Bank Secrecy Act
FinCEN Needs to Further Develop Its Form Revision Process for Suspicious Activity Reports Gao ID: GAO-10-609T April 28, 2010To assist law enforcement agencies in their efforts to combat money laundering, terrorist financing, and other financial crimes, the Bank Secrecy Act (BSA) requires financial institutions to file suspicious activity reports (SAR) to inform the federal government of transactions related to possible violations of law or regulation. Depository institutions have been concerned about the resources required to file SARs and the extent to which SARs are used. The Subcommittee asked GAO to discuss our February 2009 report on suspicious activity reporting. Specifically, this testimony discusses (1) factors affecting the number of SARs filed, (2) actions agencies have taken to improve the usefulness of SARs, (3) federal agencies' use of SARs, and (4) the effectiveness of the process used to revise SAR forms. To respond to the request, GAO relied primarily on the February 2009 report titled Bank Secrecy Act: Suspicious Activity Report Use Is Increasing, but FinCEN Needs to Further Develop and Document Its Form Revision Process (GAO-09-226), and updated it with additional information provided by FinCEN. In that report, GAO recommended that FinCEN work to further develop a strategy that fully incorporates certain GAO-identified practices to enhance and sustain collaboration among federal agencies into the forms-change process.
In 2000 through 2008, total SAR filings by depository institutions increased from about 163,000 to 732,000 per year; representatives from federal regulators, law enforcement, and depository institutions with whom GAO spoke attributed the increase mainly to two factors. First, automated monitoring systems can flag multiple indicators of suspicious activities and identify significantly more unusual activity than manual monitoring. Second, several public enforcement actions against a few depository institutions prompted other institutions to look more closely at client and account activities. Other factors include institutions' greater awareness of and training on BSA requirements after September 11, 2001 and more regulator guidance for BSA examinations. FinCEN and law enforcement agencies have taken actions to improve the quality of SAR filings and educate filers about their usefulness. Since 2000, FinCEN has issued written products with the purpose of making SAR filings more useful to law enforcement. FinCEN and federal law enforcement agency representatives regularly participate in outreach on BSA/anti-money laundering, including events focused on SARs. Law enforcement agency representatives said they also establish relationships with depository institutions to communicate with staff about crafting useful SAR narratives. FinCEN, law enforcement agencies, and financial regulators use SARs in investigations and financial institution examinations and have taken steps in recent years to make better use of them. FinCEN uses SARs to provide public and nonpublic analytical products to law enforcement agencies and depository institution regulators. Some federal law enforcement agencies have facilitated complex analyses by using SAR data with their own data sets. Federal, state, and local law enforcement agencies collaborate to review and start investigations based on SARs filed in their areas. Regulators use SARs in their examination process to assess compliance and take action against abuse by depository institution insiders. After revising a SAR form in 2006 that could not be used because of information technology limitations, in 2008, FinCEN developed a new process for revising BSA forms, including SARs, that may increase collaboration with some stakeholders, including some law enforcement groups concerned that certain of the 2006 revisions could be detrimental to investigations. Available documentation on the process did not detail the degree to which the new process would incorporate GAO-identified best practices for enhancing and sustaining federal agency collaboration. For example, it did not specify roles and responsibilities for stakeholders or depict monitoring, evaluating, and reporting mechanisms. According to FinCEN officials, it is taking some additional steps toward obtaining greater collaboration with law enforcement agency representatives, prosecutors, and multi-agency law enforcement teams and others to determine the contents of the form, but it is too soon to determine the effectiveness of the process.
GAO-10-609T, Bank Secrecy Act: FinCEN Needs to Further Develop Its Form Revision Process for Suspicious Activity Reports
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Testimony:
Before the Subcommittee on Oversight and Investigations, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:00 p.m. EDT:
Wednesday, April 28, 2010:
Bank Secrecy Act:
FinCEN Needs to Further Develop Its Form Revision Process For
Suspicious Activity Reports:
Statement of Richard J. Hillman, Managing Director:
Financial Markets and Community Investment:
GAO-10-609T:
GAO Highlights:
Highlights of GAO-10-609T, a testimony before the Subcommittee on
Oversight and Investigations, Committee on Financial Services, House
of Representatives.
Why GAO Did This Study:
To assist law enforcement agencies in their efforts to combat money
laundering, terrorist financing, and other financial crimes, the Bank
Secrecy Act (BSA) requires financial institutions to file suspicious
activity reports (SAR) to inform the federal government of
transactions related to possible violations of law or regulation.
Depository institutions have been concerned about the resources
required to file SARs and the extent to which SARs are used.
The Subcommittee asked GAO to discuss our February 2009 report on
suspicious activity reporting. Specifically, this testimony discusses
(1) factors affecting the number of SARs filed, (2) actions agencies
have taken to improve the usefulness of SARs, (3) federal agencies‘
use of SARs, and (4) the effectiveness of the process used to revise
SAR forms.
To respond to the request, GAO relied primarily on the February 2009
report titled Bank Secrecy Act: Suspicious Activity Report Use Is
Increasing, but FinCEN Needs to Further Develop and Document Its Form
Revision Process (GAO-09-226), and updated it with additional
information provided by FinCEN. In that report, GAO recommended that
FinCEN work to further develop a strategy that fully incorporates
certain GAO-identified practices to enhance and sustain collaboration
among federal agencies into the forms-change process.
What GAO Found:
In 2000 through 2008, total SAR filings by depository institutions
increased from about 163,000 to 732,000 per year; representatives from
federal regulators, law enforcement, and depository institutions with
whom GAO spoke attributed the increase mainly to two factors. First,
automated monitoring systems can flag multiple indicators of
suspicious activities and identify significantly more unusual activity
than manual monitoring. Second, several public enforcement actions
against a few depository institutions prompted other institutions to
look more closely at client and account activities. Other factors
include institutions‘ greater awareness of and training on BSA
requirements after September 11, 2001 and more regulator guidance for
BSA examinations.
FinCEN and law enforcement agencies have taken actions to improve the
quality of SAR filings and educate filers about their usefulness.
Since 2000, FinCEN has issued written products with the purpose of
making SAR filings more useful to law enforcement. FinCEN and federal
law enforcement agency representatives regularly participate in
outreach on BSA/anti-money laundering, including events focused on
SARs. Law enforcement agency representatives said they also establish
relationships with depository institutions to communicate with staff
about crafting useful SAR narratives.
FinCEN, law enforcement agencies, and financial regulators use SARs in
investigations and financial institution examinations and have taken
steps in recent years to make better use of them. FinCEN uses SARs to
provide public and nonpublic analytical products to law enforcement
agencies and depository institution regulators. Some federal law
enforcement agencies have facilitated complex analyses by using SAR
data with their own data sets. Federal, state, and local law
enforcement agencies collaborate to review and start investigations
based on SARs filed in their areas. Regulators use SARs in their
examination process to assess compliance and take action against abuse
by depository institution insiders.
After revising a SAR form in 2006 that could not be used because of
information technology limitations, in 2008, FinCEN developed a new
process for revising BSA forms, including SARs, that may increase
collaboration with some stakeholders, including some law enforcement
groups concerned that certain of the 2006 revisions could be
detrimental to investigations. Available documentation on the process
did not detail the degree to which the new process would incorporate
GAO-identified best practices for enhancing and sustaining federal
agency collaboration. For example, it did not specify roles and
responsibilities for stakeholders or depict monitoring, evaluating,
and reporting mechanisms. According to FinCEN officials, it is taking
some additional steps toward obtaining greater collaboration with law
enforcement agency representatives, prosecutors, and multi-agency law
enforcement teams and others to determine the contents of the form,
but it is too soon to determine the effectiveness of the process.
View [hyperlink, http://www.gao.gov/products/GAO-10-609T] or key
components. For more information, contact Richard J. Hillman at (202)
512-8678 or hillmanr@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our work on the use of
suspicious activity (SAR) reports by federal law enforcement and
regulatory agencies and the U.S. Department of the Treasury Financial
Crimes Enforcement Network's (FinCEN) recent efforts to implement a
new process to revise SARs and other Bank Secrecy Act (BSA) forms.
[Footnote 1] FinCEN administers BSA and its implementing regulations.
To assist law enforcement agencies in their efforts to combat money
laundering, terrorist financing, and other financial crimes, BSA
requires financial institutions to file SARs to inform the federal
government of transactions related to possible violations of law or
regulation.[Footnote 2]
Depository institutions have had to submit SARs since 1996, longer
than any other type of financial institutions, and they file the
majority of these reports--in 2008, they filed 732,563 SARs. These
institutions have expressed concerns in congressional testimony about
resource challenges involved in complying with SAR-related
requirements and the extent to which law enforcement agencies use SARs
and other reports BSA requires. Federal law enforcement agency
officials have testified that they review and use SARs proactively--
separately and in multiagency teams--to identify potential money
laundering cases and trends, as well as using them in ongoing
investigations of terrorism financing and other financial crimes.
Depository institution officials have commented they lack clear
guidance on what law enforcement looks for and finds useful in these
reports.
We reported in February 2009 that FinCEN revised the SAR form for
depository institutions in 2006 but could not implement it because of
information technology limitations.[Footnote 3] In 2008, FinCEN
developed a new process for revising BSA forms (including SARs) that
could increase collaboration with some stakeholders, including some
law enforcement groups concerned that certain 2006 revisions could be
detrimental to investigations. Law enforcement representatives' views
on the revised form were mixed--some expressed concerns that changes
on the revised form could diminish the utility of the form for
investigative purposes.
My statement today is based on our February 2009 report, and
additional information provided by FinCEN related to recent
developments in its efforts to further educate SAR filers and
implement a new process to revise SARs and other forms in tandem with
its strategy to modernize information technology. Specifically, this
statement focuses on (1) underlying factors that affect the number of
SAR filings by depository institutions, (2) actions federal and law
enforcement agencies have taken to improve the usefulness of SARs, (3)
ways in which federal agencies use SARs and actions they have taken to
make better use of them, and (4) whether the process FinCEN uses to
revise SAR forms is effective in assuring that information collected
is appropriate for law enforcement needs.
For our 2009 report, we reviewed relevant laws, regulations, agency
documents and past GAO work. We interviewed representatives from
federal banking regulators--the Board of Governors of the Federal
Reserve System (Federal Reserve), the Office of the Comptroller of the
Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the
Office of Thrift Supervision (OTS), and the National Credit Union
Administration (NCUA).[Footnote 4] We also interviewed representatives
from federal law enforcement agencies, including the Secret Service,
the Internal Revenue Service-Criminal Investigation (IRS-CI),
Immigration and Customs Enforcement (ICE), the Federal Bureau of
Investigation (FBI), the Drug Enforcement Administration (DEA), and
the Department of Justice (DOJ). We also obtained and analyzed data
from FinCEN on depository institutions' SAR filings for calendar years
2000-2007. We interviewed representatives of 15 randomly selected
depository institutions that filed various levels of SARs during 2007
about their experiences with SAR filing. We interviewed
representatives from randomly selected SAR review teams (multiagency
teams with federal, state, and local law enforcement representation)
and from High Intensity Financial Crime Areas (HIFCA) throughout the
country. To update this information, we interviewed FinCEN officials
and reviewed documents related to the new SAR form revision process.
We also updated the number of SAR filings made by depository
institutions.
We conducted our work for the February 2009 report between July 2007
through February 2009 and updated information in April 2010 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
finding 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.
Background:
The Secretary of the Treasury delegated overall authority for
enforcement of, and compliance with, BSA and its implementing
regulations to the Director of FinCEN. FinCEN develops policy and
provides guidance to other agencies, analyzes BSA data for trends and
patterns, and pursues enforcement actions when warranted. It also
relies on other agencies in implementing the BSA framework. These
activities include (1) ensuring compliance with BSA requirements to
report suspicious activity, (2) collecting and storing reported
information, and (3) taking enforcement actions or conducting
investigations of criminal financial activity.
The Secretary of the Treasury delegated BSA examination authority for
depository institutions to five banking regulators--the Federal
Reserve, OCC, OTS, FDIC, and NCUA.[Footnote 5] The regulators conduct
periodic on-site safety and soundness and compliance examinations to
assess an institution's financial condition, policies and procedures,
adherence to BSA regulations (for example, filing of SARs and other
BSA-related reports), and compliance with other laws and regulations.
Financial institutions must report any suspicious transaction relevant
to a possible violation of a law.[Footnote 6] In 1996, FinCEN required
banks and other depository institutions to report, on a SAR form,
certain suspicious transactions involving possible violations of law
or regulation, including money laundering.[Footnote 7] In the same
year, federal banking regulators required depository institutions to
report suspected money laundering and other suspicious activities
using the SAR form. IRS's Enterprise Computing Center-Detroit serves
as the central point of collection and storage of these data.[Footnote
8] Figure 1 summarizes the process for filing and accessing SARs.
Figure 1: The Process for Filing and Accessing SARs:
[Refer to PDF for image: illustration]
Conductor:
Depository institutions are required to file a SAR no later than 30
days following the discovery of any known or suspected:
* Violations aggregating to $5,000 or more where a suspect can be
identified;
* Violations of the BSA or potential money laundering aggregating
$5,000 or more;
* Insider abuse involving any amount.
Bank staff and systems:
Institution staff or automated monitoring systems identify unusual
activity. Alerts of such activity are forwarded to the BSA compliance
officer for review.
Compliance officer:
The compliance officer conducts research and decides to file, signs
the SAR, and sends it electronically to FinCEN, or through the mail
directly to IRS‘s Enterprise Computing Center.
* Monitors for continuing suspicious activity and files additional
SARs every 90 days if activity continues.
* Maintains a copy of all filed SARs and supporting documentation for
5 years from the date of filing.
Stop: Decides not to file and documents the reasons; or:
Signed: Suspicious activity report; sent to:
IRS/FinCEN:
IRS WebCBRS:
SARs and other BSA reports database;
Feeds: IRS-CI;
FinCEN:
Web Portal: Enables non-IRS users to access BSA data:
Federal, state, and local law enforcement agencies;
Federal, and state regulators;
Access to SARs.
Sources: GAO analysis; Art Explosion (images).
[End of figure]
Federal regulators and FinCEN can bring formal enforcement actions,
including civil money penalties, against institutions for violations
of BSA. Formal enforcement actions generally are used to address cases
involving systemic, repeated noncompliance; failure to respond to
supervisory warnings; and other violations. However, most cases of BSA
noncompliance are corrected within the examination framework through
supervisory actions or letters that document the institution's
commitment to take corrective action. In addition, DOJ may bring
criminal actions against individuals and corporations, including
depository and other financial institutions, for money laundering
offenses and certain BSA violations. The actions may result in
criminal fines, imprisonment, and forfeiture actions. Institutions and
individuals willfully violating BSA and its implementing regulations,
and structuring transactions to evade BSA reporting requirements, are
subject to criminal fines, prison, or both.[Footnote 9]
Law enforcement agencies housed in DOJ and the Department of Homeland
Security use SARs for investigations of money laundering, terrorist
financing, and other financial crimes. Agencies in DOJ involved in
efforts to combat money laundering and terrorist financing include
FBI; DEA; the Department's Criminal and National Security Divisions;
the Bureau of Alcohol, Tobacco, Firearms, and Explosives; the
Executive Office for U.S. Attorneys; and U.S. Attorneys Offices. The
Secret Service and ICE (in Homeland Security) also investigate cases
involving money laundering and terrorist activities. IRS-CI uses BSA
information to investigate possible cases of money laundering and
terrorist financing activities. Federal and multiagency law
enforcement teams, which may include state and local law enforcement
representatives, also use SAR data to provide additional information
about subjects during ongoing investigations.
Multiple Factors Contributed to Increases in Depository Institutions'
SAR Filings:
From 2000 through 2007, depository institutions filed an increasing
number of SARs each year and representatives from federal regulators,
law enforcement, and depository institutions with whom we spoke
attributed the increase to a number of factors. According to FinCEN
data, SAR filings by depository institutions increased from
approximately 163,000 in 2000 to more than 732,000 in 2008. In our
report, our analysis of SAR and banking data from 2004 through 2007
indicates that the growth rates in SAR filings varied over time among
depository institutions of different asset sizes. For example, the
greatest increase in SARs filed during this period by the largest
depository institutions occurred from 2004 to 2005, and SARs filed by
small credit unions nearly doubled from 2005 to 2006.
Representatives of federal banking regulators, law enforcement
agencies, and depository institutions most frequently attributed the
increase to two factors: technological advances and the effect of
public enforcement actions on institutions. According to the
representatives, automated transaction monitoring systems can flag
multiple indicators of suspicious activity and identify much more
unusual activity than could be identified manually. At the largest
depository institutions, these systems conduct complex analyses
incorporating customer profiles. The representatives also said that
issuance of several public enforcement actions in 2004 and 2005 with
civil money penalties and forfeitures up to $40 million against a few
depository institutions prompted many institutions to file more SARs.
FinCEN and the federal banking regulators took the actions because of
systemic BSA program noncompliance, which included failures to meet
SAR filing requirements. More recently in March 2010, government
actions taken against one depository institution for BSA violations,
including SARs violations, included $160 million in penalties and
fines.
Depository institution representatives with whom we spoke cited a
third factor for increases--concerns they would receive criticisms
during examinations about decisions not to file SARs. To avoid such
criticism, they said their institutions filed SARs even when they
thought them unnecessary--a practice sometimes called "defensive SAR
filing." However, according to the federal regulators and some law
enforcement officials with whom we spoke, there is no means of
determining what, if any, portion of the increase in filings could be
attributed to defensive filing. The representatives suggested
additional factors as contributing to the increase, including greater
awareness of BSA requirements after September 11, 2001, more regulator
guidance for BSA examinations, and more BSA-related training at the
institutions.
FinCEN and Law Enforcement Agencies Have Acted to Educate Filers about
The Usefulness of SARs and Improve the Quality of Their Filings:
FinCEN and law enforcement agencies have taken multiple actions to
educate filers about SARs usefulness and improve the quality of SAR
filings. Since 2000, FinCEN has issued written products with the
purpose of educating filers and making filings more useful to law
enforcement. These include (1) a regularly issued publication that
gives tips on topics such as the preparation of SARs and (2) guidance
for depository institutions and other SAR filers. For example, in its
SAR Activity Review: Trends, Tips and Issues--FinCEN regularly
provides information on suspicious activity reporting, trends, and
data analyses, law enforcement cases assisted by BSA data, and other
issues. In 2008 and in 2009, the publication included information on
suspicious activity reviews by a state banking regulator and
securities regulators, respectively. In 2009, FinCEN issued guidance
on filing SARs for mortgage loan modification and foreclosure rescue
scams and in 2010 began an effort to promote electronic filing of BSA
forms targeted at current paper filers. FinCEN representatives
regularly participate in outreach events on BSA and anti-money
laundering issues, including events on SARs. FinCEN also chairs the
Bank Secrecy Act Advisory Group--a forum for federal agencies and
financial industry representatives to discuss BSA administration,
including SAR-related issues. Federal law enforcement agency
representatives said they improved SARs' usefulness by conducting
outreach events and establishing relationships with depository
institutions in their local areas to communicate with staff about
crafting useful SAR narratives. Representatives from some multiagency
law enforcement teams told us that they subsequently noticed improved
SAR narratives from local depository institutions.
Federal Agencies Use SARs in a Variety of Ways and Have Taken a Number
of Actions in Recent Years to Make Better Use of Them:
FinCEN, law enforcement agencies, and banking regulators use SARs in
investigations and depository institution examinations and took steps
in recent years to make better use of them. FinCEN uses SARs to
provide a number of public and nonpublic analytical products to law
enforcement agencies and depository institution regulators. In 2004
and 2005, several federal law enforcement agencies signed memorandums
of understanding with FinCEN to receive bulk BSA data, including SARs.
They combined these data with information from their law enforcement
databases to facilitate more complex and comprehensive analyses.
Different team structures have been established to better analyze
SARs. For example, in 2000 and again in 2003, DOJ issued guidance that
encouraged the formation of SAR review teams with federal, state, and
local representation. Each month, these teams review SARs filed in
their areas to determine which would merit additional investigation.
In 2006, DOJ and IRS-CI collaborated on a pilot to create task forces
and augment SAR review teams with federal prosecutors in selected
districts. These task forces specifically investigate possible BSA
violations with potential for seizures or forfeitures. The regulators
also use SARs for scoping their depository institution examinations
and review SARs relating to known or suspected unlawful activities by
current and former institution-affiliated parties, including officers,
directors, and employees.
Although law enforcement agency representatives generally were
satisfied with their ability to access BSA data, various agencies and
multiagency teams we interviewed said that formatting and other issues
related to the data system slowed their downloads and reviews. In
2009, FinCEN officials described how features of FinCEN's planned
modernization effort for information technology could address these
issues. FinCEN and IRS officials said that, when budgetary resources
were available, these and other data management challenges would be
addressed as part of FinCEN's modernization plan, developed in
collaboration with IRS. FinCEN officials recently told us that they
have begun the first phase of the information technology
modernization, which they anticipate will last through fiscal year
2014.
FinCEN's Initial Steps in New Form Revision Process Did Not Include
Some Important Collaborative Practices and Mechanisms:
We reported in 2009 that FinCEN encountered a number of problems in
its 2006 revision of the SAR form and in 2008, developed a new process
for form revisions. However, the available information on the process
was limited and did not fully indicate how FinCEN would avoid or
address some of the problems previously encountered. In 2006, FinCEN
and the federal banking regulators issued proposed substantive and
formatting revisions to the SAR form. The revisions were finalized
but, because of technology limitations with IRS's data management
system, the revised form has not been implemented. Law enforcement
agency officials we interviewed had mixed views on the proposed
revisions. They generally supported most of the proposed revisions,
but some felt they had been insufficiently consulted and also
expressed concerns that some revisions could affect their work
negatively. For example, one change would replace the name and title
of a person with personal knowledge about the suspicious activity
reported on the form with a contact office, possibly increasing the
time it would take law enforcement investigators to reach a person
knowledgeable about the activity. However, banking regulators
supported this change because of concerns that a SAR listing a named
contact could jeopardize the safety and privacy of that person if it
were inappropriately disclosed.
In 2008, FinCEN developed a new process that it planned to use in
future revisions of BSA forms, including SARs. Early documentation for
the process suggested some greater stakeholder involvement at early
stages, but subsequent documentation we reviewed did not indicate that
FinCEN fully incorporated certain GAO-identified practices that can
enhance and sustain collaboration among federal agencies.[Footnote 10]
Such practices include defining a common outcome; agreeing on
respective roles and responsibilities, including how the collaborative
effort will be led; and creating the means to collect information on,
monitor, evaluate, and report efforts.
In our 2009 report, we determined that if FinCEN more fully
incorporated some of these practices it might achieve some potential
benefits--such as greater consensus from all stakeholders on proposed
SAR form revisions. We recommended that the Secretary of the Treasury
direct the Director of FinCEN to further develop and document its
strategy to fully incorporate certain of these practices into the
revision process and distribute that documentation to all
stakeholders. In written comments on the report, the FinCEN Director
generally agreed with our recommendation and noted that FinCEN
recognized the need to work with a diverse range of stakeholders to
revise BSA forms.
Recent implementation of FinCEN's process suggests greater
collaboration with stakeholders on defining a common outcome and
establishing roles and responsibilities and planned steps, which could
result in more sustained collaboration. According to FinCEN officials,
FinCEN's implementation of the process generally would involve three
phases. The initial phase has involved collaboration with a wider
range of stakeholders than in the past. For example, in addition to
collaboration with IRS information technology staff we previously
identified, current documentation indicates that FinCEN has
collaborated in more detail with federal law enforcement agency
representatives, federal financial regulators, representatives from
SAR review teams and other multiagency law enforcement teams, and
prosecutors to determine the content of a revised SAR form. FinCEN
also obtained and adopted input from other stakeholders, such as
banking industry representatives, in the Bank Secrecy Act Advisory
Group. FinCEN officials plan to obtain and adopt input from its Data
Management Council (DMC), after providing its members the opportunity
to consult with colleagues at their respective agencies.[Footnote 11]
They also plan to conduct a focus group of DMC members to obtain
feedback on how the new forms revision process is working and use that
feedback to modify the process. However, because FinCEN has not yet
completed implementation of its form revision process, it is too soon
to determine the effectiveness of the process.
Mr. Chairman and Members of the subcommittee, I appreciate this
opportunity to discuss this important issue and would be happy to
answer any questions you might have.
Contact and Acknowledgments:
For further information regarding this testimony, contact Richard J.
Hillman at (202) 512-8678. Contact points at our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this statement. Individuals making major contributions to this
statement included Toni Gillich, Kay Kuhlman, Linda Rego, and Barbara
Roesmann.
[End of section]
Footnotes:
[1] 12 U.S.C. §§ 1829b, 1951-1959, and 31 U.S.C. §§ 5311 et seq.
[2] 31 U.S.C. § 5318(g) provides for the reporting of suspicious
activities. FinCEN's SAR regulations may be found at 31 C.F.R. §§
103.15 to 103.21.
[3] 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).
[4] We use "federal banking regulators" to refer collectively to the
regulators of depository institutions (banks, thrifts, and federally
chartered credit unions).
[5] 31 C.F.R. § 103.56(b)(1)-(5). Each examination of an insured
depository institution also must include a review of the institution's
BSA compliance procedures by the appropriate federal regulator, which
has independent examination authority. 12 U.S.C. § 1818(s) and 12
U.S.C. §1786(q)(2).
[6] Pub. L. No. 102-550, title XV, § 1517(b), 106 Stat. 3672 (Oct. 28,
1992). Before 1996, depository institutions reported suspicious
activity on criminal referral forms filed with their respective
primary federal financial regulator and federal law enforcement
agencies. See 60 Fed. Reg. 46556, 46557 (Sept. 7, 1995). The USA
PATRIOT Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (Oct. 26,
2001), expands SAR reporting requirements to nondepository
institutions such as money services businesses, the securities and
futures industries, and insurance companies. FinCEN developed a SAR
form for money services businesses--68 Fed. Reg. 6613, 6615 (Feb. 10,
2003) and 67 Fed. Reg. 48704 (July 18, 2002)--and forms for other
types of financial institutions. FinCEN has not issued a SAR form for
insurance companies, which use the securities and futures form.
Recently revised forms to facilitate joint filing by depository
institutions, casinos and card clubs, insurance companies, and the
securities and futures industries were postponed because of data
quality initiatives. 72 Fed. Reg. 23891 (May 1, 2007).
[7] 61 Fed. Reg. 4326 (Feb. 5, 1996).
[8] IRS investigators and other authorized officials access the data
system directly through IRS's Intranet site in what is known as
WebCBRS. FinCEN controls non-IRS law enforcement users' access to BSA
data in WebCBRS, through Secure Outreach, which functions as a portal.
Agencies without direct access may visit FinCEN's offices and access
BSA data directly; these users are referred to as "platform users."
[9] 31 U.S.C. §§ 5322 and 5324(d).
[10] 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).
[11] In fiscal year 2007, FinCEN established its Data Management
Council as part of an initiative to maximize BSA data quality and
value. The council is aimed at ensuring internal and external data
users have clear means of identifying and communicating data issues,
requirements, and business priorities, among other goals. Members of
the council include approximately 35 representatives from FinCEN, law
enforcement and regulatory agencies, and the Internal Revenue Service,
which collects and processes BSA data and uses that data for
compliance reviews and criminal investigations.
[End of section]
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