscal year 2008. Components have frequently introduced new measures
only to discontinue them in subsequent years. For instance, OFAC
reported 4 measures in fiscal year 2005, and then discontinued 3 for
fiscal year 2006. OIA, newly formed in 2004, reported 1 performance
measure in fiscal year 2006 and none the following years.[Footnote 36]
The extent of inconsistency in TFI's performance measures creates
challenges for managers to using performance data in making management
decisions.
Figure 4: Changes in TFI Performance Measures, Fiscal Years 2005 to
2008:
[Refer to PDF for image: vertical bar graph]
Year: 2005;
New measures: 6;
Existing measures: 5;
Discontinued measures: 0.
Year: 2006;
New measures: 4;
Existing measures: 5;
Discontinued measures: 6.
Year: 2007;
New measures: 3;
Existing measures: 7;
Discontinued measures: 2.
Year: 2008;
New measures: 11;
Existing measures: 9;
Discontinued measures: 1.
Source: GAO analysis of Treasury performance and accountability
reports, fiscal years 2005-2008.
[End of figure]
According to TFI officials, the sharp increase in the number of
performance measures reported in fiscal year 2008 was a response to the
evaluation and recommendations of the Office of Management and Budget's
(OMB) Program Assessment Rating Tool (PART) in 2005 and 2006.[Footnote
37] The PART process identified potential enhancements to FinCEN's
performance measures, leading to the inclusion of new measures for
FinCEN.[Footnote 38] FinCEN officials said that Treasury performance
officials asked that the newly developed measures be added to FinCEN's
contribution to the fiscal year 2008 performance and accountability
report. According to officials in Treasury's Office of Strategic
Planning and Performance Management (OSPPM), the nature of FinCEN's
work is operational, making it easier to evaluate the bureau's
performance. TFI's policy-making components, such as TFFC, have found
it more difficult to develop meaningful performance metrics.
TFI's Current Performance Measures Exhibit Many, but Not All,
Attributes of Successful Performance Measures:
The performance measures TFI currently has in place also vary in the
degree to which they exhibit the attributes of successful performance
measures. Prior GAO work has identified nine attributes of successful
performance measures.[Footnote 39] Table 1 shows the nine attributes,
their definitions, and the potentially adverse consequences of not
having the attribute.
Table 1: GAO's Key Attributes of Successful Performance Measures:
Attribute: Linkage;
Definition: Measure is aligned with division and agencywide goals and
mission and clearly communicated throughout the organization;
Potentially adverse consequences of not having attribute: Behaviors and
incentives created by measures do not support achieving division or
agencywide goals or mission.
Attribute: Clarity;
Definition: Measure is clearly stated and the name and definition are
consistent with the methodology used to calculate it;
Potentially adverse consequences of not having attribute: Data could be
confusing and misleading to users.
Attribute: Measurable target;
Definition: Measure has a numerical goal;
Potentially adverse consequences of not having attribute: Cannot tell
whether performance is meeting expectations.
Attribute: Objectivity;
Definition: Measure is reasonably free from significant bias or
manipulation;
Potentially adverse consequences of not having attribute: Performance
assessments may be systematically over-or understated.
Attribute: Reliability;
Definition: Measure produces the same result under similar conditions;
Potentially adverse consequences of not having attribute: Reported
performance data are inconsistent and add uncertainty.
Attribute: Core program activities;
Definition: Measures cover the activities that an entity is expected to
perform to support the intent of the program;
Potentially adverse consequences of not having attribute: Not enough
information available in core program areas to managers and
stakeholders.
Attribute: Limited overlap;
Definition: Measure should provide new information beyond that provided
by other measures;
Potentially adverse consequences of not having attribute: Manager may
have to sort through redundant, costly information that does not add
value.
Attribute: Balance;
Definition: Balance exists when a suite of measures ensures that an
organization's various priorities are covered;
Potentially adverse consequences of not having attribute: Lack of
balance could create skewed incentives when measures overemphasize some
goals.
Attribute: Governmentwide priorities;
Definition: Each measure should cover a priority such as quality,
timeliness, or cost of service;
Potentially adverse consequences of not having attribute: A program's
overall success is at risk if all priorities are not addressed.
Source: GAO-03-143.
[End of table]
TFI's performance measures address many of these attributes of
successful performance measures, but do not fully address other
attributes. Figure 5 represents our assessment of TFI's 20 performance
measures versus the key attributes of successful performance measures.
Figure 5: TFI's Fiscal Year 2008 Performance Measures Relative to the
Key Attributes of Successful Performance Measures:
[Refer to PDF for image: stacked horizontal bar graph]
Attributes of successful performance measures: Linkage;
Number of measures exhibiting the attribute: 14;
Number of measures not exhibiting the attribute: 6.
Attributes of successful performance measures: Clarity;
Number of measures exhibiting the attribute: 16;
Number of measures not exhibiting the attribute: 4.
Attributes of successful performance measures: Measurable target;
Number of measures exhibiting the attribute: 20;
Number of measures not exhibiting the attribute: 0.
Attributes of successful performance measures: Objectivity;
Number of measures exhibiting the attribute: 20;
Number of measures not exhibiting the attribute: 0.
Attributes of successful performance measures: Reliability;
Number of measures exhibiting the attribute: 17;
Number of measures not exhibiting the attribute: 3.
Attributes of successful performance measures: Core program activities;
Number of measures exhibiting the attribute: 13;
Number of measures not exhibiting the attribute: 7.
Attributes of successful performance measures: Limited overlap;
Number of measures exhibiting the attribute: 20;
Number of measures not exhibiting the attribute: 0.
Attributes of successful performance measures: Government-wide
priorities;
Number of measures exhibiting the attribute: 20;
Number of measures not exhibiting the attribute: 0.
Source: GAO analysis of Treasury performance and accountability
reports, fiscal years 2005-2008.
[End of figure]
According to our analysis, TFI's 20 measures have many of the
attributes of successful performance measures, including the following.
* Measurable target. All 20 of TFI's measures have measurable,
numerical targets in place. Numerical targets allow officials to more
easily assess whether goals and objectives were achieved because
comparisons can be made between projected performance and actual
results.
* Limited overlap. We found limited overlap among TFI's 20 measures,
that is, little or no unnecessary or duplicate information provided by
the measures.
* Objectivity. We found all of TFI's measures to be objective, or
reasonably free from significant bias.
* Governmentwide priorities. We also determined that TFI's 20 measures
are linked to broader priorities such as cost-effectiveness, quality,
and timeliness.
However, the measures did not fully satisfy the following attributes.
* Linkage. Six TFI measures are not clearly linked to Treasury goals.
For example, TEOAF measures the proportion of its forfeitures that come
from high-impact cases. However, it is unclear why high-impact cases in
particular are measured as opposed to all cases. Our analysis could not
link TEOAF's measure to broader agencywide goals related to removing or
reducing threats to national security.
* Core program activities. Seven TFI measures do not sufficiently cover
core program activities. For example, OFAC has three main
responsibilities related to the administration of sanctions: (1)
issuing licenses, (2) designation programs, and (3) enforcement through
civil penalties. However, OFAC's one performance measure only assesses
cases involving civil penalties resulting from sanctions violations.
* Balance. We found that TFI's set of performance measures is not
balanced. In fiscal year 2008, TFI reported on 20 measures, 16 of which
related to FinCEN's programs and activities, 1 that related to OFAC, 1
that related to TEOAF, 2 that related to TFFC, and none that related to
OIA. As a result, a disproportionate number of measures (16) relate to
administering and enforcing the BSA and none to the analysis of
financial intelligence. An emphasis on one priority at the expense of
others may skew the overall performance and preclude TFI's managers
from understanding the effectiveness of their programs in supporting
Treasury's overall mission and goals. In addition, the lack of balance
exhibited by TFI's measures may give the impression that administering
the BSA is prioritized over other functions, such as the analysis of
financial intelligence or administration of licensing and designations
programs.
TFI Is Working to Replace Its Performance Measures, but Some Concerns
Remain:
Treasury officials acknowledge the limits of TFI's current performance
measurement and have been working to enhance its measures, by replacing
them with a single new TFI-wide measure. According to OSPPM officials,
they began an initiative to overhaul TFI's performance measurement in
2007. OSPPM officials stated that TFI's performance measures did not
effectively reflect the impact of TFI's activities. After consultation
with each TFI component, OSPPM decided to design a new composite
measure that will provide a way to assess how TFI is performing overall
as a unit. The new measure would outline the roles and functions of
TFI's components and evaluate the outcomes of their activities.
However, the process of reforming TFI's performance measurement has not
been completed. The implementation of the new measure is still
uncertain, although TFI management approved its use in May 2009 and
components finalized the measures they will contribute.[Footnote 40]
According to a Treasury official, OSPPM decided on the format of the
new composite measure after researching other federal agencies'
approaches to performance measurement, as well as those of management
consultancies in the private sector. The composite measure takes a
similar form to the measure implemented for Treasury's Office of
Technical Assistance (OTA), first reported in Treasury's fiscal year
2008 performance and accountability report[Footnote 41]. The measure
aims to provide a more comprehensive snapshot of the outcome of OTA's
activities by measuring impact and traction.[Footnote 42]
The composite measure for TFI will align the two Treasury outcomes that
relate to their activities with TFI's performance goals and focus
areas, according to Treasury.[Footnote 43] Each focus area corresponds
with a TFI component (OFAC, OIA, TFFC, and FinCEN). The components will
track 3 to 6 performance measures and will assign a numeric score to
the performance at the end of the year. Each component's measures will
be combined to reach an overall score for the component. In the end, an
overall score for TFI will be determined by averaging the individual
scores of the components.
All TFI components except TEOAF have been involved in the process of
developing the composite measure. Both OSPPM and TEOAF officials stated
that TEOAF would not be included, since its work did not logically fit
in one of the focus areas. OIA, TFFC, and OFAC have developed new
measures to assess the impact of their activities. FinCEN will use 5 of
its existing measures for its contribution to the composite measure.
TFI faces significant challenges in developing and implementing the new
composite measure. There is an inherent difficulty in creating
quantitative measures for policy organizations, whose activities may
not be easily represented with numbers. Many TFI managers pointed to
the difficulty of making qualitative information measurable for
performance reporting.
While the initiative to improve TFI's performance measurement is a
positive step, our preliminary analysis raises concerns regarding the
extent to which the new TFI composite measure will allow full and
accurate assessment of TFI's performance. For example, we identified
the following concerns:
* Objectivity and reliability of survey-based measures. OIA has
developed surveys to measure the timeliness, relevance, and accuracy of
its intelligence support, all-source analysis, and security and
counterintelligence. The survey respondents are internal customers of
OIA's products within Treasury such as the Deputy Secretary, Under
Secretaries, Assistant Secretaries, Deputy Assistant Secretaries, and
senior staff. The objectivity of the surveys is not clear given that
respondents' answers may be biased because they have a vested interest
in the outcome, as it is a reflection on their performance. The
reliability of the measures is also questionable, as only between 7 and
13 internal customers--rather than external customers in the
Intelligence Community--will be asked to complete the survey. TFI
believes that while there is no perfect method for evaluating OIA's
performance, the surveys are an effective means for Treasury
policymakers to assess OIA's performance. They also noted their plan to
survey customers in other parts of the Intelligence Community in 2010.
* Lack of validation for some components' self-assessment-based
measures. Some components' performance measures rely exclusively on
self-assessments by component managers and lack external verification.
For example, TFFC has 4 measures for which management will compile
supporting information and assign a high, medium, or low rating for
TFFC's performance in that area. Treasury and TFI acknowledge (but have
not yet addressed) a lack of a process to independently verify TFFC's
self-assessment. OTA's composite measure, which OSPPM officials cited
as similar to TFI's, also uses elements of self-assessment, but those
results are independently validated by an external source and reviewed
by Treasury.
* Calculation of overall TFI score. According to TFI, to calculate the
composite measure, individual components' results will be averaged into
a single TFI measure. Since the components are not all contributing the
same number of measures to the overall composite measure, averaging
components' scores means components' individual performance measures
are not weighted equally in TFI's overall measure.
Conclusions:
Since its creation in 2004, TFI has undertaken a variety of activities
to address a broad range of national security threats, such as
enhancing the use of financial intelligence against terrorism and the
proliferation of weapons of mass destruction. In addition, TFI and its
components have taken some steps toward more effective management of
TFI as an organization. For instance, TFI and some components have
developed strategic plans and have performed workforce planning
activities.
Nonetheless, TFI has not fully utilized some management tools to create
an integrated organization with a consistent, well-documented approach
to planning and managing its operations. As a result, additional
opportunities for improvement exist. First, despite the critical role
interagency collaboration plays in many of TFI's functions and general
approval by key interagency partners, such collaboration may not be as
effective as it could be in certain respects. TFI and some of its
interagency partners had strikingly different perceptions about the
quality of collaborative efforts involving multilateral forums. Lacking
clearly documented policies and procedures for collaboration in this
area, interagency partners were unsure how to resolve their
differences. Without a mechanism to monitor and report on the results
of such interagency collaboration, TFI officials were generally unaware
that differences existed or what impact they might be having, and thus
saw no need to take steps to understand or address them. Second, TFI
management has not clearly aligned its resources with its priorities.
Without clear, consistent objectives and an understanding of how
resources are aligned with them, it may be unclear to Congress, TFI's
interagency partners, or even TFI staff what TFI's priorities are and
whether TFI has sufficient resources to address them. In addition,
while some components have undertaken workforce planning activities,
TFI management has yet to implement a comprehensive strategic workforce
planning process for TFI as a whole. As a result, TFI may be at risk of
not having the workforce required to address future national security
threats. Finally, TFI's performance reporting has been uneven. Though
TFI has been working to improve its ability to effectively measure its
performance as a unit, TFI has not yet developed a set of performance
measures that embody the attributes of successful performance measures.
Without a set of effective performance measures, it is difficult to
judge how well TFI is achieving its mission.
Recommendations for Executive Action:
To help strengthen Treasury's ability to achieve its strategic goal of
preventing terrorism and promoting the nation's security through
strengthened international financial systems, we recommend that the
Secretary of the Treasury direct the Under Secretary for Terrorism and
Financial Intelligence to take the following four actions:
1. develop and implement, in consultation with interagency partners
participating in international forums related to anti-money laundering
and counterterrorist financing issues, (a) compatible policies,
procedures, and other means to operate across agency boundaries and (b)
a mechanism for monitoring, evaluating, and reporting on interagency
collaboration;
2. develop and implement policies and procedures for aligning resources
with TFI's strategic priorities;
3. develop and implement a TFI-wide process, including written
guidance, that addresses the key principles of strategic workforce
planning; and:
4. ensure that TFI's performance measures exhibit the key attributes of
successful performance measures.
Agency Comments and Our Evaluation:
We provided a draft copy of this report to the Departments of the
Treasury, State, and Justice. Justice and State declined to provide
comments. Treasury provided comments, which are reprinted in appendix
IV.
Treasury's comments highlighted what it views as TFI's significant
contributions since 2005. Treasury said that TFI has helped reduce the
threat of terrorist financing, stating that al Qaeda is in its worst
financial position in at least 3 years. In addition, Treasury
highlighted TFI's efforts to counter the financing of proliferation,
for example, using Executive Order 13382 to isolate banks, companies,
and individuals tied to North Korean, Iranian, and Syrian
proliferation.
Treasury's comments also discussed ongoing or planned actions related
to our four recommendations:
* With regard to our recommendation that TFI develop and implement
policies and procedures to operate across agency boundaries and develop
a mechanism for monitoring, evaluating, and reporting on interagency
collaboration, the Under Secretary for Terrorism and Financial
Intelligence indicated that his counterparts in other agencies have
never expressed concerns about process or substance to him regarding
TFI's collaboration. Nonetheless, Treasury stated that it would
redouble its efforts to coordinate with other agencies, but did not
identify specific steps it plans to take. As discussed in our report,
we recommend that such steps include developing clear policies for
conducting and monitoring the results of interagency collaboration.
* In response to our recommendation to develop and implement policies
and procedures for aligning resources with TFI's strategic priorities,
Treasury indicated that TFI is working to improve its processes in this
area. While Treasury stated that its use of the annual budget process
has worked well to match resources to strategic goals, we have
concluded that the annual budget process does not necessarily reflect
TFI's strategic priorities, in part because it reflects priorities for
only a given year and not longer-term priorities.
* In relation to our recommendation to develop and implement a TFI-wide
process to address the key principles of strategic workforce planning,
Treasury commented that it is working with Johns Hopkins University's
Capstone Consulting to develop a workforce planning model for Treasury.
As a part of this effort, TFI plans to develop and disseminate written
guidance establishing a process to align resources with TFI and
Treasury strategic goals in the next 12 months.
* Finally, Treasury stated that it will work to implement our
recommendation to ensure that TFI's performance measures exhibit the
key attributes of successful performance measures. At the same time,
Treasury contends that TFI's true performance will often be best
conveyed through briefings to those who possess the appropriate
security clearances. To ensure that such briefings provide systematic
evidence regarding TFI's performance, they should include assessments
based on performance measures that exhibit the key attributes of
successful performance measures discussed in this report. Further, we
would note that using classified information to help assess TFI's
performance does not preclude TFI from developing unclassified
performance measures or from producing an unclassified assessment of
its performance. In fact, Treasury's statements about the financial
condition of al Qaeda referenced in its response to this report provide
Treasury's assessment of TFI's impact on al Qaeda without disclosing
classified information.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to the appropriate congressional committees as well as the Secretaries
of the Treasury, State, and Justice. We will make copies available to
others upon request. In addition, the report will be available at no
charge on the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff has any questions about this report, please
contact me at (202) 512-4347 or YagerL@gao.gov. GAO staff who
contributed to this report are included in appendix V.
Sincerely yours,
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendix I: Scope and Methodology:
To analyze the Office of Terrorism and Financial Intelligence's (TFI)
use of its tools to address national security threats, we reviewed
Treasury reports and documents related to its efforts since 2004. For
example, we reviewed all of Treasury's performance and accountability
reports and FinCEN's annual reports since TFI was formed. We also
reviewed other documents discussing activities involving TFI, including
the National Money Laundering Strategy and the National Strategy for
Combating Terrorism. To identify practices for enhancing interagency
collaboration, we reviewed prior GAO reports. We then interviewed
officials from Treasury and its key interagency partners (the
Departments of State and Justice) to understand TFI's processes for
interagency collaboration.
To analyze TFI's efforts to conduct strategic resource planning, we
reviewed a variety of Treasury documents. To identify TFI's priorities,
we reviewed documents such as Treasury's performance and accountability
reports, congressional testimony by the Under Secretary for Terrorism
and Financial Intelligence, and TFI's Web site. In addition, we
reviewed documentation from TFI and its components related to strategic
planning, including the current strategic plans for TFI and each
component. Further, we reviewed TFI data regarding the number of staff
(full-time equivalents or FTE) in each TFI component for fiscal years
2005 through 2008. We then obtained data from TFI components to
illustrate how their workload has changed over time. We determined that
these data are sufficiently reliable for the purpose of this report.
Additionally, we reviewed prior GAO work related to principles of
effective strategic workforce planning.[Footnote 44] To determine the
extent to which TFI's practices reflect these principles, we
interviewed TFI management, including the Under Secretary for Terrorism
and Financial Intelligence and managers from TFI components. Further,
we interviewed officials from Treasury's Office of the Deputy Assistant
Secretary for Human Resources and Chief Human Capital Officer.
To analyze the extent to which TFI's performance measures provide an
effective assessment of TFI's performance, we reviewed Treasury's
reporting on TFI's performance. Specifically, we analyzed the
performance measures contained in Treasury's performance and
accountability reports for fiscal years 2005 through 2008. We also
evaluated TFI's performance measures for fiscal year 2008 against key
attributes of successful performance measures. To perform this
evaluation, two analysts independently assessed each of the performance
measures against the nine attributes identified in the specifications
for each attribute included in that report.[Footnote 45] Those analysts
then met to discuss and resolve any differences in the results of their
analyses. A supervisor then reviewed and approved the final results of
the analysis. To obtain information on TFI's process to improve its set
of performance measures, we interviewed officials from each TFI
component and Treasury's Office of Strategic Planning and Performance
Management. We also obtained a copy of draft TFI performance measures
that will be presented to the Office of Management and Budget for its
review. We then interviewed officials from each TFI component and
Treasury's Office of Strategic Planning and Performance Management
regarding how the data for these draft performance measures would be
obtained and how the overall TFI composite measure would be developed.
We also present data on TFI staffing and budget for fiscal years 2005
through 2008. As these data are presented for background purposes, we
did not assess their reliability.
[End of section]
Appendix II: Current U.S. Sanctions Programs:
Office of Foreign Assets Control country-based sanctions programs:
Burma;
Cuba;
Iran;
Sudan.
Source: Department of the Treasury.
[End of table]
Office of Foreign Assets Control list-based sanctions programs:
Anti-Terrorism;
Belarus;
Burma;
Cote d'Ivoire;
Counter Narcotics Trafficking;
Darfur;
Democratic Republic of Congo;
Iraq;
Lebanon;
Liberia (former regime of Charles Taylor);
Non-proliferation;
Syria;
Western Balkans;
Zimbabwe.
Source: Department of the Treasury.
[End of table]
Other Office of Foreign Assets Control sanctions programs:
Highly enriched Uranium;
North Korea;
Rough Diamonds.
Source: Department of the Treasury.
[End of table]
[End of section]
Appendix III: GAO Assessment of TFI's Fiscal Year 2008 Performance
Measures:
Table 2: GAO Assessment of TFI's Fiscal Year 2008 Performance Measures:
TFI performance measures: Number of open civil penalty cases that are
resolved within the statute of limitations period;
Component: Office of Foreign Assets Control (OFAC);
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: No;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Increase in the number of outreach
engagements with the charitable and international financial
communities;
Component: Office of Terrorist Financing and Financial Crimes (TFFC);
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: No;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Number of countries that are assessed for
compliance with the Financial Action Task Force (FATF) recommendations;
Component: TFFC;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of forfeited cash proceeds
resulting from high-impact cases;
Component: Treasury Executive Office for Asset Forfeiture (TEOAF);
Linkage: No;
Clarity: No;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: No;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Average time to process enforcement matters
(in years);
Component: Financial Crimes Enforcement Network (FinCEN);
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of bank examinations conducted by
the federal banking agencies indicating a systemic failure of the anti-
money-laundering program rule;
Component: FinCEN;
Linkage: Yes;
Clarity: No;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: No;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of FinCEN's Regulatory Resource
Center customers rating the guidance received as understandable;
Component: FinCEN;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Median time taken from date of receipt of
Financial Institution Hotline Tip Suspicious Activity Report (SAR) to
transmittal of a written analytical report to law enforcement or the
intelligence community (days);
Component: FinCEN;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of complex analytical work
completed by FinCEN analysts;
Component: FinCEN;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of countries/jurisdictions
connected to the Egmont Secure Web within 1 year of Egmont membership;
Component: FinCEN;
Linkage: Yes;
Clarity: No;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of domestic law enforcement and
foreign financial intelligence units finding FinCEN's analytical
reports highly valuable;
Component: FinCEN;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: No;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of private industry or financial
institution customers finding FinCEN's SAR products highly valuable;
Component: FinCEN;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Cost per Bank Secrecy Act (BSA) form e-filed;
Component: FinCEN;
Linkage: No;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: No;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Number of largest BSA report filers using e-
filing;
Component: FinCEN;
Linkage: No;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: No;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Number of users directly accessing BSA data;
Component: FinCEN;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of customers satisfied with the
BSA e-filing;
Component: FinCEN;
Linkage: No;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: No;
Core program activities: No;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of customers satisfied with
WebCBRS and secure outreach;
Component: FinCEN;
Linkage: No;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Share of BSA filings submitted
electronically;
Component: FinCEN;
Linkage: No;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: No;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of federal and state regulatory
agencies with memorandums of understanding (MOU) or information-sharing
agreements;
Component: FinCEN;
Linkage: Yes;
Clarity: Yes;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
TFI performance measures: Percentage of FinCEN's compliance MOU holders
finding FinCEN's information exchange valuable to improve the BSA
consistency and compliance of the financial system;
Component: FinCEN;
Linkage: Yes;
Clarity: No;
Measurable target: Yes;
Objectivity: Yes;
Reliability: Yes;
Core program activities: Yes;
Limited overlap: Yes;
Government-wide priorities: Yes.
Source: GAO analysis of the Treasury fiscal year 2008 performance and
accountability report.
[End of table]
[End of section]
Appendix IV: Comments from the Department of the Treasury:
Department Of The Treasury:
Under Secretary:
Washington, D.C.
September 4, 2009:
Loren Yager, Ph.D.
Director:
International Affairs and Trade:
United States Government Accountability Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Dr. Yager:
Thank you for the opportunity to review the draft Government
Accountability Office (GAO) report entitled, "Combating Illicit
Financing, Treasury's Office of Terrorism and Financial Intelligence
Could Manage More Effectively to Achieve its Mission." This report
assesses the Office of Terrorism and Financial Intelligence (TFI) five
years after its creation, focusing on the office's interagency
coordination, its strategic workforce planning, and its performance
measures. In addition to responding to the report's recommendations
regarding TFI's processes, we want to take this opportunity to provide
an update on the office's performance and some of its substantive
accomplishments.
Since TFI's creation, this office ” because of its unique authorities
and capabilities, along with its dedicated workforce ” has added a new
financial dimension to U.S. strategies for combating our most pressing
security challenges and has contributed significantly to the protection
of our national security. Among the issues on which we have worked most
intensely are:
* Reduced terrorist financing threat: Al Qaida in its worst financial
position in at least three years. The 9/11 Commission's Public
Discourse Project awarded the U.S. Government's efforts to combat
terrorist financing its highest grade, an A-, noting that the United
States has won the support of key countries and has made significant
strides in using terrorism finance as an intelligence tool. We have a
long way to go, but the strategy is working. Today, al Qaida is starved
for funds as its core leadership is having increasing difficulty
raising money and sustaining itself. Al Qaida is in its worst financial
position in at least three years. While we would like to go into
greater detail, we are unable to do so in an unclassified format.
* Made counter-proliferation finance a real endeavor: Advanced new
means of countering the threat. The concept of counter-proliferation
finance as part of an overall counter-proliferation strategy is a
recent development. We applied the lessons learned from using financial
tools in the terrorism context to advance a counter-proliferation
finance strategy using a new authority, Executive Order 13382. We have
used this authority to isolate banks, companies, and individuals tied
to North Korean, Iranian, and Syrian proliferation. Banks worldwide are
implementing these designations even when their own laws do not require
them to do so, making it difficult for those designated in the
United States to operate in the international financial system. We have
been working with the Financial Action Task Force (FATF) to develop
international standards to combat proliferation finance. There is now
global recognition that targeted financial authorities are an effective
means to combat proliferation, and this tool is increasingly becoming
part of multilateral strategies, including at the UN Security Council.
* Built first-ever intelligence analysis office in any finance
ministry. In 2004, with the creation of TFI's Office of Intelligence
and Analysis (OIA), Treasury became the first finance ministry in the
world to develop in-house financial intelligence and analytic
expertise. OIA's analysis plays an integral role in all aspects of our
strategies ” from mapping illicit networks, to developing targets for
action, to information-sharing with other governments and the private
sector, to determining the impact of our actions.
* Developed financial strategies for pressuring states and preventing
them from abusing the financial system. TFI has played an integral role
in the development and implementation of U.S. Government strategies for
responding to various country-specific national security threats. We
have used all of the tools at our disposal in an integrated approach.
- Iran: As the result of U.S. and multilateral government actions,
designations of those supporting Iran's nuclear and missile programs by
the United States, UN Security Council, and European Union, combined
with unprecedented outreach to dozens of banks around the world about
how Iran uses its banks and the international financial system to
pursue proliferation and terrorism, there is now a broad international
consensus that Iran poses a clear threat to the integrity of the
international financial system. As a result, most major banks have cut
off or dramatically reduced their business with Iran.
- North Korea: We have pursued a strategy that has made it more
difficult for North Korea to engage in illicit conduct, including: 1)
our action under Section 311 of the USA PATRIOT Act against Macau-based
Banco Delta Asia; 2) our designations of a number of North Korean
proliferation firms under E.O. 13382; 3) our issuance of advisories
alerting banks to North Korea's illicit and deceptive financial
conduct; and 4) our ongoing outreach to dozens of governments and banks
regarding this conduct and the financial provisions of UNSCRs 1718 and
1874. Even beyond protecting the international financial system from
illicit North Korean activity, these actions have put pressure on the
regime and provided valuable leverage for our diplomatic efforts.
Our focus on combating national security threats using financial
authorities is complemented by our work to build a foundation of strong
systemic safeguards in the financial sector.
* Promoted an understanding of threats to the financial system and
devised strategies to counter them. An important part of our mission to
ensure a safe, sound and secure financial system has been our work to
understand how illicit actors misuse the financial system and then
develop strategies to counter that misuse.
- Money laundering: In 2006, TFI coordinated the first government-wide
Money Laundering Threat Assessment, identifying current and emerging
trends and techniques used to raise, move and launder illicit proceeds.
That effort was followed by our work with the Departments of Justice
and Homeland Security to craft the 2007 National Money Laundering
Strategy, which is mapped to the vulnerabilities identified in the
threat assessment.
- Mortgage loan modification fraud: This year, Treasury launched an
interagency effort to target mortgage loan modification fraud and
foreclosure rescue scams, issuing an advisory to alert financial
institutions to various "red flags" and leading an advanced targeting
effort. This effort has produced leads that have helped to halt the
illegal practices of those offering loan modification or foreclosure
scams.
* Strengthened global requirements for protecting the financial system.
Given the global nature of the financial system, focusing only on the
U.S. financial system and its anti-money laundering and
counterterrorist financing (AML/CFT) regime is not sufficient. TFI has
worked through the FATF to set, and seek to ensure global compliance
with, strong international AML/CFT standards. We have also supported
the progressive development of international standards against
terrorist, proliferation, and other illicit financing at the UN
Security Council.
* Developed strong partnership with the private sector. Because the
private sector brings valuable insight into how the international
financial system works and how we can be effective in protecting it,
TFI has also forged important partnerships with the domestic and
international private sectors to utilize their expertise.
- Charities: TFI has issued guidance to assist charities in mitigating
the risk of exploitation by terrorist groups and has engaged in
comprehensive outreach to the charitable sector and the Arab/Muslim-
American communities to discuss issues of mutual concern.
- Private Sector Dialogues: TFI established regular meetings to
facilitate coordination among U.S. financial institutions, foreign
financial institutions, and foreign financial regulators.
- Information Sharing: TFI has pursued extensive information-sharing
with financial institutions through formal means ” such as Section
314(a) of the USA PATRIOT Act ” and informal means with the over-
arching objective of enabling those institutions and the U.S.
Government to detect, investigate and prevent abuse of the financial
system by money launderers, terrorist financiers, WMD proliferators and
other illicit actors.
* Implemented actions to protect our financial system against specific
vulnerabilities. We have taken action against jurisdictions and
individual financial institutions to protect our financial system from
specific, discrete vulnerabilities using Section 311 of the USA PATRIOT
Act. These actions have helped to protect the U.S. financial system and
have also spurred action by governments and financial institutions. In
some cases, these actions have facilitated the development of
rehabilitative measures by a financial institution or jurisdiction that
effectively addressed the underlying systemic vulnerability and led to
our withdrawal of the Section 311 designation.
These are just some of the highlights of TFI's progress. As we move
forward, we will continue these important efforts as we, at the same
time, devote attention to improving our processes.
With respect to the report's recommendation that TFI improve its
interagency coordination, we appreciate the GAO report's discussion of
TFI's "close, collaborative relationships" with its interagency
partners. The report notes concerns, however, with regard to TFI's
collaboration on two particular issues ” the implementation of Section
311 of the USA PATRIOT Act and building international coalitions within
international forums related to AML/CFT. As the report recognizes, TFI
already has a robust process to engage with the interagency in both of
these areas. TFI' s extensive coordination with the interagency in
implementing Section 311 was addressed in my letter to you of September
22, 2008. In the context of the Financial Action Task Force (FATF) and
the FATF-style regional bodies, this process involves regular
communication to ensure that all relevant agency views are considered
and the U.S. Government is appropriately represented. Of course, each
agency's individual view does not, and cannot, prevail each time. While
I recognize that it is inevitable that our interagency partners may
from time to time be dissatisfied with the process for one reason or
another, their dissatisfaction has never risen to the level of an
expression of concern to me by any of my counterparts about either
process or substance. In any event, in light of the information the GAO
report brought to our attention, we will redouble our efforts to
coordinate with our colleagues.
The report also recommends that TFI develop a process to improve
strategic workforce planning by: 1) developing and implementing
policies and procedures for aligning resources with TFI's strategic
priorities; and 2) issuing written guidance as part of the
implementation of a TFI-wide process to address the key principles of
strategic workforce planning. As the report notes, to date, TFI as a
whole has used the annual budget process as a review of how our
offices' resources match up to it strategic goals and how they should
be adjusted. Conducting this review in the context of the budget
process has provided an efficient means to determine whether we
are, or are not, on target in terms of meeting our goals, as well as
performing other necessary regulatory and sanctions functions. This
approach has worked well in light of the office's steady growth since
2004, the new authorities and responsibilities we have been given, and
evolving challenges and priorities as set forth by the National
Security Council. However, TFI is working to improve its processes in
this area.
Specifically, Treasury is currently working with the Johns Hopkins
Group to develop a detailed workforce planning model for the
Department. The Capstone Team returns to Treasury in October to refine
and ultimately pilot the model within Treasury's Departmental Offices
(DO) in the May-June 2010 timeframe. The focus of the model is to
integrate offices' budget requirements and determine how needed skill
sets can be successfully recruited within identified funding restraints
to meet current and anticipated future mission requirements. TFI plans
to work closely with DO Human Resources and establish clear and well
defined processes to be incorporated into written guidance. This
document will be used to more effectively align limited resources with
TFI and Treasury strategic goals. TFI expects to develop and
disseminate written guidance within the next 12 months.
Finally, we will work to implement the GAO's recommendation that TFI
develop performance measures that exhibit the nine attributes of
successful performance measures. The GAO report correctly notes that
the number and substance of TFI's performance measures have not been
constant ” they have evolved year by year as the office's size,
mission, and responsibilities have continued to expand. We believe that
it is appropriate that we continue to raise the bar for our
performance, rather than maintain static measures that can easily be
met, and we view this approach to performance measures as a means to
push the organization as a whole to improve. With respect to
performance measures generally, as stated above, the best measure of
our performance ” the actual impact of our actions ” is not one that
can be easily quantified or reduced to an unclassified statement. Our
assessment of impact often is derived from highly classified
intelligence. Thus, while we will finalize performance measures and
work to ensure they meet the attributes of successful measures, it will
nonetheless be the case that our true performance will often best be
conveyed through briefings to those who possess the appropriate
clearances.
Thank you for your important efforts during this review, and please do
not hesitate to contact me or my staff if you have any questions.
Sincerely,
Signed by:
Stuart A. Levey:
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Loren Yager, Director, (202) 512-4347, YagerL@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Jeff Phillips (Assistant
Director), Jason Bair, Lisa Reijula, Katherine Brentzel, Martin de
Alteriis, and Mary Moutsos made key contributions to this report.
Elizabeth Curda, Karen Deans, Cardell Johnson, Barbara Keller, and Hugh
Paquette also contributed to the report.
[End of section]
Footnotes:
[1] Pub. L. No 108-447, Div. H, Title II, Section 222, Dec. 8, 2004, 31
U.S.C. § 313.
[2] Pub. L. No. 107-56, Oct. 26, 2001.
[3] The Bank Secrecy Act of 1970 requires U.S. financial institutions
to assist U.S. government agencies to detect and prevent money
laundering. Specifically, the act requires financial institutions to,
among other things, keep records of purchases of negotiable
instruments, file reports of cash transactions exceeding $10,000 (daily
aggregate amount), and report suspicious activity relevant to a
possible violation of law such as money laundering, tax evasion, or
other criminal activities.
[4] Pub.L No.108-177, Dec. 13, 2003.
[5] Pub. L No.108-458, Dec. 17, 2004.
[6] The FATF is an intergovernmental body that develops and promotes
international standards for combating money laundering and the
financing of terrorism. Established in 1989, it currently has 34
members and more than 20 observers, including eight FATF-style regional
bodies. The FATF works to generate the necessary political will to
bring about legislative and regulatory reforms in anti-money laundering
and counterterrorist financing.
[7] An FIU is a central national agency responsible for receiving (and
as permitted, requesting), analyzing, and disseminating disclosures of
financial information concerning potential financing of terrorism or
money laundering.
[8] Treasury is organized into two major parts: the departmental
offices and bureaus. The departmental offices are primarily responsible
for the formulation of policy, while the bureaus carry out the specific
operations assigned to the department. Accounting for 98 percent of the
Treasury workforce, the bureaus include the Bureau of Engraving and
Printing, the U.S. Mint, FinCEN, the Internal Revenue Service, and the
Bureau of the Public Debt, among others.
[9] A U.S. sanction is any restriction or condition on economic
activity with respect to a foreign country or foreign nationals, or
property in which a foreign country or foreign national has an
interest, that is imposed by the United States for reasons of foreign
policy or national security. For example, financial sanctions may be
targeted against persons designated as either weapons of mass
destruction proliferators or global terrorists, depending on which set
of sanctions is employed, and any transactions with them by U.S.
persons are prohibited and any property they have within the United
States is blocked. According to Treasury, the goal of such actions is
to deny sanctioned parties access to the U.S. financial and commercial
systems. Treasury, and State, under certain programs, can make
designations under these sanctions authorities, which are published in
the Federal Register.
[10] The Egmont Group is a global association of FIUs, currently with
116 members. The Egmont Group provides a forum for FIUs from around the
world to cooperate in the fight against money laundering and financing
of terrorism through information exchange, training, and the sharing of
expertise in order to foster the implementation of domestic programs in
member countries.
[11] G-7 refers to the Group of Seven Finance Ministers and Central
Bank Governors, which includes Canada, France, Germany, Italy, Japan,
the United Kingdom, and the United States. The G-7 has met regularly
since the mid-1980s.
[12] The Proliferation Security Initiative is a multinational effort to
prevent the trafficking of WMD, their delivery systems, and related
materials to and from states and nonstate actors of proliferation
concern. The Proliferation Security Initiative has no formal
organization or bureaucracy. U.S. agencies are involved in the
Proliferation Security Initiative as a set of activities, rather than a
program. The Proliferation Security Initiative encourages partnership
among states to work together to develop a broad range of legal,
diplomatic, economic, military, law enforcement, and other capabilities
to prevent WMD-related transfers to states and nonstate actors of
proliferation concern. International participation is voluntary, and
there are no binding treaties on those who choose to participate.
[13] The mutual evaluation program is the primary instrument by which
the FATF monitors and assesses progress made by member governments in
implementing the FATF Recommendations, which are designed to prevent
use of financial systems for money laundering or terrorist financing.
FATF assessors work to identify the systems and mechanisms developed by
countries with diverse legal, regulatory, and financial frameworks, in
order to implement robust anti-money laundering and counterterrorist
financing systems. Using a set of established criteria, assessors
observe the degree of compliance with FATF Recommendations as well as
the effectiveness of a country's anti-money laundering and
counterterrorist financing regime. See FATF, Methodology for Assessing
Compliance with the FATF 40 Recommendations and the FATF 9 Special
Recommendations (Paris, France, 2004).
[14] For additional 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).
[15] We reported on Treasury's Section 311 activities in GAO, 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.:
Sept. 30, 2008).
[16] Asset forfeiture is a legal mechanism by which title to property
involved in or derived from unlawful activity is divested to the United
States.
[17] GAO, Results-Oriented Government: Practices That Can Help Enhance
and Sustain Collaboration among Federal Agencies, [hyperlink,
http://www.gao.gov/products/GAO-06-15] (Washington, D.C.: Oct. 21,
2005).
[18] Other practices include (1) defining and articulating a common
outcome, (2) establishing mutually reinforcing or joint strategies to
achieve the outcome, (3) identifying and addressing needs by leveraging
resources, (4) agreeing upon agency roles and responsibilities, (5)
reinforcing agency accountability for collaborative efforts through
agency plans and reports, and (6) reinforcing individual accountability
for collaborative efforts through agency performance management
systems.
[19] [hyperlink, http://www.gao.gov/products/GAO-08-1058].
[20] According to TFFC officials, in addition to State and Justice,
participating agencies include the Department of Homeland Security and
the Securities and Exchange Commission.
[21] In June 2009, the Under Secretary for TFI provided us a copy of a
document that he characterized as TFI's strategic plan and said that he
used it to manage TFI. However, this unsigned, undated document lacked
some characteristics typically found in a strategic plan (including
those of some TFI components) such as an indication of the time period
covered and the name of the senior official who approved the document.
[22] GAO, Managing for Results: Critical Issues for Improving Federal
Agencies' Strategic Plans, [hyperlink,
http://www.gao.gov/products/GAO/GGD-97-180] (Washington, D.C.: Sept.
16, 1997)
[23] The six elements are (1) a comprehensive agency mission statement;
(2) agencywide long-term goals and objectives for all major functions
and operations; (3) approaches (or strategies) and the various
resources needed to achieve the goals and objectives; (4) a description
of the relationship between the long-term goals and objectives and the
annual performance goals; (5) an identification of key factors,
external to the agency and beyond its control, that could significantly
affect the achievement of the strategic goals; and (6) a description of
how program evaluations were used to establish or revise strategic
goals and a schedule for future program evaluations.
[24] Department of the Treasury, Financial Crimes Enforcement Network,
Strategic Plan: Fiscal Years 2008-2012 (Washington, D.C.: April 2008).
[25] Department of the Treasury, Treasury Forfeiture Fund, Strategic
Plan, Fiscal Years 2007-2012 (Washington, D.C.: September 2007).
[26] Department of the Treasury, Office of Intelligence and Analysis,
Strategic Direction, Fiscal Years 2009-2011 (Washington, D.C.: July
2008).
[27] Strategic goals in TFI's strategic plan are to (1) provide expert
all-source analysis on financial and other networks supporting
terrorism, weapons of mass destruction proliferation, and other
national security threats in order to marshal TFI priorities and
action; (2) execute the nation's financial sanctions policies and use
other TFI tools and authorities to advance U.S. government objectives;
(3) lead policy development, coordination, and coalition building to
counter financial aspects of national security threats and pressure
obstructionist countries; and (4) enhance the transparency and
integrity of the financial system, and support law enforcement and
financial regulators in fighting crime.
[28] From 2005 to 2008, the number of SARs grew from approximately
900,000 to 1.3 million and the number of employees grew from 291 to
299.
[29] From 2005 to 2008, the value of seized assets grew from $304
million to $557 million and the number of FTEs grew from 20 to 22.
[30] From 2005 to 2008, the number of license actions grew from
approximately 40,000 to approximately 63,000 and the number of FTEs
grew from 132 to 155.5.
[31] OIA's staff grew from 45 FTEs in 2005 to 135 FTEs in 2008. We are
not reporting the specific number of intelligence taskings, as this
information is for official use only.
[32] TFFC's staff grew from 19 FTEs in 2005 to 34 FTEs in 2008.
[33] Treasury administers the Cuban Assets Control Regulations, 31 CFR
Part 515, which includes provisions on obtaining licenses to engage in
certain otherwise prohibited activities. These regulations were
recently amended. See 74 Fed. Reg. 46000. Recent changes include the
authorization of family travel under a general license rather than a
specific license. It is unclear at this time what impact these changes
will have on OFAC's resources.
[34] GAO, Human Capital: Key Principles for Effective Strategic
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39]
(Washington, D.C.: Dec. 11, 2003).
[35] Other principles are to (1) determine the critical skills and
competencies that will be needed to achieve current and future
programmatic results; (2) develop strategies that are tailored to
address gaps in number, deployment, and alignment of human capital
approaches for enabling and sustaining the contributions of all
critical skills and competencies; and (3) build the capability needed
to address administrative, educational, and other requirements
important to supporting workforce strategies.
[36] According to TFI, since 2007 OIA has tracked its timeliness,
relevance, and accuracy to measure its performance and has reported on
these measures to the Office of the Director of National Intelligence
each year. These data were not included in Treasury's performance and
accountability reports.
[37] PART was used to assess and improve federal program performance.
PART encouraged the development of performance measures that are
outcome-oriented, relate to the overall purpose of the program, and
have ambitious targets. All programs receiving PART assessments also
developed improvement plans that should be ambitious, include actions
with completion dates, and be designed to improve program results.
[38] OFAC's Economic and Trade Sanctions Program was also evaluated by
PART, in 2002. It was recommended that OFAC develop long-term
performance goals with specific time frames and measures.
[39] GAO, Tax Administration: IRS Needs to Further Refine Its Tax
Filing Season Performance Measures, [hyperlink,
http://www.gao.gov/products/GAO-03-143] (Washington, D.C.: Nov. 22,
2002).
[40] After approval from the appropriate Treasury management, the
measure will be sent to OMB for its endorsement. OSPPM managers told us
that OMB has seen a draft of the composite measure and been informed of
the overall approach.
[41] Department of the Treasury, Fiscal Year 2008 Performance and
Accountability Report (Washington, D.C.: Nov. 17, 2008).
[42] According to Treasury officials, "impact" refers to whether or not
the policy initiative had a positive outcome. "Traction" refers to how
efficiently and effectively the policy office works with partners or
the extent to which the policy office influences progress toward an
outcome.
[43] The Treasury outcomes for TFI are (1) removed or reduced threats
to national security from terrorism, proliferation of WMD, drug
trafficking and other criminal activity on the part of rogue regimes,
individuals, and their support networks, and (2) safer and more
transparent U.S. and international financial systems.
[44] [hyperlink, http://www.gao.gov/products/GAO-04-39].
[45] [hyperlink, http://www.gao.gov/products/GAO-03-143
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
