oversight

Combating Money Laundering: Opportunities Exist to Improve the National Strategy

Published by the Government Accountability Office on 2003-09-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Requesters




September 2003
                 COMBATING MONEY
                 LAUNDERING
                 Opportunities Exist to
                 Improve the National
                 Strategy




GAO-03-813 

                                                September 2003


                                                COMBATING MONEY LAUNDERING

                                                Opportunities Exist to Improve the
Highlights of GAO-03-813, a report to           National Strategy
congressional requesters




Money laundering is a serious                   Treasury, Justice, and financial regulatory officials with whom GAO spoke
crime, with hundreds of billions of             said that the National Money Laundering Strategy was initially beneficial but
dollars laundered annually.                     that, over time, certain factors and events affected its development and
Congress passed the Money                       implementation. They endorsed the concept of a strategy to coordinate the
Laundering and Financial Crimes                 federal government’s efforts to combat money laundering and related
Strategy Act of 1998 to better
coordinate the efforts of law
                                                financial crimes. They also said that the strategy initially had a positive effect
enforcement agencies and financial              on promoting interagency planning and communication, but different agency
regulators in combating money                   views emerged over the scope and commitment required, and other events
laundering. This act required the               affected the strategy, such as the September 11 terrorist attacks and the
issuance of an annual National                  creation of the Department of Homeland Security.
Money Laundering Strategy for 5
years, ending with the issuance of              The strategy generally has not served as a useful mechanism for guiding the
the 2003 strategy. To help with                 coordination of federal law enforcement agencies’ efforts to combat money
deliberations on reauthorization, as            laundering and terrorist financing. While Treasury and Justice made
agreed with your offices, GAO                   progress on some strategy initiatives designed to enhance interagency
determined (1) agency perspectives              coordination of money laundering investigations, most have not achieved the
on the benefit of the strategy and
factors that affected its
                                                expectations called for in the annual strategies. Also, the 2002 strategy did
development and implementation,                 not address agency roles in investigating terrorist financing, thus, it did not
(2) whether the strategy has served             help resolve potential duplication of efforts and disagreements over which
as a useful mechanism for guiding               agency should lead investigations. In May 2003, Justice and Homeland
the coordination of federal law                 Security reached an agreement aimed at resolving these problems.
enforcement agencies’ efforts, (3)
the role of the strategy in                     Most financial regulators GAO interviewed said that the strategy had some
influencing the activities of federal           influence on their anti-money laundering efforts because it provided a forum
financial regulators, and (4)                   for enhanced coordination, particularly with law enforcement agencies.
whether the strategy has reflected              However, they said that it has had less influence than other factors. They
key critical components.                        described several other influences on their efforts, particularly their ongoing
                                                oversight responsibilities in ensuring compliance with the Bank Secrecy Act
                                                and, more recently, the USA PATRIOT Act, which was passed in October
GAO recommends that, if the                     2001 to fight terrorist financing and increase anti-money laundering efforts.
requirement for a national strategy
is reauthorized, the Secretaries of             GAO’s work reviewing national strategies has identified several critical
the Treasury and Homeland                       components needed for development and implementation; however, key
Security and the Attorney General               components have not been well reflected in the strategy. The first is clearly
strengthen the leadership structure             defined leadership, with the ability to marshal necessary resources.
for strategy development and
                                                However, the leadership for the strategy has not agreed on the strategy’s
implementation, require processes
to ensure key priorities are                    scope or ensured that target dates for completing initiatives were met. The
identified, and establish                       second is clear priorities, as identified by threat and risk assessments, to
accountability mechanisms. The                  help focus resources on the greatest needs. Each strategy contained more
departments generally concurred                 priorities than could be realistically achieved and none of the strategies was
with GAO’s report.                              linked to a threat and risk assessment. The third is that established
                                                accountability mechanisms provide a basis for monitoring and assessing
www.gao.gov/cgi-bin/getrpt?GAO-03-813.
                                                program performance. While later strategies contained several initiatives
To view the full product, including the scope   designed to establish performance measures, as of July 2003, none had yet
and methodology, click on the link above.       been completed. Officials attributed this to the difficulty in establishing such
For more information, contact Rich Stana at
(202) 512-8777 or Davi D'Agostino at (202)      measures for combating money laundering.
512-8678.
Contents 



Letter          
                                                                        1
                Results in Brief 
                                                       4
                Background
                                                              7
                Early Benefit of the NMLS Was Affected by Certain Factors and 

                  Events                                                                
15
                NMLS Generally Has Not Been as Useful as Envisioned for Guiding 

                  the Coordination of Law Enforcement Efforts 
                         16
                NMLS Has Had Some Influence on Financial Regulators’ Efforts, 

                  but Other Factors Played a Larger Role 
                              31
                The Annual NMLS Has Not Reflected Critical Components 

                  Identified by GAO as Key to Developing and Implementing 

                  National Strategies
                                                  37
                Conclusions                                                             

                                                                                        46
                Recommendations for Executive Action 
                                  47
                Agency Comments and Our Evaluation
                                     47

Appendix I      Scope and Methodology                                                   51



Appendix II 	   Legislation Has Expanded the Responsibility to
                Combat Money Laundering                                                 53



Appendix III	   Summary of Key Anti-Money Laundering Provisions
                in Title III of the USA PATRIOT Act and Rules                           57



Appendix IV     Comments from the Department of the Treasury                            66



Appendix V      Comments from the Department of Justice                                 68 




Appendix VI 	   Comments from the Department of Homeland 

                Security                                                                70 





                Page i                               GAO-03-813 Combating Money Laundering
Appendix VII           GAO Contacts and Staff Acknowledgments                                   74
                       GAO Contacts                                                             74
                       Acknowledgments                                                          74

Related GAO Products                                                                            75



Tables
                       Table 1: NMLS Goals, Objectives, and Priorities, 1999 through 2002
      13
                       Table 2: Status of HIFCA Task Forces as of May 2003
                     18
                       Table 3: Status of NMLS Initiatives Related to HIFCA Oversight 
         22
                       Table 4: NMLS Initiatives to Review Bank Examination Procedures, 

                                as of July 2003                                                 36
                       Table 5: Annual NMLS—Dates Submitted to Congress                         38
                       Table 6: Status of 2002 NMLS Initiatives Designed to Measure
                                Performance                                                     43


Figures
                       Figure 1: The Three Stages of Money Laundering                            8
                       Figure 2: Principal Agencies Responsible for NMLS before the
                                Creation of DHS                                                 10
                       Figure 3: Principal Agencies Responsible for NMLS after the
                                Creation of DHS                                                 11




                       Page ii                               GAO-03-813 Combating Money Laundering
Abbreviations

AFMLS                      Asset Forfeiture and Money Laundering Section

BSA                        Bank Secrecy Act 

CFTC                       Commodity Futures Trading Commission 

DEA                        Drug Enforcement Administration           

DHS                        Department of Homeland Security 

EOUSA                      Executive Office for U.S. Attorneys 

FBI                        Federal Bureau of Investigation 

FDIC                       Federal Deposit Insurance Corporation 

FinCEN                     Financial Crimes Enforcement Network 

FRB                        Federal Reserve Board 

HIFCA                      High Intensity Money Laundering and Related 

                           Financial Crime Area
ICE                        Bureau of Immigration and Customs Enforcement
IRS-CI                     Internal Revenue Service-Criminal Investigation
JTTF                       Joint Terrorism Task Force
MLCA                       Money Laundering Control Act of 1986
NCUA                       National Credit Union Administration
NMLS                       National Money Laundering Strategy
OCC                        Office of the Comptroller of the Currency
OGQ                        Operation Green Quest
OTS                        Office of Thrift Supervision
SAR                        Suspicious Activity Report
SEC                        Securities and Exchange Commission
TFOS                       Terrorist Financing Operations Section
USA PATRIOT Act            Uniting and Strengthening America by Providing
                           Appropriate Tools Required to Intercept and
                           Obstruct Terrorism Act of 2001




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Page iii                                       GAO-03-813 Combating Money Laundering
United States General Accounting Office
Washington, DC 20548




                                   September 26, 2003 


                                   The Honorable Charles E. Grassley 

                                   Chairman, Caucus on International Narcotics Control 

                                   United States Senate 


                                   The Honorable Carl Levin 

                                   Ranking Minority Member 

                                   Permanent Subcommittee on Investigations 

                                   Committee on Governmental Affairs 

                                   United States Senate 


                                   Money laundering—the process of disguising or concealing illicit funds to 

                                   make them appear legitimate—is a serious issue, with an estimated 

                                   $500 billion to $1 trillion laundered worldwide annually, according to the 

                                   United Nations Office of Drug Control and Prevention. Money laundering

                                   provides the fuel for drug dealers, arms traffickers, terrorists, and other 

                                   criminals to operate and expand their activities, which can have

                                   devastating social and economic consequences. 


                                   Although the U.S. government had been working to combat money 

                                   laundering for many years, efforts by law enforcement and regulatory 

                                   agencies took on particular urgency, as the operations of large-scale 

                                   criminal organizations grew increasingly sophisticated. To better 

                                   coordinate the anti-money laundering efforts of federal, state, and local 

                                   law enforcement agencies and financial regulators, Congress enacted the

                                   Money Laundering and Financial Crimes Strategy Act of 1998 (Strategy 

                                   Act).1 This act called for the annual issuance of a strategy to combat 

                                   money laundering—the National Money Laundering Strategy (NMLS). This 

                                   requirement will end with the issuance of the 2003 strategy unless 

                                   reauthorized by Congress. In anticipation of reauthorization discussions, 

                                   Congress is interested in knowing how the strategy has affected 

                                   coordination and whether improvements could be made to increase its 

                                   benefits. 





                                   1
                                       Pub. L. 105-310, 112 Stat. 2941 codified as 31 U.S.C. §§ 5340-42, 5351-55 (1998).



                                   Page 1                                              GAO-03-813 Combating Money Laundering
While money laundering first became a federal crime in 1986 with the
passage of the Money Laundering Control Act,2 law enforcement and the
federal financial regulators had sought to protect the U.S. financial system
from certain types of criminal activity since the passage of the Bank
Secrecy Act (BSA) in 1970, which instituted currency reporting
requirements.3 By periodically amending the BSA, Congress has added
anti-money laundering requirements for many types of financial
institutions and transactions. Such amendments and the resulting
regulations have increased the number of federal agencies with
responsibility for ensuring compliance with anti-money laundering
requirements, thereby creating a need to coordinate the efforts of
numerous financial regulatory and law enforcement agencies. Appendix II
describes major anti-money laundering legislation since 1970.

The Strategy Act requires the President—acting through the Secretary of
the Treasury and in consultation with the Attorney General and other
relevant federal, state, and local law enforcement and regulatory
officials—to develop and submit the annual NMLS to Congress by
February 1 of each year from 1999 through 2003. The goal of the Strategy
Act is to increase coordination and cooperation among the various
regulatory and enforcement agencies and to effectively distribute
resources to combat money laundering. The Strategy Act requires the
NMLS to define comprehensive, research-based goals, objectives, and
priorities for reducing money laundering and related financial crime in the
United States. The NMLS has generally included multiple priorities to
combat money laundering to guide federal agencies’ activities.
Additionally, the Strategy Act authorizes the Secretary of the Treasury to
designate High Intensity Money Laundering and Related Financial Crime
Areas (HIFCA), in which federal, state, and local law enforcement would
work cooperatively to develop a focused and comprehensive approach to
targeting money laundering activity.4

In the wake of the September 11, 2001, terrorist attacks, Congress passed
the Uniting and Strengthening America by Providing Appropriate Tools



2
    18 U.S.C. § 1956-57 (1994).
3
 Currency and Foreign Transactions Reporting Act (commonly referred to as the Bank
Secrecy Act), Pub. L. No. 91-508, 84 Stat. 1114 (1970) (codified as amended in 12 U.S.C. §§
1829(b), 1951-1959; 31 U.S.C. §§ 5311-5330.
4
  Such an “area” could be a geographic area, financial system, industry sector, or financial
institution.




Page 2                                           GAO-03-813 Combating Money Laundering
Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT
Act) to, among other things, both fight terrorist financing and increase
anti-money laundering efforts through further expansion of the types of
financial institutions and transactions that are subject to anti-money
laundering record keeping and reporting requirements.5 The NMLS has
also changed to reflect new federal priorities in the aftermath of
September 11, 2001, including a goal to combat terrorist financing in 2002.

To assist in congressional deliberations on whether there is a continuing
need for an annual NMLS, this report discusses the results of our review of
the development and implementation of the 1999 through 2002 strategies.
Specifically, as agreed with your offices, our objectives were to determine
(1) agency perspectives on the benefit of the NMLS and factors that
affected its development and implementation, (2) whether the strategy has
served as a useful mechanism for guiding the coordination of federal law
enforcement agencies’ efforts to combat money laundering and terrorist
financing, (3) the role of the NMLS in influencing the anti-money
laundering and antiterrorist financing activities of the federal financial
regulators, and (4) whether the NMLS has reflected the critical
components we have found to be necessary for the development and
implementation of such a strategy.

To determine agency perspectives on the benefit of the NMLS, we
interviewed responsible officials at and reviewed relevant documentation
obtained from the principal law enforcement components with anti-money
laundering responsibilities at the Departments of the Treasury, Justice,
and Homeland Security and the federal financial regulatory agencies.6 In
general, our work reviewing the strategy’s usefulness for guiding the
coordination of law enforcement agencies’ efforts consisted of
(1) examining the structure and operation of HIFCA task forces,
(2) analyzing the implementation of NMLS initiatives to enhance
interagency coordination, and (3) assessing the extent to which the 2002
NMLS addressed agency roles in combating terrorist financing. We did this
by interviewing relevant agency officials, reviewing agency policies for



5
 The anti-money laundering provisions are contained in Title III of the USA PATRIOT Act,
Pub. L. No. 107-56, 115 Stat. 272 (2001).
6
 The federal financial regulators include the Federal Reserve Board, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency, Office of Thrift
Supervision, the National Credit Union Administration, the Securities and Exchange
Commission, and the Commodity Futures Trading Commission.




Page 3                                         GAO-03-813 Combating Money Laundering
                     coordination, evaluating staffing levels and other resources devoted to
                     NMLS initiatives, and reviewing the NMLS. Our work determining the role
                     of the NMLS in influencing the efforts of the federal financial regulators
                     focused primarily on the NMLS goal that sought to coordinate their efforts.
                     In 2002, the goal was, “Prevent Money Laundering Through Cooperative
                     Public-Private Efforts and Necessary Regulatory Measures.” This goal had
                     similar titles in earlier strategies (see table 1). We also examined the role
                     the financial regulators played in supporting Treasury’s efforts under the
                     NMLS goal to strengthen international cooperation to fight money
                     laundering. To do this, we interviewed financial regulatory, Treasury, and
                     law enforcement agency officials. We also reviewed regulatory
                     examination guidelines, policies, and training information. To determine
                     whether the NMLS reflected components we have found necessary for
                     national strategies, we reviewed drafts of the strategies from 1999 to
                     2002, interviewed officials that had been involved in the development and
                     implementation of the strategies, and compared the results from this work
                     with findings from our past work reviewing national strategies and their
                     implementation.

                     We conducted our work from June 2002 to August 2003 in accordance
                     with generally accepted government auditing standards. Additional
                     information on our scope and methodology is discussed in appendix I.


                     The Treasury, Justice, and financial regulatory agency officials we
Results in Brief 
   interviewed generally agreed that the NMLS was initially beneficial but
                     that, over time, certain factors and events affected its development and
                     implementation. The officials endorsed the concept of a strategy to
                     coordinate the federal government’s efforts to combat money laundering
                     and related financial crimes. Generally, the officials commented that the
                     annual NMLS probably was more beneficial in the first 2 years (1999 and
                     2000) than in the subsequent years (2001 and 2002). For example, Treasury
                     officials said that the NMLS was initially instrumental in focusing on the
                     need to combat money laundering systemically and not solely on a case-
                     by-case basis. However, different agency views emerged about the
                     appropriate scope of the NMLS and the level of agency commitment to the
                     strategy that was required. Thus, the officials said the strategy did not
                     reach its potential for integrating and harmonizing the nation’s efforts to
                     combat money laundering and related financial crimes. In addition, other
                     events affected or delayed the strategy’s implementation. For example,
                     changes in the administration and senior agency officials led to major
                     revisions to the NMLS in 2001 and 2002. In addition, the 2001 strategy was
                     issued on September 12, 2001. Subsequent to the attacks of September 11,


                     Page 4                                  GAO-03-813 Combating Money Laundering
the government’s focus changed to terrorist financing, making money
laundering less of a priority. More recently, the 2003 strategy was delayed,
in part, because the creation of the Department of Homeland Security
(DHS) brought a new player into the mix with the transfer of Treasury’s
enforcement functions and staff to the new department.

As a mechanism for guiding the coordination of federal law enforcement
agencies’ efforts to combat money laundering and related financial crimes,
the NMLS has had mixed results but generally has not been as useful as
envisioned by the Strategy Act. For example, although expected to have a
central role in coordinating law enforcement agencies’ efforts to combat
money laundering, HIFCA task forces generally had not yet been
structured and operating as intended and had not reached their
expectations for leveraging investigative resources or creating
investigative synergies. In some cases, federal law enforcement agencies
had not provided the levels of commitment and staffing to the task forces
called for by the strategy. Further, while Treasury and Justice made
progress on some NMLS initiatives designed to enhance interagency
coordination of money laundering investigations, most had not achieved
the expectations called for in the annual strategies, including plans to
(1) use a centralized system to coordinate investigations and (2) develop
uniform guidelines for undercover investigations. Headquarters officials
cited differences in the various agencies’ anti-money laundering priorities
as a primary reason why initiatives had not achieved their expectations.
Moreover, due to difficulties in reaching agreement over which agency
should lead investigations, the 2002 NMLS did not address agency and task
force roles and interagency coordination procedures for investigating
terrorist financing. Law enforcement officials told us that the lack of
clearly defined roles and coordination procedures contributed to
duplication of efforts and disagreements over which agency should lead
investigations. To help resolve these long-standing jurisdictional issues, in
May 2003, the Attorney General and the Secretary of Homeland Security
signed a memorandum of agreement regarding roles and responsibilities in
investigating terrorist financing. It is too soon to determine whether the
agreement will be successful in resolving these issues.

Most financial regulators we interviewed said that the NMLS had some
influence on their anti-money laundering efforts because it provided a
forum for enhanced coordination, particularly with law enforcement
agencies. Law enforcement agency officials said the level of coordination
between their agencies and the financial regulators was good. However,
the financial regulators also said that other factors had more influence on
them than the strategy. For example, the financial regulators cited their


Page 5                                  GAO-03-813 Combating Money Laundering
ongoing oversight responsibilities in ensuring compliance with the BSA as
a primary influence on them. Another influence has been anti-money
laundering working groups, some of which were initiated by the financial
regulators or law enforcement agencies prior to enactment of the Strategy
Act. The officials said that the U.S. government’s reaction to September 11,
which included a change in government perspective and new regulatory
requirements placed on financial institutions by the USA PATRIOT Act,
has driven their recent anti-money laundering and antiterrorist financing
efforts. Although the financial regulators said that the NMLS had less
influence on their anti-money laundering activities than other factors, they
have completed the tasks for which the NMLS designated them as lead
agencies over the years, as well as most of the tasks for which they were
to provide support to Treasury.

In recent years, our work in reviewing national strategies for various
crosscutting issues has identified several critical components needed for
their development and implementation, including effective leadership,
clear priorities, and accountability mechanisms.7 For a variety of reasons,
these critical components generally have not been fully reflected in the
development and implementation of the annual NMLS. For example, the
joint Treasury-Justice leadership structure that was established to oversee
NMLS-related activities generally has not resulted in (1) reaching
agreement on the appropriate scope of the strategy; (2) ensuring that
target dates for completing strategy initiatives were met; and (3) issuing
the annual NMLS by February 1 of each year, as required by the Strategy
Act. Although Treasury generally took the lead role in strategy-related
activities, the department had no incentives or authority to get other
departments and agencies to provide necessary resources and
participation. Also, the annual strategies have not identified and prioritized
issues that required the most immediate attention. Each strategy has
contained more priorities than could be realistically achieved, the
priorities have not been ranked in order of importance, and no priority has
been explicitly linked to a threat and risk assessment. Further, although
the 2001 and 2002 strategies contained initiatives to measure program
performance, none had been used to ensure accountability for results.
Officials attributed this to the difficulty in establishing such measures for
combating money laundering. In addition, Treasury has not provided
annual reports to Congress on the effectiveness of policies to combat



7
GAO continues to develop critical success factors for evaluating national strategies and
will report on this work later this year.




Page 6                                         GAO-03-813 Combating Money Laundering
             money laundering and related financial crimes, as required by the Strategy
             Act.

             If Congress reauthorizes the requirement for an annual NMLS, this report
             provides recommendations for the Secretary of the Treasury, working
             with the Attorney General and the Secretary of Homeland Security, to
             (1) strengthen the leadership structure responsible for strategy
             development and implementation, (2) ensure that clear priorities are
             identified, and (3) establish accountability mechanisms, so that the NMLS
             better meets its interagency coordination and cooperation expectations.

             In commenting on a draft of this report, Treasury said that our
             recommendations are important, should Congress reauthorize the
             legislation requiring future strategies; Justice said that our observations
             and conclusions will be helpful in assessing the role that the strategy
             process has played in the federal government’s efforts to combat money
             laundering; and DHS said that it agreed with our recommendations. The
             seven federal financial regulatory agencies did not address our
             recommendations, although the Federal Deposit Insurance Corporation
             (FDIC) noted that should a national money laundering strategy continue,
             annual goals should be achievable and roles and responsibilities clearly
             defined. The National Security Council did not respond to our request for
             comments.


             Money laundering is the process used to transform monetary proceeds
Background   derived from criminal activities into funds and assets that appear to have
             come from legitimate sources. Although the magnitude of global money
             laundering is unknown, many estimates suggest annual ranges in the
             hundreds of billions of dollars. The process of money laundering generally
             takes place in three stages: placement, layering, and integration. In the
             placement stage, cash is converted into monetary instruments, such as
             money orders or traveler’s checks, or deposited into financial institution
             accounts. In the layering stage, these funds are transferred or moved into
             other accounts or other financial institutions to further obscure their illicit
             origin. In the integration stage, the funds are used to purchase assets in the
             legitimate economy or to fund further activities. All financial sectors and
             certain commercial businesses can be targeted during one or more of
             these stages. Many of these entities are required to report transactions
             with certain characteristics to law enforcement if they appear to be
             potentially suspicious. The transactions would generally fall within either
             the placement or layering stage if they proved to be involved in money



             Page 7                                   GAO-03-813 Combating Money Laundering
laundering. Transaction reporting requirements are discussed further later
in this report. Figure 1 shows the three stages of money laundering.

Figure 1: The Three Stages of Money Laundering



                 Illicit activity
                Cash is generated by
                drug trafficking, fraud,
                    and so forth.



                            1 - Placement
                         Cash is converted to
                       monetary instruments or is
                                                                                      Bank of Anytown
                        deposited into financial                             Pay to the
                                                                                                    $
                                                                             Order of
                         institution accounts.


                                                                 Funds are moved through wire transfers,
                                                                 checks, money orders, and so forth.


                                      2 - Layering
   Stages




                                Funds are moved to other
                                 financial institutions to
                                     obscure origins.


                                                                       Funds are moved through wire transfers,
                                                                       checks, money orders, and so forth.


                                 3 - Integration
                             Funds are used to acquire
                             legitimate assets or fund
                                  further activities.




Source: Financial Crimes Enforcement Network, FinCEN Related Series:
An Assessment of Narcotics Related Money Laundering, July 1992.



Terrorist financing is generally characterized by different motives than
money laundering and the funds involved often originate from legitimate
sources. However, the techniques for hiding the movement of funds
intended to be used to finance terrorist activity—techniques to obscure



Page 8                                                            GAO-03-813 Combating Money Laundering
                            the origin of funds and the ultimate destination—are often similar to those
                            used to launder money. Therefore, Treasury, law enforcement agencies,
                            and the federal financial regulators often employ similar approaches and
                            techniques in trying to detect and prevent both money laundering and
                            terrorist financing.


Many Agencies Are           Agencies under the Departments of the Treasury, Justice, and Homeland
Responsible for Combating   Security are to coordinate with each other and with financial regulators in
Money Laundering and        combating money laundering. Within Treasury, the Financial Crimes
                            Enforcement Network (FinCEN) was established in 1990 to support law
Terrorist Financing         enforcement agencies by collecting, analyzing, and coordinating financial
                            intelligence information to combat money laundering. In addition to
                            FinCEN, Treasury components actively involved in anti-money laundering
                            and antiterrorist financing efforts include the Executive Office for
                            Terrorist Financing and Financial Crimes, the Office of International
                            Affairs, and the Internal Revenue Service and its Criminal Investigation
                            unit (IRS-CI).8

                            Department of Justice components involved in efforts to combat money
                            laundering and terrorist financing include the Criminal Division’s Asset
                            Forfeiture and Money Laundering Section (AFMLS) and Counterterrorism
                            Section, the Federal Bureau of Investigation (FBI), the Drug Enforcement
                            Administration (DEA), and the Executive Office for U.S. Attorneys
                            (EOUSA) and U.S. Attorneys Offices.9 With the creation of DHS in March
                            2003, anti-money laundering activities of the Customs Service were
                            transferred from Treasury to DHS’s Bureau of Immigration and Customs
                            Enforcement (ICE).

                            The financial regulators who oversee financial institutions’ anti-money
                            laundering efforts include the depository institution financial regulators—
                            the Federal Reserve Board (FRB), FDIC, Office of the Comptroller of the
                            Currency (OCC), Office of Thrift Supervision (OTS), and the National
                            Credit Union Administration (NCUA)—and also the Securities and



                            8
                             Among other duties, Treasury’s Executive Office for Terrorist Financing and Financial
                            Crimes is charged with developing and implementing the NMLS and U.S. government
                            strategies to combat terrorist financing. These duties were previously conducted by
                            Treasury’s Office of Enforcement, which was disbanded in March 2003.
                            9
                             Justice’s Asset Forfeiture and Money Laundering Section (AFMLS) is the department’s
                            focal point for NMLS issues.




                            Page 9                                         GAO-03-813 Combating Money Laundering
                                                    Exchange Commission (SEC), which regulates the securities markets, and
                                                    the Commodity Futures Trading Commission (CFTC), which regulates
                                                    commodity futures and options markets. While OCC and OTS are bureaus
                                                    within Treasury, the FRB, FDIC, NCUA, SEC, and CFTC are independent
                                                    agencies that are not part of the executive branch. Figure 2 shows the
                                                    primary agencies responsible for combating money laundering and
                                                    terrorist financing before the creation of DHS. Figure 3 shows the primary
                                                    agencies responsible for combating money laundering and terrorist
                                                    financing after the creation of DHS.

Figure 2: Principal Agencies Responsible for NMLS before the Creation of DHS



     Financial regulators

    FRB        FDIC   OCC                     Department of                                  Department
                                               the Treasury                                   of Justice
    SEC        NCUA   OTS

    CFTC

                                  Office of      Office of                               Counter-                        U.S.
                                Enforcement    International   IRS     EOUSA    AFMLS    terrorism    FBI     DEA     Attorneys
                                                  Affairs                                 Section                      Offices


                            FinCEN      Customs



Source: GAO.




                                                    Page 10                               GAO-03-813 Combating Money Laundering
Figure 3: Principal Agencies Responsible for NMLS after the Creation of DHS



    Financial regulators

   FRB         FDIC   OCC                Department of                 Department of                        Department
                                          the Treasury               Homeland Security                       of Justice
   SEC         NCUA   OTS

  CFTC

                            Executive Office     Office of                                              Counter-                     U.S.
                               for Terrorist   International   IRS          ICE      EOUSA   AFMLS      terrorism    FBI   DEA    Attorneys
                             Financing and        Affairs                                                Section                   Offices
                            Financial Crimes


                                FinCEN



Source: GAO.




NMLS Was Intended to                               Given law enforcement’s mixed history of both productive partnerships
Coordinate the U.S.                                and turf-protection battles, proponents of the Strategy Act envisioned that
Government’s Anti-Money                            the implementation of an annual NMLS would inaugurate a new level of
                                                   coordination and cooperation between law enforcement agencies. The
Laundering Efforts                                 NMLS also sought to coordinate the efforts of law enforcement agencies
                                                   and financial regulators to ensure that financial institutions were
                                                   sufficiently vigilant to detect possible money laundering and that they
                                                   reported any suspicious activity to law enforcement agencies to assist in
                                                   their efforts to investigate money laundering and, more recently, terrorist
                                                   financing.

                                                   The process for developing the NMLS has varied slightly from year to year,
                                                   but it has generally involved Treasury working with other agencies to
                                                   develop a draft. Treasury officials said that they have sometimes asked
                                                   officials from other agencies to take the lead in drafting certain sections
                                                   that pertain particularly to their efforts. In other instances, Treasury has
                                                   drafted the sections and asked for participating agencies’ review and
                                                   comments on the sections relevant to them. Upon completion of the draft
                                                   NMLS, the relevant agencies are given the opportunity to clear the final
                                                   document through the Office of Management and Budget’s clearance
                                                   process, which requires that the agencies approve the document, that is,
                                                   signify their agreement with its contents. Treasury officials told us that by
                                                   approving the NMLS through this process, the agencies have agreed to it
                                                   and should be held accountable to Congress and the public to complete
                                                   their assigned responsibilities.


                                                   Page 11                                           GAO-03-813 Combating Money Laundering
The drafting process has generally resulted in a document that lists four to
six broad goals, each containing objectives, which in turn contain a list of
priorities. Over time, the goals have changed, sometimes in their wording
or order, and other times to cover new threats. For example, in the wake
of September 11, the 2002 NMLS added the goal, “Focus Law Enforcement
and Regulatory Resources on Identifying, Disrupting, and Dismantling
Terrorist Financing Networks.” As of September 24, the 2003 NMLS had
not yet been issued. Table 1 shows the NMLS goals from 1999 through
2002 and the number of objectives and priorities.




Page 12                                 GAO-03-813 Combating Money Laundering
Table 1: NMLS Goals, Objectives, and Priorities, 1999 through 2002

 NMLS year           NMLS goals                                                                                         Objectives       Prioritiesa
 1999                1.      Strengthening domestic enforcement to disrupt the flow of illicit money.                                8            21
                     2. 	 Enhancing regulatory and cooperative public-private efforts to prevent money                               7            15
                          laundering.
                     3. 	 Strengthening partnerships with state and local governments to fight money                                 5                 5
                          laundering throughout the United States.
                     4.      Strengthening international cooperation to disrupt the global flow of illicit money.                    6            25
 Total                                                                                                                            26              66
 2000                1.      Strengthening domestic enforcement to disrupt the flow of illicit money.                                9            18
                     2. 	 Enhancing regulatory and cooperative public-private efforts to prevent money                               7            16
                          laundering.
                     3. 	 Strengthening partnerships with state and local governments to fight money                                 4                 5
                          laundering throughout the United States.
                     4.      Strengthening international cooperation to disrupt the global flow of illicit money.                    7            19
 Total                                                                                                                            27              58
 2001                5. 	 Focus law enforcement efforts on the prosecution of major money laundering                                 5            15
                          organizations and systems.
                     6.      Measure the effectiveness of anti-money laundering efforts.                                             1                 4
                     7. 	 Prevent money laundering through cooperative public-private efforts and necessary                          4            13
                          regulatory measures.
                     8. 	 Coordinate law enforcement efforts with state and local governments to fight money                         3                 6
                          laundering throughout the United States.
                     9. 	 Strengthening international cooperation to combat the global problem of money                              5            13
                          laundering.
 Total                                                                                                                            18              51
 2002                10. Measure the effectiveness of anti-money laundering efforts.                                                 2                 9
                     11. 	Focus law enforcement and regulatory resources on identifying, disrupting, and                             3            11
                          dismantling terrorist financing networks.
                     12. 	Increase the investigation and prosecution of major money laundering organizations                         4            11
                          and systems.
                     13. 	Prevent money laundering through cooperative public-private efforts and necessary                          2                 7
                          regulatory measures.
                     14. 	Coordinate law enforcement efforts with state and local governments to fight money                         3                 5
                          laundering throughout the United States.
                     15. Strengthen international anti-money laundering regimes.                                                     5            10
 Total                                                                                                                            19              50
Source: NMLS 1999 to 2002.
                                                       a
                                                        The NMLS for 1999 and 2000 used the term “Action Item,” and the NMLS for 2001 and 2002 used
                                                       the term “Priority.”




                                                       Page 13                                          GAO-03-813 Combating Money Laundering
     The Strategy Act also created an operating mechanism within which to
     enhance interagency coordination of law enforcement investigations—
     HIFCAs. In accordance with the Strategy Act and the 1999 NMLS:

•	    HIFCA designations would allow law enforcement to concentrate its
     resources in areas where money laundering or related financial crimes
     appeared to be occurring at a higher rate than average.10 An interagency
     HIFCA Designation Working Group would review requests for such
     designations and provide advice for selections to be made by the Secretary
     of the Treasury, in consultation with the Attorney General.11

•	   A money laundering action team, where appropriate, would be created
     when a HIFCA was designated to spearhead a coordinated federal, state,
     and local anti-money laundering effort in the area, or an existing task force
     already on the ground would be mobilized.

     The 2001 NMLS specified that HIFCAs were to be operational and conduct
     investigations designed to result in indictments, convictions, and seizures,
     rather than focusing principally on intelligence gathering. Also, the 2001
     NMLS reinforced the expectations that HIFCA task forces “will be
     composed of, and draw upon, all relevant federal, state, and local
     agencies, and will serve as the model of our anti-money laundering efforts”
     and that the Departments of the Treasury and Justice were to jointly
     oversee the HIFCA task forces.

     The Strategy Act mandated that the NMLS be submitted to Congress by
     February 1 of each year, 1999 to 2003. The Strategy Act also required
     that—at the time each NMLS was transmitted to the Congress (other than
     the first transmission of any such strategy)—the Secretary of the Treasury
     must submit a report containing an evaluation of the effectiveness of
     policies to combat money laundering and related financial crimes.




     10
       According to the Strategy Act, several factors are to be considered in making HIFCA
     designations, including the population of the area, the number of bank and nonbank
     financial institution transactions, and observed changes in trends and patterns of money
     laundering activity.
     11
       Generally, the Secretary and the Attorney General can make designations on their own
     initiative, at the suggestion of other federal agencies, or at the formal request of a state or
     local official involved in money laundering detection, prevention, or enforcement.




     Page 14                                           GAO-03-813 Combating Money Laundering
                       The Treasury, Justice, and regulatory agency officials we interviewed said
Early Benefit of the   that the NMLS was initially beneficial but, over time, certain factors and
NMLS Was Affected      events affected its development and implementation. Officials from each
                       of the agencies endorsed the concept of having a national strategy for
by Certain Factors     combating money laundering and related financial crimes. Generally, the
and Events             officials said that the annual NMLS probably was more beneficial in the
                       first 2 years (1999 and 2000) than in the subsequent years (2001 and 2002).
                       As an initial benefit, for example, Treasury officials said that the NMLS
                       was instrumental in focusing on the need to combat money laundering
                       systemically and not solely on a case-by-case basis, encouraging multiple
                       law enforcement agencies to work together, and raising general awareness
                       of the importance of combating financial crimes. The NMLS enhanced
                       their planning and communication when it was new because it served to
                       formalize interagency communication in a way that had not existed before.
                       Similarly, the officials noted that the early strategies were instrumental in
                       expanding the perspectives of the regulatory agencies by refocusing them
                       on the purposes underlying their BSA responsibilities. The early strategies
                       renewed attention on the fight against money laundering that supports
                       particular reporting or record keeping obligations. That is, due partly to
                       the strategies, the financial regulators became more focused regarding
                       ways in which criminals could be using financial institutions for money
                       laundering activities.

                       However, after the first couple of years, the benefit of the annual NMLS
                       was affected by a number of factors and events, according to the Treasury,
                       Justice, and regulatory agency officials we interviewed. One factor cited
                       was that the principal agencies had significantly differing views about the
                       appropriate purpose and structure of the strategy. For instance, Treasury
                       preferred a document that covered the full breadth and scope of the
                       federal government’s planned anti-money laundering efforts, while Justice
                       preferred a more concise document that included only those priorities that
                       realistically could be addressed during the year. Likewise, the regulatory
                       agencies generally favored a more concise document. Several officials said
                       that this fundamental difference in views resulted in less-than-full
                       commitment or buy-in from some agencies, which lessened the overall
                       benefit of the recent strategies.

                       An event that affected the 2001 NMLS was the change in presidential
                       administrations prior to the strategy’s issuance. Treasury and Justice
                       officials explained that with the arrival of a new administration, it was
                       necessary to revise a nearly complete NMLS to match the new
                       administration’s vision for combating money laundering. This redrafting



                       Page 15                                 GAO-03-813 Combating Money Laundering
                        process caused the NMLS to be issued very late, leaving little time to
                        implement any goals or objectives before drafting the 2002 NMLS.

                        The officials said that the implementation of the recent strategies has been
                        affected most significantly by external events—particularly September 11,
                        2001, and its aftermath, which included passage of the USA PATRIOT Act
                        and the creation of DHS. Treasury and Justice officials said that the 2001
                        NMLS, which was issued on September 12, 2001, was virtually obsolete at
                        issuance because the nature of the issues they faced had just changed
                        dramatically. After September 11, combating terrorist financing became a
                        major element of the federal government’s anti-money laundering efforts,
                        but it was not part of the 2001 NMLS.

                        The passage of the USA PATRIOT Act increased the requirements on many
                        financial institutions for conducting due diligence, record keeping,
                        reporting, and sharing information. Because implementing the USA
                        PATRIOT Act became the main focus for the financial regulators in the
                        2002 NMLS, financial regulators attributed their efforts to the USA
                        PATRIOT Act rather than the NMLS. The creation of DHS required the
                        transfer of most of the law enforcement functions and staff from agencies
                        formerly under Treasury to the new agency. Justice anti-money laundering
                        components remained in Justice. Treasury and Justice officials said that
                        the implementation of some 2002 NMLS priorities was delayed pending
                        formation of the new department. They also said that issuance of the 2003
                        NMLS has been delayed by the same disruptions.


                        As a mechanism for guiding the coordination of federal law enforcement
NMLS Generally Has      agencies’ efforts to combat money laundering and related financial crimes,
Not Been as Useful as   the NMLS has had mixed results and—according to the evidence we
                        reviewed and the officials we contacted—generally has not been as useful
Envisioned for          as envisioned by the Strategy Act. For example, although expected to have
Guiding the             a key role in the federal government’s efforts to disrupt and dismantle
                        large-scale money laundering organizations, HIFCA task forces generally
Coordination of Law     were not yet structured and operating as intended and had not reached
Enforcement Efforts     their expectations for leveraging investigative resources or creating
                        investigative synergies. Further, while Treasury and Justice made progress
                        on some NMLS initiatives designed to enhance interagency coordination of
                        money laundering investigations, most had not achieved the expectations
                        called for in the annual strategies. Moreover, the 2002 NMLS did not
                        address agency roles and interagency coordination procedures for
                        conducting terrorist financing investigations.



                        Page 16                                 GAO-03-813 Combating Money Laundering
HIFCA Task Forces             As envisioned by the Strategy Act, HIFCAs represent a major NMLS
Generally Had Not Yet         initiative and were expected to have a flagship role in the U.S.
Been Structured and           government’s efforts to disrupt and dismantle large-scale money
                              laundering operations. They were intended to improve the coordination
Operating as Intended         and quality of federal money laundering investigations by concentrating
                              the investigative expertise of federal, state, and local agencies in unified
                              task forces, thereby leveraging resources and creating investigative
                              synergies. While neither the Strategy Act nor the annual NMLS specified a
                              time frame for when designated HIFCAs were to become fully operational,
                              we found that the task forces had made some progress but generally had
                              not yet been structured and operating as intended. As of July 2003,
                              Treasury and Justice were in the process of reviewing the HIFCA task
                              forces to remove obstacles to their effective operations. The results of this
                              review could provide useful input for an evaluation report on the HIFCA
                              program, which the Strategy Act requires Treasury to submit to the
                              Congress in 2004.

Status of HIFCA Task Forces   In May 2003, we contacted each of the seven designated HIFCAs to obtain
                              information on the status of their task forces (see table 2). At that time,
                              two of the seven HIFCAs (the Southwest Border and Miami) had not
                              started operations. Law enforcement officials in the Southwest Border
                              area cited several reasons for the HIFCA’s nonoperational status, including
                              (1) difficulty in coordinating activities in such a large area and (2) lack of
                              funds to persuade state and local officials to participate.12 In Miami, federal
                              law enforcement officials had met but had not reached agreement on how
                              the HIFCA should be structured or how it should operate. For example,
                              the officials had not agreed on whether the Miami HIFCA should conduct
                              investigations or focus principally on intelligence gathering.




                              12
                                The Southwest Border HIFCA was designated to focus on a specific money laundering
                              system—i.e., the smuggling of bulk cash between the United States and Mexico—rather
                              than a specific geographic area. It was to include three U.S. judicial districts—the Southern
                              District of Texas, the Western District of Texas, and the District of Arizona.




                              Page 17                                         GAO-03-813 Combating Money Laundering
Table 2: Status of HIFCA Task Forces as of May 2003

                                                                                                       Number of participating law
                                                                                                         enforcement agencies
                                                                                    Lead
                                                          Shared office
                                                                       a                                                                                  b
 Date designated HIFCA                                   Start date                 agency        Federal        State      Local        Total     space?
                                                                                                                                                      

 March 2000                  Los Angeles                 September 2001             IRS-CI               10           2           4         16     No
                             New York/New                March 2000                 ICE and              10           6         21          37     Yes
                             Jersey                                                 IRS-CI
                             Puerto Rico                 March 2000                 ICE and               6           3           1         10     Yes
                                                                                    IRS-CI
                             Southwest Border                                                        Not yet operating
 September 2001              Chicago                     September 2002             IRS-CI                3           1           0           4    Yes
                             San Francisco               September 2002             ICE and               7           0           0           7    No
                                                                                    IRS-CI
 January 2003                Miami                                                                   Not yet operating
Source: Representatives from the seven designated HIFCAs and federal agency data.
                                                               a
                                                                The start date is the date local HIFCA officials considered the task force to be conducting either
                                                               investigations or intelligence gathering activities.
                                                               b
                                                                According to Treasury and Justice officials, a key to the success of the HIFCA program is the ability
                                                               to promote interagency cooperation by locating task force participants together in the same office
                                                               space.


                                                               In September 2003, in commenting on a draft of this report, Justice said
                                                               that while the Southwest Border HIFCA has not worked out as intended,
                                                               the participants in Texas and Arizona met on numerous occasions over the
                                                               past 4 years in an attempt to find an organizational structure that could
                                                               meet the needs of all of the participants. Justice also said that
                                                               headquarters officials and participants in the Southwest Border area
                                                               recently decided that the dual-state HIFCA was too ambitious and that the
                                                               HIFCA should be limited to Texas and relocated to augment an existing
                                                               task force.

                                                               Although the 2001 NMLS specified that HIFCAs were to conduct
                                                               investigations rather than principally gather intelligence, we found that
                                                               two of the five operating task forces (Los Angeles and San Francisco)
                                                               were primarily focusing on intelligence gathering activities—such as
                                                               reviews of Suspicious Activity Reports (SAR) and other information
                                                               required by the BSA—and had not established multiagency investigative




                                                               Page 18                                               GAO-03-813 Combating Money Laundering
units to act on the intelligence.13 HIFCA officials in Los Angeles told us
they planned to locate task force participants together in the same area in
mid- or late-2003, at which time multiagency investigative units would be
established. In San Francisco, a HIFCA official told us their proposal to
become a HIFCA specified that the task force would focus on intelligence
and that there were no plans to establish multiagency investigative units
within the HIFCA. Treasury and Justice officials responsible for
overseeing the HIFCAs told us that headquarters was reluctant to require
the task forces to establish multiagency investigative units, primarily
because the Strategy Act did not provide additional funds or personnel to
establish such units. The officials noted that even though the 2001 NMLS
specified that HIFCAs were to conduct investigations, task forces that
focus on intelligence gathering activities but do not conduct investigations
do enhance interagency efforts to combat money laundering.

Also, because the investigative activities of the three HIFCAs that had
multiagency investigative units (Chicago, New York/New Jersey, and
Puerto Rico) were based on task force structures already in place before
the HIFCA designation, the overall effect of the NMLS on these task forces
is unclear. For example, the New York/New Jersey HIFCA essentially
represented a renaming of the well-established El Dorado Money
Laundering Task Force, which had existed since 1992. As mentioned
previously, a HIFCA task force could be (1) created when a HIFCA was
designated or (2) based on an existing task force.

Further, in some cases, federal law enforcement agencies had not
provided the levels of commitment and staffing to the HIFCA task forces
called for by the strategy. As shown in table 2, ICE and/or IRS-CI were
designated the lead agency in each of the five operational task forces. We
found that most of the HIFCAs did not have DEA or FBI agents assigned
full-time to the task forces. For example, regarding the three HIFCAs with
multiagency investigative units, DEA and the FBI were not members of the
Chicago HIFCA, DEA was not a member of the New York/New Jersey
HIFCA, and both DEA and the FBI had only part-time representation on
the Puerto Rico HIFCA. As also shown in table 2, four of the five operating



13
  Pursuant to regulations issued by Treasury as authorized by the BSA and each of the bank
regulators, certain financial institutions are required to file SARs with FinCEN to report
transactions involving $5,000 or more that they suspect involve funds derived from illegal
activity. These reports provide information that can enable law enforcement agencies to
generate investigative leads, understand financial relationships in ongoing investigations,
and identify forfeitable assets.




Page 19                                        GAO-03-813 Combating Money Laundering
                          HIFCAs had little or no participation from state and local law enforcement
                          agencies, with the notable exception being the New York/New Jersey
                          HIFCA. The NMLS called for each HIFCA to include participation from all
                          relevant federal, state, and local agencies.

                          Justice headquarters officials said the main problem with supporting the
                          HIFCA task forces was the absence of additional funds or personnel to
                          offer law enforcement agencies in return for their participation. A DEA
                          official told us that, because of differences in agencies’ guidelines for
                          conducting undercover money laundering investigations, DEA will not
                          dedicate staff to HIFCA task force investigative units but will support
                          intelligence-related activities.14 FBI officials cited resource constraints as
                          the primary reason why the bureau does not fully participate. Various task
                          force officials mentioned lack of funding to compensate or reimburse
                          participating state and local law enforcement agencies as a barrier to their
                          participation in HIFCA operations. Further, Treasury and Justice officials
                          noted that a key to the success of the HIFCA program is the ability to
                          promote interagency cooperation by locating task force participants
                          together in the same office space. Accordingly, the 2002 NMLS called for
                          headquarters to examine how to fund the colocation of HIFCA task force
                          participants absent funds appropriated specifically for that purpose.

                          While we recognize that federal law enforcement agencies have resource
                          constraints and competing priorities, we note that HIFCA task forces were
                          expected to make more effective use of existing resources or of such
                          additional resources as may be available. Without commitment and
                          staffing from relevant federal, state, and local agencies, the task forces
                          cannot fully leverage resources and create investigative synergies, as
                          envisioned by the Strategy Act.

Oversight of HIFCA Task   Treasury and Justice have not provided the level of oversight of the HIFCA
Forces Has Not Met        task forces called for by the NMLS. For example, in response to our initial
Expectations              inquiries and formal requests for information, Treasury and Justice
                          officials responsible for overseeing the HIFCA task forces could not
                          readily provide basic information, such as names of participating agencies




                          14
                           As discussed later in this report, the 2002 NMLS called for Treasury and Justice to
                          develop uniform guidelines for undercover money laundering investigations.




                          Page 20                                         GAO-03-813 Combating Money Laundering
and contact persons or the results of task force operations.15 Also, as
shown in table 3, Treasury and Justice had not addressed various NMLS
initiatives designed to oversee HIFCA operations, and many of the
initiatives were still ongoing well past expected completion dates. Fully
addressing these initiatives could help ensure accountability within the
HIFCAs, as well as refine the operational mission, structure, and
composition of the task forces.




15
  Treasury and Justice were to jointly oversee the HIFCA task forces. To assist their efforts,
the departments created an interagency HIFCA working group. Regarding the 2002 NMLS,
the group was to include representatives from the Customs Service, DEA, EOUSA, the
Executive Office for Organized Crime Drug Enforcement Task Forces, FBI, Federal Law
Enforcement Training Center, FinCEN, IRS-CI, Justice’s Asset Forfeiture and Money
Laundering Section, Office of National Drug Control Policy, U.S. Postal Inspection Service,
Secret Service, and Treasury’s Office of Enforcement.




Page 21                                          GAO-03-813 Combating Money Laundering
Table 3: Status of NMLS Initiatives Related to HIFCA Oversight

 Annual                                                                                              Target date for                                Status (as of July
                                                                                                                                                          a
 NMLS          NMLS initiative                                                                       completion            Target date met?         2003)
 2000          Oversee newly designated HIFCA task forces:
 NMLS
               16. Report on the progress of the HIFCA task forces.                                  (1) December 2000     No                       Not addressed
               17. 	Formulate a reporting system so that the impact of                               (2) During the year   No                       Ongoing
                    the HIFCAs can be evaluated.
 2001          Design the organizational structure of HIFCA task forces                              October 2001          No                       Not addressed
 NMLS          and designate regional task force directors.

               HIFCA representatives will brief Treasury and Justice
               officials on:
               18. HIFCA activities and coordination efforts.                                        (1) March 2002        No                       Not addressed
               19. 	The progress of investigations and the involvement                               (2) Quarterly         No                       Not addressed
                    of federal, state, and local law enforcement and
                    regulatory agencies.
               Establish a new asset forfeiture reporting system for                                 March 2002            No                       Ongoing
               HIFCA task forces and implement its usage.
 2002          Review HIFCA task forces to remove obstacles to their
 NMLS          effective operation:
               20. 	Review the progress of each HIFCA and assess                                     (1) December 2002     (1) No                   (1) Ongoing
                    how well the HIFCA concept is working.
               21. 	Recommend what changes to make so that the                                       (2) February 2003     (2) No                   (2) Ongoing
                    HIFCAs can achieve their mission objectives.
               Each HIFCA will report on participation of state and local November 2002                                    No                       Ongoing
               enforcement, regulatory, and prosecution agencies, and
               identify steps needed to include participation of all
               relevant agencies.
                                                                                                                                                                 b
               Provide advanced money laundering training in each of                                 November 2002         Yes                      Completed
               the six HIFCA locations.
Source: GAO analysis of the NMLS (2000 through 2002) and interviews with Treasury and Justice headquarters officials.
                                                                 a
                                                                  “Not addressed” indicates that Treasury and Justice took little or no action on the NMLS initiative
                                                                 and that no future action is planned. “Ongoing” indicates that Treasury and Justice had not completed
                                                                 the initiative by its target date, but there was ongoing or planned future work related to the initiative.
                                                                 b
                                                                 Advanced money laundering training was not provided to the Southwest Border HIFCA, because the
                                                                 HIFCA did not have an operational task force.


                                                                 Treasury and Justice officials told us the primary reasons for not
                                                                 addressing or not yet completing the HIFCA initiatives were that
                                                                 headquarters (1) was reluctant to impose a structure or reporting
                                                                 requirement on the field without offering any new resources and (2) did
                                                                 not believe that a single structure could fit every HIFCA. The officials also
                                                                 said that the individual HIFCAs were in the best position to address their



                                                                 Page 22                                                   GAO-03-813 Combating Money Laundering
                            specific needs and problems. Further, the officials told us that, while most
                            of the HIFCA initiatives had not been addressed or were not yet
                            completed, the HIFCA structure at headquarters has provided a
                            framework for regular interagency meetings to discuss money laundering
                            trends and ways to improve interagency cooperation.

                            As shown in table 3, although only one of the HIFCA initiatives was
                            completed by the specified milestone or goal date, many of the initiatives
                            were still ongoing. For example, the 2002 NMLS called for a review of
                            HIFCA task forces to remove obstacles to their effective operation.
                            Specifically, the initiative called for an interagency HIFCA team to
                            (1) review the accomplishments of the HIFCA task forces to date; (2)
                            examine structural and operational issues, including how to fund the
                            colocation of participants in HIFCA task forces absent funds appropriated
                            for that purpose; and (3) examine existing operations and make
                            recommendations to ensure that each HIFCA is composed of all relevant
                            federal, state, and local enforcement authorities, prosecutors, and
                            financial supervisory agencies as needed. As of July 2003, the HIFCA
                            review team was still in the process of assessing the HIFCAs. When
                            completed, the team’s review could provide useful input for an evaluation
                            report on the effectiveness of and the continued need for HIFCA
                            designations, which is required by the Strategy Act to be submitted to the
                            Congress in 2004.

Money Laundering Training   According to the 2002 NMLS, Treasury and Justice have conducted a
Was Provided to HIFCAs      substantial amount of fundamental, advanced, and specialized money
                            laundering training to task forces, agencies, investigators, and prosecutors.
                            For example, as included in the 2002 NMLS (see table 3), the Federal Law
                            Enforcement Training Center, in cooperation with Treasury and Justice,
                            have provided an advanced money laundering training course in six
                            HIFCA locations. According to a Federal Law Enforcement Training
                            Center official, approximately 900 to 1,000 agency representatives have
                            participated in the 3-day training seminar. The official said that the
                            training focused on numerous issues, including money laundering statutes,
                            the impact of the USA PATRIOT Act, basic and international banking,
                            asset forfeiture issues, and specific money laundering schemes and
                            organizations.




                            Page 23                                 GAO-03-813 Combating Money Laundering
NMLS Initiatives to             While Treasury and Justice made progress on some NMLS initiatives that
Enhance Coordination of         were specifically designed to enhance coordination of federal law
Law Enforcement                 enforcement agencies’ money laundering investigations, most of the
                                initiatives were not addressed or were still ongoing.16 In general, the failure
Investigations Generally        to address or complete the initiatives indicates that interagency
Were Not Addressed or           coordination was falling short of expectations.
Were Still Ongoing


Progress Was Made on Some       Treasury and Justice made progress in implementing some of the NMLS
Law Enforcement Coordination    law enforcement coordination initiatives. For example, as called for in the
Initiatives                     1999 and 2000 strategies, the departments took steps to (1) enhance the
                                money laundering focus of interagency counter-drug task forces and
                                (2) collect and analyze information on the money laundering aspects of the
                                task forces’ investigations. More recently, the 2002 NMLS called for an
                                interagency team to identify money laundering-related targets for
                                coordinated enforcement action. The strategy noted that targets could be
                                particular organizations or systems used or exploited by money
                                launderers, such as the smuggling of bulk cash and unlicensed money
                                transmitters. In August 2002, Treasury and Justice created an interagency
                                team and identified a money laundering-related target and four cities in
                                which to conduct investigations. In July 2003, Justice officials told us that
                                U.S. Attorneys Office officials had agreed to participate in the targeting
                                initiative and that the initiative was ongoing.

Most Law Enforcement            Most of the annual strategy initiatives designed to enhance interagency
Coordination Initiatives Were   coordination of law enforcement investigations were not addressed or
Not Addressed or Were Still     were still ongoing. Three examples are as follows. First, the Customs
Ongoing                         Service created a Money Laundering Coordination Center in 1997 to
                                (1) serve as the repository for all intelligence information gathered
                                through undercover money laundering investigations and (2) function as
                                the coordination and “deconfliction” center for both domestic and
                                international undercover money laundering investigations.17 Both the


                                16
                                  Each of the four published annual strategies (1999 through 2002) presented one or more
                                initiatives to enhance interagency coordination of money laundering investigations.
                                Collectively, the four strategies presented 14 such initiatives.
                                17
                                   Deconfliction is a process that law enforcement agencies use to help ensure officer safety
                                during tactical activities such as drug stings. For example, by logging each planned activity
                                into a central location or deconfliction unit, officers try to ensure that they are not
                                targeting another investigation’s subjects or otherwise compromising an ongoing
                                investigation.




                                Page 24                                         GAO-03-813 Combating Money Laundering
1999 and the 2000 NMLS contained an initiative to encourage all applicable
federal law enforcement agencies to participate in the Money Laundering
Coordination Center. During our review, Customs Service officials (before
the agency was transferred to DHS) told us that, although Justice agencies
(including DEA and FBI) were invited to use the center, these agencies
were only occasional users and did not contribute information to the
center.18

DEA and FBI officials told us that their agencies did not use the Money
Laundering Coordination Center because they could not reach a
satisfactory memorandum of understanding regarding participation,
including controls over the dissemination of information. DEA officials
added that the center does not meet DEA’s needs because it is used for
deconfliction only. In August 2003, the DEA officials said that DEA had
created and was testing a new database that is designed to be a single
source for information on money laundering investigations related to drug
money. The officials added that DEA has briefed Treasury and DHS about
the new database, but as of August 2003, no other agencies were
participating.

Second, federal law enforcement agencies do not have uniform guidelines
applicable to undercover money laundering investigations. According to
the 2002 NMLS and our discussions with law enforcement officials, the
lack of uniform guidelines inhibits some agencies from participating in
investigations that have an international component. For example, a DEA
official told us that DEA guidelines generally are more restrictive than
guidelines used by Customs (as part of ICE) in regard to (1) obtaining
approval to initiate and continue undercover investigations and
(2) coordinating activities with foreign counterparts. Therefore, the
officials noted that DEA generally could not participate in international
undercover money laundering investigations led by Customs. The
2002 NMLS called for Treasury and Justice to develop uniform undercover
guidelines by September 2002 to ensure the full participation of all
applicable federal law enforcement agencies in undercover money
laundering investigations. Treasury officials told us the initiative is still
ongoing but has been put on hold, pending reorganizations associated with
the creation of DHS.




18
  In March 2003, the Customs Service and the Money Laundering Coordination Center were
transferred from Treasury to DHS’s ICE.




Page 25                                      GAO-03-813 Combating Money Laundering
Third, Treasury and Justice have not yet fully implemented NMLS
initiatives designed to establish SAR review teams in federal judicial
districts. The 2001 NMLS contained an initiative that called for the creation
of a SAR review team in each federal judicial district. Generally, each
team—to be comprised of an Assistant U.S. Attorney and representatives
from federal, state, and local law enforcement agencies—was expected to
evaluate all SARs filed in their respective federal judicial district.

The 2001 SAR initiative has been partially implemented. Treasury officials
noted that Justice has primary responsibility for implementation because
Justice provides guidance and direction to EOUSA and the U.S. Attorneys
Offices. According to EOUSA officials, Justice, EOUSA, and the U.S.
Attorneys Offices have actively encouraged the creation of SAR review
teams and these efforts remain ongoing. At our request, in July 2003,
EOUSA conducted an informal survey of U.S. Attorneys Offices and
reported that at least 33 of the 94 federal judicial districts were actively
using interagency SAR review teams.

The 2002 NMLS had a more conservative SAR-related initiative, calling for
the establishment of five additional review teams. Specifically, the 2002
NMLS initiative called for Treasury and Justice—by August 2002—to
(1) identify a priority list of five federal judicial districts that do not have a
SAR review team but could benefit from one and (2) work with EOUSA
and the respective U.S. Attorneys Offices to encourage the creation of
interagency review teams.19 As of July 2003, this initiative had not yet been
completed, but efforts were still ongoing.

Further, although not called for by the NMLS, the IRS has had a related
initiative to create interagency SAR review teams. Specifically, IRS-CI data
show that IRS has established 41 SAR review teams nationwide—with all
35 IRS field offices having at least one functioning team—and that most of
the review teams had participation from other agencies. According to IRS­
CI officials, collectively, the 41 teams are to review every SAR filed in the
94 federal judicial districts. The officials said that at least 4 of the districts
in which a HIFCA task force is located were using an interagency SAR
review team. The officials noted that IRS review teams are not to duplicate



19
 According to the 2002 NMLS, SAR review teams also can review selected wire transfers.
The strategy noted that expanding the work of the teams to include the selective review of
wire transfers could help law enforcement agencies coordinate their efforts to investigate
and prosecute money laundering organizations.




Page 26                                        GAO-03-813 Combating Money Laundering
                           SAR reviews already performed by existing task forces in federal judicial
                           districts.

Reasons for Not Fully      Treasury officials told us that resource constraints and competing
Implementing Interagency   priorities were the primary reasons why many of the law enforcement
Coordination Initiatives   coordination initiatives were not yet fully implemented. Also, the officials
                           said that, over the past few years, Treasury has given higher priority to
                           other parts of the annual strategy—such as international, regulatory, and
                           terrorism-related initiatives—than to domestic law enforcement initiatives.
                           Further, the officials said that Treasury generally took the lead in
                           implementing the annual strategy but could not require other agencies to
                           focus on specific initiatives or activities. In this regard, the officials said
                           that other agencies frequently had their own priorities.

                           Justice officials also said that the annual strategies have contained more
                           initiatives than realistically could be pursued. The officials added that to
                           the extent NMLS initiatives were not completed or target dates were
                           missed, it was because of competing priorities or the lack of resources
                           available for proper implementation of the strategy. The officials noted
                           that there are complex issues involved in attempting to coordinate the
                           resources, practices, and priorities of two (and sometimes more)
                           departments and several law enforcement agencies, as well as U.S.
                           Attorneys Offices throughout the country. Further, Justice officials told us
                           that while NMLS initiatives to institutionalize coordination may not have
                           been fully implemented, the efforts to do so and regular meetings have
                           been continuing.




                           Page 27                                  GAO-03-813 Combating Money Laundering
NMLS Did Not Address         In developing the 2002 NMLS, Treasury and Justice officials met to discuss
Agency Roles and Task        the roles of the various investigative agencies involved in combating
Force Coordination in        terrorist financing. However, the two departments could not reach
                             agreement, and the 2002 strategy was published without addressing the
Terrorist Financing          agencies’ roles. In general, Justice’s position was that it had exclusive
Investigations, but a        statutory authority to lead all terrorist financing investigations, while
Recent Interagency           Treasury maintained that it also had the authority and the needed
Agreement May Help           expertise to lead such investigations.20 In commenting on a draft of the
Clarify Roles                2002 strategy, the FBI noted the following:

                        •	    The strategy does not address the various agencies’ duplication of efforts
                             to combat terrorist financing.

                        •	    By not specifically addressing and delineating the roles of the respective
                             agencies, the strategy creates more confusion than it resolves and wastes
                             limited resources.

                             Moreover, the strategy section on U.S. government efforts to identify,
                             disrupt, and dismantle terrorist financing networks did not mention or
                             clarify roles of the three primary law enforcement task forces involved in
                             investigating terrorist financing—Customs’ Operation Green Quest (OGQ)
                             and the FBI’s Terrorist Financing Operations Section (TFOS) and Joint
                             Terrorism Task Forces (JTTF).21

                             According to Treasury officials, the NMLS drafting process realistically
                             could not have been expected to resolve the long-standing, highly
                             challenging issues associated with the interagency jurisdictional dispute.
                             While we agree that it may have been unrealistic to expect the drafting
                             process to resolve the long-standing issues, we note that a primary role of
                             the NMLS is to enhance interagency coordination and help resolve turf-
                             protection battles. Because the issue was not addressed in the 2002 NMLS,
                             the problem remained, thus leaving unresolved possible duplication of
                             efforts and disagreements over which agency should lead investigations.
                             In our view, any way the NMLS could have advanced resolution of the
                             matter would have been beneficial.


                             20
                               In commenting on a draft of this report, Justice said that, in summary, 18 U.S.C. § 2332b(f)
                             assigned to the Attorney General primary investigative responsibility for all federal crimes
                             of terrorism generally, and that 18 U.S.C. § 2339B(e) directed the Attorney General
                             specifically to conduct any investigation of a possible violation of the federal terrorism
                             financing statutes.
                             21
                                  In March 2003, Customs and OGQ were transferred from Treasury to DHS’s ICE.




                             Page 28                                          GAO-03-813 Combating Money Laundering
Agencies Did Not Fully           To help avoid overlapping investigations and duplication of efforts, it is
Coordinate Terrorist Financing   important that agencies investigating terrorist financing have coordination
Investigations                   mechanisms. At the policy level, a National Security Council policy
                                 coordination committee on terrorist financing is responsible for
                                 coordinating antiterrorist financing activities.22 This committee is to
                                 consider evidence of terrorist financing networks and coordinate
                                 strategies for targeting terrorists, their financiers, and supporters. At the
                                 operational level, we found that some interagency coordination of terrorist
                                 financing investigations existed between agency headquarters’
                                 components. For example, OGQ and TFOS had assigned one agent to each
                                 other’s headquarters in Washington, D.C. The FBI also was to provide
                                 information on its activities to OGQ through daily downloads from the
                                 FBI’s terrorist financial database. Further, OGQ and FBI officials told us
                                 that local mechanisms existed around the country to deconflict
                                 investigations.

                                 While OGQ and the FBI task forces took steps to inform each other about
                                 the targets of their investigations, we found that the task forces did not
                                 fully coordinate their activities. For example, at the three locations we
                                 visited (Los Angeles, Miami, and New York City), OGQ and JTTF officials
                                 told us they generally were not aware of each other’s financial
                                 investigations and that the task forces generally did not share investigative
                                 information. Several officials indicated that there were problems with
                                 conflicting or competing investigations, including disagreements over
                                 which task force should lead investigations. Officials at all three locations
                                 noted that the government’s antiterrorist financing efforts could be
                                 improved if the task forces worked more closely with each other or were
                                 combined.

                                 Further, at the three locations we visited, IRS-CI officials who had agents
                                 assigned to the local OGQ and JTTF also indicated that the task forces
                                 were not fully operating in a coordinated and integrated manner.
                                 Specifically, in Miami and New York City, IRS-CI officials told us that
                                 having both OGQ and the JTTF doing the same type of antiterrorist
                                 financing work was a duplication of effort. IRS-CI officials in Los Angeles
                                 noted that communication between the two task forces could be better.
                                 Also, in response to our inquiry about interagency coordination, U.S.




                                 22
                                  Committee participants include representatives from the Departments of the Treasury,
                                 Justice, and State; the National Security Council; and the intelligence community.




                                 Page 29                                       GAO-03-813 Combating Money Laundering
                                Attorneys Office officials in the Southern District of Florida provided the
                                following response in February 2003:

                                “With respect to the FBI’s Joint Terrorism Task Force (FBI-JTTF) and Customs’ Operation
                                Green Quest, we would like to see increased cooperation and coordination between the
                                agencies. Too often agents of the FBI and Customs are investigating terrorist financing
                                independent of each other or overlapping in the targets of their investigations. Some of the
                                barriers to greater interagency participation may be conflicting priorities of each of the
                                agencies. Ongoing battles as to which agency is the ‘lead’ agency continues to be a
                                problem…”

                                In commenting on a draft of this report, Treasury said that it continues to
                                believe that the dispute over who took the lead in investigating the
                                financing of terrorism did not necessarily result in duplication of efforts.
                                Treasury said that the issue was largely definitional, with the FBI leading
                                terrorist investigations with an ancillary financial component versus
                                Customs financial investigations that might have a terrorist-related
                                connection.

May 2003 Interagency            On May 13, 2003, the Attorney General and the Secretary of Homeland
Agreement Defined Agency        Security signed a memorandum of agreement regarding the antiterrorist
Roles                           financing roles of the respective departments and component agencies. In
                                general, the agreement gives the FBI the lead role in investigating terrorist
                                financing and specifies that DHS is to pursue terrorist financing
                                investigations solely through its participation in FBI-led task forces,
                                except as expressly approved by the FBI. Some excerpts from the May
                                2003 agreement are paraphrased substantially as follows:

                           •	   The FBI is to lead terrorist financing investigations and operations,
                                utilizing the intergovernmental and intra-agency National JTTF at FBI
                                headquarters and the JTTFs in the field. Through TFOS, the FBI is to
                                provide overall operational command to the national JTTF and the field
                                JTTFs.

                           •	   After June 30, 2003, DHS is to pursue terrorist financing investigations and
                                operations solely through its participation in the National JTTF, the field
                                JTTFs, and TFOS, except as expressly approved by TFOS.

                           •	   The Secretary of Homeland Security agreed that, no later than June 30,
                                2003, OGQ was to no longer exist as a program name. The Secretary
                                agreed to ensure that any future DHS initiative or program to investigate
                                crimes affecting the integrity and lawful operation of U.S. financial




                                Page 30                                         GAO-03-813 Combating Money Laundering
                         infrastructures would be performed through the financial crimes division
                         at ICE.

                         The May 2003 agreement also contained several provisions designed to
                         enhance the coordination and integration of FBI and ICE financial
                         investigations. For example, the agreement calls for the FBI and ICE to
                         (1) detail appropriate personnel to each other’s task forces, (2) take steps
                         to ensure that the detailees have full and timely access to data and other
                         information, and (3) develop procedures to ensure effective operational
                         coordination of FBI and ICE investigations. Further, the FBI Director and
                         the Assistant Secretary for ICE were to provide a joint written report on
                         the implementation status of the agreement 4 months after its effective
                         date to the Attorney General, the Secretary of Homeland Security, and the
                         Assistant to the President for Homeland Security. However, as of
                         September 24, 2003, the report had not yet been issued.

                         If successful, the May 2003 agreement could prove to be a significant step
                         toward establishing a coordinated interagency framework for conducting
                         terrorist financing investigations. At the time of our review, it was too
                         early to assess the implementation of the agreement.


                         Most financial regulators we interviewed said that the NMLS had some
NMLS Has Had Some        influence on their anti-money laundering and antiterrorist financing efforts
Influence on Financial   but that it has had less influence than other factors. Officials said that,
                         since September 11, a change in government perspective and additional
Regulators’ Efforts,     requirements placed on financial institutions by the USA PATRIOT Act
but Other Factors        and its implementing regulations have been the primary influences on
                         their efforts. Although the financial regulators said that the NMLS had
Played a Larger Role     minimal influence on establishing priorities for their anti-money
                         laundering and antiterrorist financing activities, they have completed the
                         tasks for which they were designated as lead agencies over the years, and
                         most of those for which they were to provide support to Treasury. The
                         2002 NMLS noted that the financial regulators were responsible for
                         implementing the parts of the USA PATRIOT Act that applied to the
                         entities they regulate. Appendix III describes the anti-money laundering
                         requirements set forth in the USA PATRIOT Act and the rules that have
                         been implemented thereunder.




                         Page 31                                 GAO-03-813 Combating Money Laundering
Financial Regulators Said   Most financial regulators we interviewed said that the NMLS had some
Factors Other Than the      influence on their anti-money laundering efforts because it has provided a
NMLS Exerted a Greater      forum for enhanced coordination, particularly with law enforcement
                            agencies, but that it has had less influence than other factors. Similarly,
Influence on Their Anti-    law enforcement agency officials told us that the level of coordination
Money Laundering Efforts    between the financial regulators and their agencies was good and that they
                            received the assistance and information they needed from the regulators.
                            They did not, however, attribute this to the strategy but, rather, to legal
                            requirements.

                            Financial regulators said that several other factors influenced their anti-
                            money laundering efforts to a greater extent than the NMLS. These factors
                            include working groups that had already developed as a result of BSA
                            implementation, the impact of September 11 on raising awareness of the
                            importance of fighting money laundering and terrorist financing, and the
                            passage of the USA PATRIOT Act. The financial regulators said that they
                            have been working on anti-money laundering issues for many years and
                            generally initiate their own anti-money laundering activities. Bank
                            regulators and SEC pointed out that the BSA was passed in 1970 and that
                            they have been concerned with ensuring banks’ and broker-dealers’
                            compliance with its requirements ever since. The USA PATRIOT Act
                            extended responsibility for implementing the BSA to additional financial
                            regulators as well as increased anti-money laundering requirements for
                            certain financial institutions.23 Additionally, most financial regulators
                            participate in the BSA Advisory Group, in which the financial regulators
                            coordinate and communicate among themselves and with financial
                            institutions on enforcing BSA requirements. Other coordinating forums
                            include the Federal Financial Institutions Examination Council, Financial
                            Action Task Force, and USA PATRIOT Act working groups established to
                            develop and implement regulations resulting from the passage of the USA
                            PATRIOT Act.24



                            23
                              Not all BSA regulations have been implemented for banks and broker-dealers at the same
                            time. The suspicious activity reporting requirement for banks was adopted by Treasury in
                            1996. The suspicious activity reporting requirement for most broker-dealers was adopted
                            by Treasury in 2002. Broker-dealers affiliated with bank holding companies were subject
                            to the earlier 1996 reporting requirement.
                            24
                              The Financial Action Task Force is an international body with 33 member countries,
                            territories, and organizations that sets international standards to assist countries in their
                            efforts to combat money laundering and terrorist financing. The U.S. delegation to the
                            Financial Action Task Force includes representatives from the Departments of the
                            Treasury, Justice, and State.




                            Page 32                                           GAO-03-813 Combating Money Laundering
Although the NMLS provided a forum in which the financial regulators
could better coordinate with law enforcement agencies, other avenues for
cooperation are prescribed by law, and some existed before passage of the
Strategy Act. For example, depository institutions have been required to
file SARs since 1996. Since December 2002, securities brokers and dealers
have been required to file SARs with FinCEN as a result of the USA
PATRIOT Act and its implementing regulations. (See app. III.) Certain
financial institutions are also required to file Currency Transaction
Reports with FinCEN for transactions that involve $10,000 or more in
currency. Like SARs, these reports are supposed to be analyzed to look for
suspicious activity. Financial regulators said they oversee financial
institutions’ programs for complying with these legal requirements
because it is their statutory responsibility, not because it is included in the
NMLS. They said they would do so with or without the strategy.

Most officials said that September 11 greatly affected how the
administration and Congress thought about money laundering because
some of the techniques used to launder money, illicitly moving funds to
avoid detection, are similar to those used to finance terrorist activity.
Some officials said the new administration was more concerned with the
burden anti-money laundering compliance placed on financial institutions
prior to September 11, but that the events of September 11 changed this,
resulting in more attention being paid to the importance of anti-money
laundering compliance. Congress passed the USA PATRIOT Act, which,
for example, increased the due diligence, reporting, and record keeping
requirements for some financial institutions to guard against their being
used by their customers to launder money or finance terrorist activity.
Some officials noted that USA PATRIOT Act requirements reflected topics
being discussed in the NMLS and other working group meetings that might
still have been in the discussion phase had not September 11 motivated
their inclusion in the USA PATRIOT Act, thus requiring Treasury and other
agencies to issue regulations. Reflecting this change of emphasis, the 2002
NMLS discussed the need to adapt traditional methods of combating
money laundering to unconventional tools used by terrorist organizations
to finance their operations. According to the 2002 NMLS, the primary
responsibility of the financial regulators was to participate in the drafting
and issuance of USA PATRIOT Act regulations and to provide technical
expertise on the operations of depository institutions and other financial
institutions to Treasury. The regulators also worked to educate financial
institutions and their own staff on the new requirements.




Page 33                                  GAO-03-813 Combating Money Laundering
Federal Financial           The federal financial regulators have participated in the implementation of
Regulators Have Been        the NMLS from 1999 to 2002 in a variety of ways, including participation in
Involved in the             working groups established by the NMLS and, in 2002, worked with
                            Treasury to implement provisions of the USA PATRIOT Act. The federal
Implementation of Many      financial regulators were expected to participate in NMLS initiatives, but
Action Items in the NMLS,   Treasury, rather than the financial regulators, was usually designated as
but Most Have Been Led      the lead agency responsible for implementation.25 Most federal financial
by Treasury                 regulators are independent federal agencies. Therefore, while the financial
                            regulators have committed to work with Treasury and Justice on NMLS
                            initiatives, they are not required to do so because, with the exception of
                            OCC and OTS, they are not part of the executive branch. Previous
                            strategies have called for the financial regulators to work with Treasury
                            and Justice on several efforts, such as (1) coordinating on establishing
                            policies for enhanced information sharing between law enforcement
                            agencies and the regulatory agencies, (2) working with the financial
                            services industry to develop guidance for financial institutions to enhance
                            scrutiny of high-risk money laundering transactions and customers, and
                            (3) developing a SAR requirement for broker-dealers. However, policies
                            for enhanced information sharing were not finalized until the USA
                            PATRIOT Act required that they be developed. For example, section 314 of
                            the USA PATRIOT Act was designed to enhance cooperation among
                            certain entities involved in the detection of money laundering. Section
                            314(a) encourages regulatory authorities and law enforcement authorities
                            to share with financial institutions information regarding individuals,
                            entities, and organizations engaged in or reasonably suspected based on
                            reliable evidence of engaging in terrorist acts or money laundering
                            activities. Section 314(b) encourages information sharing among financial
                            institutions themselves. In addition, rules promulgated by FinCEN under
                            section 314 allow law enforcement authorities to make requests to
                            financial institutions through FinCEN of certain account information for
                            individuals, entities, and organizations that may be engaged in terrorist
                            acts or money laundering activities. Information is provided to FinCEN,
                            who gives the law enforcement entities a comprehensive product. SEC
                            worked with FinCEN on a proposed broker-dealer SAR requirement from
                            1999 to 2001. However, a final rule was not issued until 2002, when it was
                            required under the USA PATRIOT Act.




                            25
                             The 1999 NMLS did not designate leads for priority or action items, but the 2000, 2001,
                            and 2002 NMLS did.




                            Page 34                                         GAO-03-813 Combating Money Laundering
Each NMLS has called for the federal bank regulators as a group or OCC
individually to lead a review of their bank examination procedures
regarding anti-money laundering efforts and to implement the results of
these reviews. While the financial regulators have been involved in a
variety of different tasks and working groups in the NMLS, they served as
leads only in these reviews.26 Table 4 lists annual NMLS initiatives to
review bank examination procedures, the lead agency or agencies, and the
status of the initiatives.




26
  However, OCC, along with the Departments of the Treasury and State, was designated as
lead in the 2001 NMLS for initiating counter measures against noncooperative countries
and territories.




Page 35                                       GAO-03-813 Combating Money Laundering
Table 4: NMLS Initiatives to Review Bank Examination Procedures, as of July 2003

 NMLS year             NMLS initiativea                                                                                       Status
 1999 	               Federal bank regulators, in cooperation with the Department of the Treasury, will conduct               Completed
                      a review of existing bank examination procedures relating to the prevention and detection
                                                                                                       b
                      of money laundering at financial organizations, to be completed within 180 days. Lead:
                      None designated.
 2000 	               The federal bank supervisory agencies will implement the results of their 180-day review
                      of bank examinations procedures relating to the prevention and detection of money
                      laundering at financial organizations. Lead: OCC. Examples of anticipated actions:
                      OCC will (1) update Comptroller’s Handbook for Bank Examiners, including a new                          (1) Completed 

                      requirement to perform transactional testing of high-risk accounts at every bank 
                      (2) Completed 

                      examination and (2) implement a program to target for examination those institutions that
                      are considered most vulnerable to money laundering. 

                      FDIC will amend examination procedures on enhanced guidance to bank examiners on                        Completed
                      high-risk activities to include guidance on foreign correspondent accounts.
                      FDIC and OCC will continue to develop interagency anti-money laundering training                        Completed
                      modules, which will be completed in 2000.
                      The Federal Reserve will: (1) implement new procedures that will concentrate on ensuring (1) Completed 

                      that banks implement effective operating systems and procedures to manage operations     (2) Completed

                      legal and reputational risks as they pertain to BSA anti-money laundering efforts; (2) 

                      provide guidance on appropriate levels of enhanced scrutiny for high-risk customers and  (3) Ongoing 

                      services; and (3) increase emphasis on maintaining systems to detect and investigate 

                      suspicious activity throughout every business sector of a banking organization. 

                      OTS will assess the efficacy of its recently revised risk-focused BSA examination                       Completed 

                      procedures and will implement enhancements developed by benchmarking with other 

                      agencies. 

 2001                 Continue to identify and implement enhancements to examination procedures where                         Ongoing
                      necessary to address the ever-changing nature of money laundering. Lead: All federal
                      bank regulators.
 2002                 Review current examination procedures of the federal supervisory agencies to determine                  Ongoing
                      whether enhancements are necessary to address the ever-changing nature of money
                      laundering, including terrorist financings. Lead: OCC and Treasury.
Source: 1999 to 2002 NMLS and financial regulatory data.
                                                           a
                                                            The NMLS for 1999 and 2000 used the term “Action Item,” and the NMLS for 2001 and 2002 used
                                                           the term “Priority.”
                                                           b
                                                           Although NCUA officials said they also completed these initiatives, the NMLS named only FRB,
                                                           OCC, FDIC, and OTS as agencies responsible for these initiatives.


                                                           The financial regulators have also worked with Treasury as the lead
                                                           agency for the U.S. government’s international anti-money laundering
                                                           efforts. Over time, the NMLS has called for the United States to strengthen
                                                           international cooperation and collaboration and to work to strengthen the
                                                           anti-money laundering efforts of other countries. Much of Treasury’s effort
                                                           in this area has been done as part of multinational bodies, such as the
                                                           Financial Action Task Force, and international financial institutions, such



                                                           Page 36                                            GAO-03-813 Combating Money Laundering
                       as the World Bank and the International Monetary Fund.27 Treasury’s
                       efforts, working with these bodies, have focused on making anti-money
                       laundering assessments a permanent part of the International Monetary
                       Fund and World Bank surveillance and oversight of financial sectors and
                       providing technical assistance and training to jurisdictions willing to make
                       the necessary changes to their anti-money laundering regimes. Treasury
                       officials involved in international anti-money laundering efforts said that
                       the NMLS has served as a useful tool to plan and coordinate their
                       international efforts that include the financial regulators, which provide
                       technical assistance and participate in international meetings of these
                       bodies. Officials from the FRB, OCC, FDIC, OTS, SEC, and CFTC all said
                       that they had worked with Treasury on international anti-money
                       laundering efforts, including the preparation for or participation in
                       meetings of the Financial Action Task Force and of international financial
                       institutions.


                       In recent years, our work in reviewing national strategies for various
The Annual NMLS        crosscutting issues has identified several critical components needed for
Has Not Reflected      their development and implementation; however, key components have
                       not been well reflected in the NMLS.28 These components include clearly
Critical Components    defined leadership, with the ability to marshal necessary resources; setting
Identified by GAO as   clear priorities and focusing resources on the greatest areas of need, as
                       identified by threat and risk assessments; and established accountability
Key to Developing      mechanisms to provide a basis for monitoring and assessing program
and Implementing       performance. We identified a number of ways in which these critical
National Strategies    components could be better reflected in the development and
                       implementation of the annual NMLS, should it be reauthorized.




                       27
                        As mentioned previously, in addition to Treasury, the U.S. delegation to the Financial
                       Action Task Force includes representatives from the Departments of Justice and State.
                       28
                          See U.S. General Accounting Office, Combating Terrorism: Observations on National
                       Strategies Related to Terrorism, GAO-03-519T (Washington D.C.: Mar. 3, 2003); Homeland
                       Security: A Framework for Addressing the Nation’s Efforts, GAO-01-1158T (Washington
                       D.C.: Sept. 21, 2001); International Crime Control: Sustained Executive-Level
                       Coordination of Federal Response Needed, GAO-01-629 (Washington D.C.: Aug. 13, 2001);
                       and Managing for Results: Next Steps to Improve the Federal Government’s Management
                       and Performance, GAO-02-439T (Washington D.C.: Feb. 15, 2002). In addition, GAO
                       continues to develop critical success factors for evaluating national strategies related to
                       homeland security and terrorism and will report on this topic later this year.




                       Page 37                                         GAO-03-813 Combating Money Laundering
NMLS Leadership             Our past work in reviewing various national strategies has consistently
Structure Generally Has     concluded that having clearly defined leadership, with the ability to
Not Resulted in Consensus   marshal necessary resources, is a critical component of any national
                            strategy. For instance, our work has noted the importance of establishing
on the Approach NMLS        a focal point or executive-level structure to provide overall leadership that
Should Take                 would rise above the interests of any one department or agency. Regarding
                            the annual NMLS, we found that the joint Treasury-Justice leadership
                            structure generally has not been able to reach consensus in developing
                            and implementing the strategies—particularly in recent years when the
                            structure did not include representatives from the two departments’ top
                            leadership. This has resulted in an inability to reach agreement on the
                            appropriate scope of the strategy and ensure that target dates for
                            completing strategy initiatives were met.

                            The Strategy Act required the President, acting through the Secretary of
                            the Treasury and in consultation with the Attorney General, to produce an
                            annual NMLS. However, Treasury and Justice officials told us that the
                            Strategy Act did not provide additional funding or otherwise enhance
                            either department’s ability to develop and implement the annual strategies.
                            Rather, development and implementation of the annual NMLS has been
                            dependent largely on consensus-building efforts between Treasury and
                            Justice—with Treasury having de facto lead responsibility. In this regard,
                            Treasury officials told us that, while the department could request
                            participation from other agencies, it had no incentives it could use to
                            marshal necessary resources or compel participation in implementing
                            initiatives or action items. The Treasury officials noted, for example, that
                            the department’s inability to compel action by other agencies was a
                            contributing factor to delays in producing each annual NMLS. As shown in
                            table 5, none of the four annual strategies issued to date was submitted to
                            the Congress by February 1 of each year, as required by the Strategy Act.
                            As of September 24, the 2003 strategy had yet to be submitted.

                            Table 5: Annual NMLS—Dates Submitted to Congress

                             Annual NMLS           Required issue date    Date submitted           Months late
                             1999                  February 1999          September 1999                     7
                             2000                  February 2000          March 2000                         1
                             2001                  February 2001          September 2001                     7
                             2002                  February 2002          July 2002                          5
                             2003                  February 2003          Not yet issued           More than 7
                            Source: Annual NMLS.




                            Page 38                                      GAO-03-813 Combating Money Laundering
The initial NMLS (1999) established a joint leadership structure for
implementing the strategy. Specifically, the strategy noted that overall
implementation of the strategy would be guided by an interagency
Steering Committee chaired by the Deputy Secretary of the Treasury and
the Deputy Attorney General, with participation of relevant departments
and agencies. The Steering Committee was to be responsible for
overseeing action items and timelines and, as appropriate, making specific
assignments. Also, with respect to action items that involved international
aspects of anti-money laundering efforts, the National Security Council
was to have a central role and was to advise the Steering Committee, as
necessary. The 2000 NMLS also called for the Steering Committee to
oversee implementation of initiatives, although the strategy did not
mention a specific role for the National Security Council.

According to Treasury officials, the Steering Committee was not
reconvened to oversee the development and implementation of the 2001
NMLS, in part because of the change in administrations and the timing in
making political appointments. Instead, overall responsibility for
developing and implementing the 2001 NMLS was assumed by two lower-
level officials—a Treasury Deputy Assistant Secretary (Money Laundering
and Financial Crimes) and a Justice Criminal Division Section Chief (Asset
Forfeiture and Money Laundering). The 2002 NMLS called for Treasury
and Justice to reconvene the Steering Committee to provide coordination
and cooperation among all the participating departments and agencies.
However, according to Treasury and Justice officials, the Steering
Committee was not reestablished. Treasury and Justice officials with
responsibility for developing the strategy and overseeing its
implementation at those departments said the benefits of the Steering
Committee were that it brought together the officials who were needed to
make decisions when those below them could not agree and that it could
hold those responsible for implementing certain priorities accountable for
getting things done.

Moreover, the role of the National Security Council in overseeing
implementation of the annual NMLS remains somewhat unclear.29 On the
one hand, the National Security Council does have a designated policy
coordination committee responsible for overseeing antiterrorist financing
activities, including those related to implementation of the 2002 NMLS. On



29
 In response to our request, National Security Council officials declined to meet with us to
discuss the Council’s role regarding the annual NMLS.




Page 39                                         GAO-03-813 Combating Money Laundering
                                 the other hand, Treasury and Justice officials told us that this policy
                                 coordination committee has no responsibility for addressing other aspects
                                 of the strategy. The officials said that they were unaware of any National
                                 Security Council component responsible for overseeing all aspects of
                                 NMLS implementation.


NMLS Initiatives Have Not        Our past work in reviewing various national strategies has recognized the
Been Clearly Prioritized         importance of identifying and prioritizing issues that require the most
                                 immediate attention. While each NMLS (1999 through 2002) identified
                                 some “top” priorities, each strategy contained more priorities—of
                                 seemingly equal importance—than could be realistically achieved. Our
                                 prior strategy work also has shown that threat and risk assessments can
                                 be useful in establishing priorities; however, none of the money laundering
                                 strategies issued to date was preceded or guided by such an assessment.

Annual Strategies Have           The Strategy Act called for the NMLS to include comprehensive, research-
Contained More Priorities Than   based goals, objectives, and priorities for reducing money laundering and
Could Realistically Be           related financial crimes in the United States. The 1999 NMLS included a
Accomplished                     total of 66 priorities, which laid out actions to be taken by Treasury,
                                 Justice, and the financial regulators; the number decreased to 50 in the
                                 2002 NMLS (see table 1). According to Treasury officials, Treasury’s vision
                                 for the annual strategies was to provide Congress and the public with a
                                 comprehensive document identifying current and planned anti-money
                                 laundering (and in 2002, antiterrorist financing) initiatives. The officials
                                 also said that the strategies did identify some top priorities for each
                                 respective year and that the most important priorities generally were
                                 discussed in the each strategy’s executive summary. Nonetheless, the
                                 officials acknowledged that, in retrospect, each strategy probably
                                 contained more priorities than realistically could have been completed
                                 during the annual strategy year.

                                 Similarly, Justice and regulatory officials told us that the annual strategies
                                 generally have been too long and included too many initiatives and
                                 priorities to deal with in a given year. The officials noted that the strategies
                                 looked good on paper and contained important issues and concepts but
                                 served more as reference documents than strategies. The officials said that
                                 the annual strategies generally did not affect how their agencies set policy
                                 direction or aligned resources. Also, Justice officials told us that the
                                 strategies generally did not affect field offices or how field agents
                                 conducted their work. Justice and regulatory officials told us they would
                                 prefer a broader, more conceptual and focused strategy with fewer
                                 priorities and more realistic goals that could be achieved during the year.


                                 Page 40                                  GAO-03-813 Combating Money Laundering
                               Justice officials noted that target dates for completing strategy priorities
                               generally were not met, because there were too many priorities and there
                               was no funding or new resources provided to implement the plan. Justice
                               officials said that by focusing on too many priorities, the strategy can
                               divert resources from investigations and other law enforcement activities.

Threat and Risk Assessments    Our past work in reviewing various national strategies has shown that
Have Not Been Used to Assist   threat and risk assessments can serve to better target use of funds, set
in Establishing Priorities     priorities, and avoid duplication of effort.30 For example, regarding federal
                               efforts to combat terrorism, the importance of setting priorities on the
                               basis of risks was highlighted in our 1998 testimony before the
                               Subcommittee on National Security, International Affairs and Criminal
                               Justice, House Committee on Government Reform and Oversight. Our
                               statement emphasized that

                               “… a critical piece of the equation in decisions about establishing and expanding programs
                               to combat terrorism is an analytically sound threat and risk assessment using valid inputs
                               from the intelligence community and other agencies. Threat and risk assessments could
                               help the government make decisions about how to target investments in combating
                               terrorism and set priorities on the basis of risk; identify program duplication, overlap, and
                                                                                                 31
                               gaps; and correctly size individual agencies’ levels of efforts.”

                               However, regarding the annual NMLS, none of the four strategies (1999
                               through 2002) issued to date was preceded or guided by such an
                               assessment. Further, in response to our inquiries, Treasury and Justice
                               officials indicated that the 2003 NMLS would not be based on a formal
                               assessment of threats and risks.

                               Law enforcement officials generally had favorable views on the need for
                               the NMLS to be driven by some consideration of a threat and risk
                               assessment. Justice officials noted that money laundering investigations
                               take a lot of expertise, money, and time, and that, in their view, a formal
                               assessment of threats and risks would help to set NMLS priorities and
                               assist law enforcement in focusing its limited resources. Justice officials
                               told us that they drafted a money laundering threat assessment in late



                               30
                                U.S. General Accounting Office, Combating Terrorism: Threat and Risk Assessments
                               Can Help Prioritize and Target Program Investments, GAO-NSIAD-98-74 (Washington
                               D.C.: Apr. 9, 1998).
                               31
                                 U.S. General Accounting Office, Combating Terrorism: Observations on Crosscutting
                               Issues, GAO/T-NSIAD-98-164 (Washington D.C.: Apr. 23, 1998).




                               Page 41                                          GAO-03-813 Combating Money Laundering
                                2002 and circulated it to other law enforcement agencies.32 The officials
                                planned to use the assessment as a basis for setting 2003 NMLS priorities.
                                Treasury officials generally agreed with the concept of a money laundering
                                threat assessment to drive priorities, but told us that the assessment
                                prepared by Justice was not useful. The officials added that, in their view,
                                Justice’s threat assessment mostly contained information that was already
                                widely known and, thus, probably was at least implicitly considered in
                                setting priorities while drafting the 2003 strategy.33


Accountability                  Our past work in reviewing various national strategies has recognized the
Mechanisms Have                 importance of establishing accountability mechanisms to assess resource
Recently Been Included in       utilization and program performance. The 2001 and 2002 strategies
                                presented various initiatives designed to establish performance measures
the NMLS, But None Had          related to federal anti-money laundering efforts. As of July 2003, efforts
Yet Been Completed              were ongoing on many of them, while others had not been addressed.
                                Another potential accountability mechanism required in the Strategy Act
                                was annual reports to Congress on the effectiveness of anti-money
                                laundering policies; however, Treasury has not provided such reports.

NMLS Initiatives to Establish   Establishing and implementing performance measures for the NMLS
Performance Measures Have       would assist in monitoring and evaluating law enforcement and financial
Not Been Addressed or Are       regulatory agencies’ anti-money laundering and antiterrorist financing
Ongoing                         efforts. The 2001 strategy was the first annual strategy to call for the
                                creation of performance measures and indicators to evaluate results
                                against stated goals. The 2002 NMLS continued on the work started under
                                the 2001 strategy. Both strategies designated components of Treasury and
                                Justice to co-lead the initiatives. As shown in table 6, the 2002 NMLS
                                contained five initiatives to measure the effectiveness and results of
                                federal anti-money laundering activities. As of July 2003, Treasury and
                                Justice had not yet completed any of these initiatives, although efforts
                                were still ongoing to complete some of them.




                                32
                                   We reviewed a copy of the draft threat assessment at Justice headquarters. However,
                                since the document was never finalized or published, we were not in a position to comment
                                on it.
                                33
                                 As mentioned previously, the 2003 strategy had not yet been issued as of September 24,
                                2003.




                                Page 42                                        GAO-03-813 Combating Money Laundering
Table 6: Status of 2002 NMLS Initiatives Designed to Measure Performance

                                                                                                                                          Status
                                                                                                                                                           a
 2002 NMLS initiative                                                              Target date for completion            Target date met? (as of July 2003)
 Develop a “traffic light” (e.g., red, yellow, or green) To be presented in 2003                                         Nob                    Not addressed
 system for scoring progress on NMLS goals and           NMLS
 providing an indication of where the strategy stands at
 a given point in time.
 Devise and implement a uniform case reporting
 system to measure the results of federal law
 enforcement agencies’ anti-money laundering efforts.
 22. 	Consider adapting the case reporting system                                  (1) Not specified                     Not applicable         (1) Ongoing
      used by an existing federal agency for use by
      federal law enforcement agencies.
 23. Develop recommendations for how qualitative                                   (2) November 2002                     No                     (2) Ongoing
     factors, such as case significance, can be
     incorporated into quantitative measures of
     success.
 Establish a standardized reporting system for                                     Not specified                         Not applicable         Ongoingc
 Treasury and Justice to use to quantify assets
 forfeited or seized pursuant to money laundering
 investigations.
 Analyze “cost of doing criminal business” initiatives to Not specified                                                  Not applicable         Ongoing 

 develop a pricing model for laundering money in non-

                          d

 narcotics-related cases.
 Review the costs and resources devoted to anti-       December 2002                                                     No                     Not addressed
 money laundering efforts. Analyze results from budget
 data requests, and work to ensure that data requests
 relating to work against terrorist financing are also
 incorporated.e
Source: 2002 NMLS and interviews with Treasury and Justice officials.
                                                                  a
                                                                   “Not addressed” indicates that Treasury and Justice took little or no action on the NMLS initiative and
                                                                  that no future action is planned. “Ongoing” indicates that Treasury and Justice had not completed the
                                                                  initiative by its target date, but that there was ongoing or planned future work related to the initiative.
                                                                  b
                                                                      According to Treasury officials, the 2003 NMLS will not include the traffic light scorecard.
                                                                  c
                                                                   According to Treasury officials, the department has had systems in place to measure assets forfeited
                                                                  or seized pursuant to Treasury’s money laundering investigations. EOUSA officials told us that
                                                                  Justice, EOUSA, and the U.S. Attorneys Offices—working closely with other Justice law enforcement
                                                                  agencies—have ongoing efforts to develop a reporting system to accurately measure assets forfeited
                                                                  or seized. The officials noted that developing such a system is a complicated and time-consuming
                                                                  process. Also, the officials said that future efforts to develop a standardized reporting system
                                                                  inevitably would have to include DHS.
                                                                  d
                                                                   In 2001, the Customs Service’s Money Laundering Coordination Center completed a study to
                                                                  determine the percentage commission charged to launder money in narcotics cases. The study was
                                                                  to serve as a baseline for tracking changes in the commission rate over time. The 2002 NMLS also
                                                                  noted that another federal agency had conducted a study relating to the cost of doing business for
                                                                  alien smuggling. The 2002 strategy called for FinCEN to lead an effort to examine these business
                                                                  model assessments to determine if a systematic model could be constructed to apply to all types of
                                                                  money laundering cases.




                                                                  Page 43                                                     GAO-03-813 Combating Money Laundering
                           e
                            In 2001, the Office of Management and Budget obtained budget data from law enforcement and
                           financial regulatory agency units that were involved in the prevention, investigation, or prosecution of
                           money laundering.


                           Generally, the purpose of the 2002 NMLS measurement initiatives was to
                           provide Congress and other policymakers a basis for (1) evaluating federal
                           agencies’ anti-money laundering efforts and results and
                           (2) deciding how to deploy limited public resources most effectively. For
                           example, the traffic-light scorecard was intended to provide information
                           on the overall performance of the federal government’s efforts to combat
                           money laundering and assess how well the government was executing
                           each of the six goals described in the 2002 strategy (and future strategies).
                           Also, the 2002 NMLS notes that the initiative to review law enforcement
                           and financial regulatory costs and resources devoted to anti-money
                           laundering activities was designed to permit Congress and other
                           policymakers to draw informed conclusions about the effectiveness of
                           those activities.

                           The 2002 NMLS noted that, while deceptively easy to articulate in the
                           abstract, the task of developing meaningful performance measures for
                           federal agencies engaged in combating money laundering has proven to be
                           quite difficult. Treasury officials also told us that (1) the 2002 strategy was
                           not published until July 2002, which did not leave much time for either
                           implementation or evaluation and (2) several measurement initiatives
                           were put on hold pending the reorganization associated with DHS.
                           Further, the officials noted that Treasury generally had no plans to report
                           on performance progress (results and accomplishments) made under the
                           2002 strategy.

                           The 2002 strategy did provide, for the first time in an NMLS, some baseline
                           facts and figures designed to help determine how well the federal
                           government was succeeding in its efforts to detect, prevent, and deter
                           money laundering. For example, the strategy published U.S. Sentencing
                           Commission data for fiscal year 2000 regarding defendants sentenced in
                           federal court for the principal offense of money laundering. The 2002
                           strategy noted that the Sentencing Commission data could be tracked over
                           a period of years and, thereby, serve as one measure for evaluating
                           progress in combating money laundering.

Treasury Has Not Met the   The Strategy Act required that—at the time each NMLS was transmitted to
Requirement for Annual     the Congress (other than the first transmission of any such strategy)—the
Effectiveness Reports 	    Secretary of the Treasury submit a report containing an evaluation of the
                           effectiveness of policies to combat money laundering and related financial



                           Page 44                                                GAO-03-813 Combating Money Laundering
                      crimes.34 As of July 2003, Treasury had not submitted any effectiveness
                      reports. Treasury officials said they did not see this as a requirement to
                      submit a separate report and, in their view, the strategy itself has been
                      used to report on the effectiveness of the government’s anti-money
                      laundering efforts. The officials explained that the “accomplishment”
                      sections that were added to the 2002 strategy were intended to meet the
                      Strategy Act’s reporting requirement.

                      We believe that this information does not fully meet the Strategy Act’s
                      requirement, because the accomplishment sections generally provided
                      descriptive information about initiatives rather than evaluations of the
                      effectiveness of policies to combat money laundering and related financial
                      crimes. For example, an accomplishment section in the 2002 strategy
                      noted that HIFCA task forces initiated over 100 investigations in 2001, but
                      the section did not address the effectiveness of the HIFCA concept or the
                      task forces.


Ways to Incorporate   We identified a number of ways in which the critical components for
Critical Strategy     national strategies could be incorporated into the NMLS, should Congress
Components into the   decide to continue the requirement. To incorporate a more clearly defined
                      leadership structure that has the ability to marshal resources for a
NMLS                  coordinated effort against money laundering and terrorist financing, a
                      high-level leadership mechanism could be reestablished or a single official
                      could be designated to carry out this responsibility. The role of the
                      leadership structure would be to marshal resources to ensure that the
                      vision laid out in the strategy is achieved, resolve disputes between
                      agencies, and ensure accountability for strategy implementation. This
                      leadership mechanism would also be in a good position to evaluate annual
                      progress and report such progress to Congress, as is currently required of
                      Treasury. This is especially critical now that there are three principal
                      departments with anti-money laundering and antiterrorist financing
                      responsibilities, in addition to the federal financial regulators.

                      One way to help set clear priorities and focus resources on the areas of
                      greatest need would be to require that the strategy be linked to a periodic
                      threat assessment. Such an assessment would outline what the lead
                      agencies see as the most significant threats. This would provide a better




                      34
                           31 U.S.C. § 5341(c).




                      Page 45                                 GAO-03-813 Combating Money Laundering
              basis to draft a strategy to address these threats. Performance could be
              measured by the level of progress made in combating these threats.

              One way to improve accountability for the agencies and regulators
              following the strategy would be for the strategy to set broad policy
              objectives that leave it to the principal agencies to develop outcome-
              oriented performance measures that are linked to the NMLS’s goals and
              objectives. These performance measures would be reflected in the
              agencies’ annual performance plans. However, our work showed that,
              throughout its history, the NMLS has tried to specify detailed priorities for
              each objective, many of which were not accomplished or, in the case of
              the financial regulators, would have been accomplished for statutory
              reasons even without a strategy.


              The annual NMLS has had mixed results in guiding the efforts of law
Conclusions   enforcement and financial regulators in the fight against money laundering
              and, more recently, terrorist financing. Through our work in reviewing
              other national strategies, we have identified critical components needed
              for successful development and implementation; but, to date, these
              components have not been well reflected in the annual NMLS. We believe
              that incorporating these critical components into the NMLS would
              improve its development and implementation. For example, the current
              NMLS leadership structure has not reached consensus on the approach
              the strategy should take or ensured that goals and objectives are met, and
              has failed to issue any of the annual strategies on time. A clearly defined
              high-level leadership structure could better ensure that resources are
              appropriately marshaled for achieving the strategy’s vision and goals.

              Also, without an assessment of threats and risks, it is difficult to determine
              what the highest-priority activities should be. Linking the strategy’s
              development to a periodic assessment of threats and risks could help set
              priorities and ensure that resources are focused on the areas of greatest
              need. Moreover, such assessments could be helpful in tracking progress
              made in combating money laundering and terrorist financing.

              Furthermore, the establishment of accountability mechanisms could help
              to provide a basis for monitoring and assessing NMLS implementation.
              One possible mechanism would be linking the relevant agencies’
              performance plans more closely to NMLS goals and objectives. Another
              mechanism would be to ensure that periodic progress reports are
              submitted to Congress, as currently required by the Strategy Act.



              Page 46                                 GAO-03-813 Combating Money Laundering
                            In sum, if Congress decides to reauthorize the requirement for an annual
                            NMLS, adoption of these critical components in the agencies’ future
                            efforts could help to resolve or mitigate the deficiencies we identified.

                            If Congress reauthorizes the requirement for an annual NMLS, we
Recommendations for 
       recommend that the Secretary of the Treasury, working with the Attorney
Executive Action 
          General and the Secretary of Homeland Security, take appropriate steps to

                       •	    strengthen the leadership structure responsible for strategy development
                            and implementation by establishing a mechanism that would have the
                            ability to marshal resources to ensure that the strategy’s vision is achieved,
                            resolve disputes between agencies, and ensure accountability for strategy
                            implementation;

                       •	    link the strategy to periodic assessments of threats and risks, which
                            would provide a basis for ensuring that clear priorities are established and
                            focused on the areas of greatest need; and

                       •	    establish accountability mechanisms, such as (1) requiring the principal
                            agencies to develop outcome-oriented performance measures that must be
                            linked to the NMLS’s goals and objectives and that also must be reflected
                            in the agencies’ annual performance plans and (2) providing Congress with
                            periodic reports on the strategy’s results.


                            We provided a draft of this report for review and comment to the
Agency Comments 
           Departments of the Treasury, Justice, and Homeland Security; seven
and Our Evaluation 
        federal financial regulatory agencies (FRB, FDIC, OCC, OTS, NCUA, SEC,
                            and CFTC); and the National Security Council.

                            In written comments, Treasury said that our recommendations for
                            improving the process for creating the NMLS and enhancing accountability
                            of all agencies with responsibility for combating financial crimes and the
                            financing of terrorism are important, should Congress reauthorize the
                            legislation requiring future strategies. Justice did not specifically address
                            our recommendations but said that our observations and conclusions will
                            be helpful in assessing the role that the strategy process has played in the
                            federal government’s efforts to combat money laundering. For example,
                            Justice concurred with our conclusion that linking the strategy’s
                            development to a threat assessment could help set priorities and ensure
                            that limited resources are focused on the areas of greatest need. DHS said
                            that it would work with the Secretary of the Treasury as recommended




                            Page 47                                 GAO-03-813 Combating Money Laundering
and would do its part to implement necessary actions to address concerns
raised in the report.

Treasury, Justice, and DHS said that the lack of funds to finance NMLS
development and implementation was an impediment and that the success
of the HIFCA program in particular would be enhanced by an independent
funding source. While we did not assess the participating agencies’ funding
decisions regarding the NMLS or the HIFCA program, our report
acknowledges that federal law enforcement agencies have resource
constraints and competing priorities. We also note, however, that a
primary purpose of the NMLS was to improve the coordination and quality
of federal anti-money laundering investigations by concentrating and
leveraging existing resources, including funding. Further, the report notes
that HIFCA task force officials said that the lack of funding to compensate
or reimburse participating state and local law enforcement agencies was a
barrier to their participation. The 2002 NMLS called for an interagency
team to examine how to fund the colocation of participants in HIFCA task
forces absent funds appropriated for that purpose. At the time of our
review, this initiative had not yet been completed.

Treasury also said that it has satisfied the Strategy Act requirement that it
submit a report to Congress—at the time the NMLS is submitted—on the
effectiveness of policies to combat financial crimes. Treasury said that
(1) evaluations of effectiveness have been contained in the NMLS itself
and (2) any evaluation of effectiveness logically forms a part of the NMLS.
While the annual strategies have contained some useful information to
help Congress better understand programs to combat money laundering
and terrorist financing, the strategies generally have provided descriptive
information about NMLS initiatives rather than evaluations of the
effectiveness of policies. As noted in our report, Treasury and Justice have
efforts under way to measure performance that, when completed, could
provide useful input into an overall evaluation of the effectiveness of
policies to combat financial crimes.

DHS highlighted the value of its Money Laundering Coordination Center,
stating that the center has provided information to DEA, FBI, and other
outside agencies on at least 46 occasions and that DEA was the most
active outside agency user of the center, with at least 21 requests for
assistance. While the sharing of relevant information is commendable, as
mentioned in our report, DEA officials told us that the center does not
meet DEA’s needs and that DEA has created a new database for
information on money laundering investigations related to drugs. DHS also
provided additional information on (1) methods used by ICE to coordinate


Page 48                                 GAO-03-813 Combating Money Laundering
terrorist financing investigations with other agencies and (2) steps taken
by ICE and the FBI to implement the May 2003 memorandum of agreement
between Justice and DHS regarding roles and responsibilities in
investigating terrorist financing.

The full text of Treasury’s, Justice’s, and DHS’s written comments are
reprinted in appendix IV, V, and VI, respectively. The three departments
also provided technical comments and clarifications, which have been
incorporated in this report where appropriate.

Of the seven federal financial regulatory agencies, four (FRB, FDIC,
NCUA, and SEC) provided technical comments and clarifications, which
have been incorporated in this report where appropriate. The other three
agencies (OCC, OTS, and CFTC) had no comments. FDIC also said that,
should a national money laundering strategy continue, annual goals should
be achievable and roles and responsibilities clearly defined.

The National Security Council did not respond to our request for
comments.


As arranged with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after its
issue date. At that time, we will send copies of this report to interested
congressional committees and subcommittees. We will also make copies
available to others on request. In addition, the report will be available at
no charge on GAO’s Web site at http://www.gao.gov.




Page 49                                   GAO-03-813 Combating Money Laundering
If you or your staffs have any questions about this report or wish to 

discuss the matter further, please contact Richard M. Stana at (202) 512-

8777 or by e-mail at stanar@gao.gov or Davi M. D’Agostino at (202) 512-

8678 or by e-mail at dagostinod@gao.gov. GAO contacts and key 

contributors to this report are listed in appendix VII. 





Richard M. Stana, Director 

Homeland Security and Justice 





Davi M. D’Agostino, Director 

Financial Markets and Community Investment 





Page 50                                GAO-03-813 Combating Money Laundering
Appendix I: Scope and Methodology 



              To determine agency perspectives on the benefit of the annual National
              Money Laundering Strategy (NMLS), we interviewed responsible officials
              at and reviewed relevant documentation obtained from the principal law
              enforcement components with anti-money laundering responsibilities at
              the Departments of the Treasury, Justice, and Homeland Security and the
              federal financial regulatory agencies. To determine whether the NMLS has
              served as a useful mechanism for guiding law enforcement agencies’
              efforts, we (1) compared the structure and operation of High Intensity
              Money Laundering and Related Financial Crime Area (HIFCA) task forces
              to guidance provided in the strategies, (2) assessed whether the
              implementation of NMLS initiatives to enhance interagency coordination
              has met strategic goals, and (3) assessed the extent to which the 2002
              NMLS addressed agency roles in combating terrorist financing. To do this,
              we interviewed responsible officials and reviewed documentation from
              the four primary agencies responsible for investigating money laundering
              and related financial crimes—Treasury’s Internal Revenue Service-
              Criminal Investigation (IRS-CI), Justice’s Federal Bureau of Investigation
              (FBI) and Drug Enforcement Administration (DEA), and Homeland
              Security’s Bureau of Immigration Control and Enforcement (ICE).1 For
              investigations of terrorist financing, we reviewed the roles and activities of
              and interviewed officials from ICE’s Operation Green Quest (OGQ) and
              two FBI components—Terrorist Financing Operations Section (TFOS) and
              Joint Terrorism Task Forces (JTTF).2 Our work with law enforcement
              agencies was conducted at the principal federal agencies’ headquarters in
              Washington, D.C., and at field office locations in three major U.S. financial
              centers (Los Angeles, Miami, and New York City).

              To determine the role of the NMLS in influencing the anti-money
              laundering activities of federal financial regulators, we reviewed their
              efforts to carry out the NMLS 2002 goal, “Prevent Money Laundering
              Through Cooperative Public-Private Efforts and Necessary Regulatory
              Measures,” and its earlier iterations. We gathered information on these
              agencies’ anti-money laundering and antiterrorist financing efforts—
              including efforts to implement provisions of the Uniting and Strengthening


              1
              Our work at ICE primarily involved the same Customs Service officials we contacted at
              Treasury before they were transferred to Homeland Security in March 2003.
              2
                OGQ operated through two components—a targeting and coordination center located in
              Washington, D.C., and financial investigation groups in 20 U.S. cities. The FBI’s TFOS, also
              located in Washington, D.C., was created to provide a centralized component to conduct
              and coordinate terrorist financing investigations. The FBI’s 66 JTTFs are located
              throughout the nation to investigate and prevent acts of terrorism.




              Page 51                                         GAO-03-813 Combating Money Laundering
Appendix I: Scope and Methodology




America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (USA PATRIOT Act)—and determined the
influence of the NMLS on those efforts. We also examined the role the
financial regulators played in supporting Treasury’s efforts under the
NMLS goal to strengthen international cooperation to fight money
laundering. To do this work, we interviewed responsible headquarters
officials and reviewed documentation from the Commodity Futures
Trading Commission (CFTC), Federal Deposit Insurance Corporation
(FDIC), Federal Reserve Board (FRB), National Credit Union
Administration (NCUA), Office of the Comptroller of the Currency (OCC),
Office of Thrift Supervision (OTS), Treasury, and Securities and Exchange
Commission (SEC). We also interviewed officials from the law
enforcement agencies listed above to assess coordination between law
enforcement and the financial regulators.

To compare NMLS efforts to the components we have found are necessary
for a successful strategy, we reviewed drafts of the strategies from 1999 to
2002, interviewed officials who had been involved in the development and
implementation of the strategies, and compared the results from this work
with findings from our past work reviewing national strategies and their
implementation.

We conducted our work from June 2002 to August 2003 in accordance
with generally accepted government auditing standards.




Page 52                                GAO-03-813 Combating Money Laundering
Appendix II: Legislation Has Expanded the
Responsibility to Combat Money Laundering

              The U.S. government’s framework for preventing, detecting, and
              prosecuting money laundering has been expanded through additional
              pieces of legislation since its inception in 1970 with the Bank Secrecy Act
              (BSA).1 The BSA required, for the first time, that financial institutions
              maintain records and reports that financial regulators and law
              enforcement agencies have determined have a high degree of usefulness in
              criminal, tax, and regulatory matters. The BSA authorizes the Secretary of
              the Treasury to issue regulations on the reporting of certain currency
              transactions. The BSA had three main objectives: create an investigative
              audit trail through regulatory reporting standards; impose civil and
              criminal penalties for noncompliance; and improve detection of criminal,
              tax, and regulatory violations.

              The reporting system implemented under the BSA was by itself an
              insufficient response to money laundering because, under the BSA,
              anybody who satisfied the reporting requirements would not be subject to
              money laundering violations. Thus, Congress enacted the Money
              Laundering Control Act of 1986 (MLCA),2 which made money laundering a
              criminal offense separate from any BSA reporting violations. It created
              criminal liability for individuals or entities that conduct monetary
              transactions knowing that the proceeds involved were obtained from
              unlawful activity and made it a criminal offense to knowingly structure
              transactions to avoid BSA reporting. Penalties under the MLCA include
              imprisonment, fines, and forfeiture.

              Congress enacted the Money Laundering Prosecution Improvements Act
              of 1988 to enhance the provisions of the BSA and the MLCA and amended
              provisions in both statutes.3 The Improvements Act aimed to increase the
              cooperation that the government receives from financial institutions by
              imposing liability and fines on facilitators, such as negligent bankers. It
              also expanded the definition of a financial institution under the BSA and
              permitted government agencies to undertake sting operations.




              1
               Currency and Foreign Transactions Reporting Act (commonly referred to as the Bank
              Secrecy Act), Pub. L. No. 91-508, 84 Stat. 1114 (1970) (codified as amended in 12 U.S.C. §§
              1829(b), 1951-1959; 31 U.S.C. §§ 5311-5330.
              2
                  18 U.S.C. §§ 1956 -1957 (1994).
              3
               Pub. L. No. 100-690, 102 Stat. 4354-59, 4378 (1988) (codified as amended in scattered
              sections of 12 U.S.C., 18 U.S.C. and 31 U.S.C.).



              Page 53                                         GAO-03-813 Combating Money Laundering
Appendix II: Legislation Has Expanded the
Responsibility to Combat Money Laundering




The Annunzio-Wylie Anti-Money Laundering Act of 1992 amended the BSA
in a number of ways.4 It authorized Treasury to require financial
institutions to report any suspicious transaction relevant to a possible
violation of a law. It also authorized Treasury to require financial
institutions to carry out anti-money laundering programs and create
record-keeping rules relating to fund transfer transactions. Annunzio-
Wylie also made the operation of an illegal money transmitting business a
crime.

As authorized by Annunzio-Wylie, in 1996, Treasury issued a rule requiring
that banks and other depository institutions use a Suspicious Activity
Report (SAR) form to report activities involving possible money
laundering. During the same year, bank regulators issued regulations
requiring all depository institutions to report suspected money laundering
as well as other suspicious activities using this form. The bank regulators
also placed SAR requirements on the subsidiaries, including broker-dealer
firms, of the depository institutions and their holding companies under
their jurisdiction.

The Money Laundering and Financial Crimes Strategy Act of 1998
(Strategy Act)5 amended the BSA to require the President, acting through
the Secretary of the Treasury, in consultation with the Attorney General
and other relevant agencies, including state and local agencies, to
coordinate and implement a national strategy, produced annually for 5
years beginning in 1999, to address money laundering. In addition, it
requires the Secretary of the Treasury to designate certain areas as high-
risk areas for money laundering and related financial crimes and to
establish a Financial Crime-Free Communities Support Program. The
purpose of demarcating areas as high risk is to designate the communities
that experience severe problems with money laundering that need more
help. The Strategy Act also authorizes federal funding of efforts by state
and local law enforcement agencies to investigate money laundering
activities. In 1999, Treasury consulted with 18 federal agencies, bureaus,
and offices in developing the NMLS. By 2002, that number had increased
to over 25. The Strategy Act provides that the NMLS should include:




4
 Pub. L. No. 102-550, 106 Stat. 4044-47 (1992) (codified as amended in scattered sections of
12 U.S.C., 18 U.S.C., and 22 U.S.C.).
5
    31 U.S.C. §§ 5340-42, 5351-55 (1998).




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Appendix II: Legislation Has Expanded the
Responsibility to Combat Money Laundering




1. 	 Goals for reducing money laundering and related financial crimes in
     the United States.

2. 	 Goals for coordinating regulatory efforts to prevent the exploitation of
     financial systems in the United States through money laundering.

3. 	 A description of operational initiatives to improve the detection and
     prosecution of money laundering and related financial crimes and the
     seizure and forfeiture of the proceeds derived from those crimes.

4. 	 The enhancement of partnerships between the private financial sector
     and law enforcement agencies with regard to the prevention and
     detection of money laundering and related financial crimes.

5. 	 The enhancement of cooperative efforts between the federal
     government and state and local officials, including state and local
     prosecutors and other law enforcement officials; and cooperative
     efforts among the several states and between state and local officials,
     including state and local prosecutors and other law enforcement
     officials.

In the wake of the September 11 terrorist attacks, Congress enacted the
Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) on
October 25, 2001.6 The passage of the USA PATRIOT Act was prompted, in
part, by the enhanced awareness of the importance of combating terrorist
financing as part of the U.S. government’s overall anti-money laundering
efforts, because terrorist financing and money laundering both involve
similar techniques. Title III of the USA PATRIOT Act, among other things,
expands Treasury’s authority to regulate the activities of U.S. financial
institutions; requires the promulgation of regulations; imposes additional
due diligence requirements; establishes new customer identification
requirements; and requires financial institutions to maintain anti-money
laundering programs. In addition, title III adds activities that can be
prosecuted as money laundering crimes and increases penalties for
activities that were money laundering crimes prior to enactment of the



6
    Pub. L. No. 107-56, 115 Stat. 272 (2001).




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Responsibility to Combat Money Laundering




USA PATRIOT Act. Further, title III amends various sections of the BSA,
the MLCA, and other statutes. Appendix III contains a detailed summary of
key provisions in title III of the USA PATRIOT Act.




Page 56                                     GAO-03-813 Combating Money Laundering
Appendix III: Summary of Key Anti-Money
Laundering Provisions in Title III of the USA
PATRIOT Act and Rules

           Due diligence
           (Section 312)
           Amends 31 U.S.C. § 5318 by requiring U.S. financial institutions to exercise due diligence and, in some cases, enhanced due diligence, when opening
           or operating correspondent accounts for foreign financial institutions or private banking accounts for wealthy foreign individuals. Also requires U.S.
           financial institutions to establish due diligence policies, procedures, and controls reasonably designed to detect and report money laundering through
           such correspondent and private banking accounts.

            Proposed rule                         Sets forth certain minimum due diligence and enhanced due diligence requirements and otherwise adopts                Issuance date:
                                                  a risk-based approach, permitting financial institutions to tailor their programs to their own lines of              May 30, 2002
            Applies to:                           business, financial products and services offered, size, customer base, and location.
            Financial institutions

            Interim final rule                    Defers the application of Section 312 requirements and provides interim compliance guidance pending                  Effective date:
                                                  issuance of a final rule.                                                                                            July 23, 2002
            Applies to:
            Financial institutions other than
            banks, securities brokers and
            dealers, futures commission
            merchants, and introducing brokers

           Shell bank ban and record keeping
           (Sections 313 and 319(b))
           Amends 31 U.S.C. § 5318 by prohibiting U.S. banks and securities firms from opening or maintaining accounts for foreign shell banks, meaning banks
           that have no physical presence anywhere and no affiliation with another, non-shell bank. Requires closure of any existing correspondent accounts for
           foreign shell banks by December 2001. Also requires U.S. firms to take reasonable steps to ensure no foreign bank client is allowing a foreign shell
           bank to utilize the foreign bank’s U.S. correspondent account. Also requires foreign banks with U.S. correspondent accounts to identify their owners
           and designate a U.S. resident to accept legal service of a government subpoena or summons. Allows U.S. to subpoena documents related to the
           foreign bank's U.S. account whether the documents are inside or outside the U.S. Allows the Attorney General or Treasury to require closure of a
           foreign bank's U.S. account if the foreign bank ignores a government subpoena or summons.

            Final rule                            Defines the scope of the application of the shell bank prohibition and record keeping requirement and                Effective date:
                                                  provides certification form to aid covered financial institutions in complying with the rule.                        October 28, 2002
            Applies to:
            Banks and securities broker-dealers



           Public-private cooperation
           (Section 314)
           Enables and encourages two forms of information sharing to deter terrorism and money laundering: (1) among law enforcement, the regulators, and
           financial institutions (314(a)); and (2) among financial institutions themselves (314(b)).

            Final rule                            Creates a communication network to link federal law enforcement agencies with financial institutions so              Effective date:
                                                  that information relating to suspected terrorists and money launderers can be exchanged quickly and                  September 26, 2002
            Applies to:                           without compromising pending investigations. Federal law enforcement agencies can provide names of
            Financial institutions and federal    suspected terrorists and money launderers to financial institutions through Treasury’s Financial Crimes
            government law enforcement            Enforcement Network (FinCEN). After receiving the information, financial institutions are required to check
            agencies                              accounts and transactions involving suspects and report matches. Law enforcement agencies                  can
                                                  then follow up with the financial institution directly. Permits the sharing of information relating to individuals
                                                  and entities suspected of money laundering or terrorism among financial institutions so long as financial
                                                  institutions provide a yearly notice to FinCEN of their intent to share information under this provision.




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                    Appendix III: Summary of Key Anti-Money
                    Laundering Provisions in Title III of the USA
                    PATRIOT Act and Rules




Commodity firms and credit unions
(Section 321)
Clarifies that commodity firms and credit unions are "financial institutions" subject to Title 31's anti-money laundering provisions.

Concentration accounts
(Section 325)
Amends 31 U.S.C. § 5318(h) by authorizing Treasury regulations to ensure that client funds moving through a financial institution's administrative
accounts do not move anonymously, but are marked with the client’s name.

Customer verification
(Section 326)
Amends 31 U.S.C. § 5318 by requiring all U.S. financial institutions to implement procedures to verify the identity of any person seeking to open an
account and requires all clients to comply with such procedures. Requires Treasury jointly with financial regulators to implement rules requiring
financial institutions to comply.

 Joint final rule                      Requires banks, savings associations, credit unions, private banks, and trust companies to implement           Effective date:
                                       procedures to verify the identity of any person seeking to open an account.                                    June 9, 2003
 Applies to:
 Banks, savings associations, credit                                                                                                                  Compliance date:
 unions, private banks, and                                                                                                                           October 1, 2003
 trust companies

 Joint final rule                      Requires mutual funds to implement procedures to verify the identity of any person seeking to open an          Effective date:
                                       account.                                                                                                       June 9, 2003
 Applies to:
 Mutual funds                                                                                                                                         Compliance date:
                                                                                                                                                      October 1, 2003

 Joint final rule                      Requires futures commission merchants and introducing brokers to implement procedures to verify the            Effective date:
                                       identity of any person seeking to open an account.                                                             June 9, 2003
 Applies to:
 Futures commission merchants                                                                                                                         Compliance date:
 and introducing brokers                                                                                                                              October 1, 2003

 Joint final rule                      Requires broker-dealers to implement procedures to verify the identity of any person seeking to open an        Effective date:
                                       account.                                                                                                       June 9, 2003
 Applies to:
 Broker-dealers                                                                                                                                       Compliance date:
                                                                                                                                                      October 1, 2003

 Proposed rule                         Requires certain banks lacking a federal functional regulator to implement procedures to verify the identity   Issuance date:
                                       of any person seeking to open an account.                                                                      May 9, 2003
 Applies to:
 Banks lacking a federal functional
 regulator


 Report to Congress                    Report to Congress on ways to improve the ability of financial institutions to identify foreign nationals.     Issuance date:
                                                                                                                                                      October 2002
 Applies to:
 Financial institutions




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                      Appendix III: Summary of Key Anti-Money
                      Laundering Provisions in Title III of the USA
                      PATRIOT Act and Rules




International cooperation
(Section 330)
Directs the United States to negotiate with other countries to increase anti-money laundering and terrorist financing cooperation, ensure adequate
record keeping of transactions and accounts related to money laundering or terrorism.

Anti-money laundering programs
(Section 352)
Amends 31 U.S.C. § 5318(h) to require all U.S. financial institutions to establish anti-money-laundering programs. Authorizes Treasury, after consulting
with the appropriate federal regulators to prescribe minimum standards for these programs.

 Interim final rule                    Banks, savings associations, credit unions, registered brokers and dealers in securities, futures           Effective date:
                                       commission merchants, and casinos deemed in compliance with Section 352 if they establish and               April 24, 2002
 Applies to:                           maintain anti-money laundering programs pursuant to existing BSA rules, or rules adopted by their federal
 Banks, savings associations, credit   functional regulator or self-regulatory organization.
 unions, registered brokers and
 dealers in securities, futures
 commission merchants, and casinos


 Interim final rule                    Required operators of a credit card system to establish programs reasonably designed to detect and          Effective date:
                                       prevent money laundering and the financing of terrorism.                                                    April 24, 2002
 Applies to:
 Credit card system operators


 Interim final rule                    Required money services businesses to establish programs reasonably designed to prevent money               Effective date:
                                       laundering and the financing of terrorism.                                                                  April 24, 2002
 Applies to:
 Money services business


 Interim final rule                    Required mutual funds to establish programs reasonably designed to detect and prevent money                 Effective date:
                                       laundering and the financing of terrorism.                                                                  April 24, 2002
 Applies to:
 Mutual funds


 Proposed rule                         Would require certain insurance companies (those offering life or annuity products) to establish programs   Issuance date:
                                       reasonably designed to detect and prevent money laundering and the financing of terrorism. Prescribes       September 26, 2002
 Applies to:                           minimum anti-money laundering standards applicable to insurance companies.
 Insurance companies


 Proposed rule                         Would require unregistered investment companies, such as hedge funds, commodity pools, and similar          Issuance date:
                                       investment vehicles, to establish programs reasonably designed to detect and prevent money laundering       September 26, 2002
 Applies to:                           and the financing of terrorism.
 Unregistered investment companies




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                  Laundering Provisions in Title III of the USA
                  PATRIOT Act and Rules




 Amendment of interim final rule        Extends the provision that temporarily defers, for dealers in precious metals, pawnbrokers, loan or finance   Effective date:
                                        companies, private bankers, insurance companies, travel agencies, telegraph companies, sellers of             November 6, 2002
 Applies to:                            vehicles, persons engaged in real estate closings, certain investment companies, commodity pool
 Dealers in precious metals,            operators and commodity trading advisers, the requirement to adopt anti-money laundering programs.
 pawnbrokers, loan or finance
 companies, private bankers,
 insurance companies, travel
 agencies, telegraph companies,
 sellers of vehicles, persons engaged
 in real estate closings, certain
 investment companies, commodity
 pool operators and commodity
 trading advisers


 Proposed rule                          Would require dealers in precious metals, stones, or jewels to establish programs reasonably designed to      Issuance date:
                                        detect and prevent money laundering and the financing of terrorism.                                           February 21, 2003
 Applies to:
 Dealers in precious metals,
 stones, or jewels

 Advance notice of                      Solicits comments on whether businesses engaged in vehicle sales should be required to adopt anti-            Issuance date:
 proposed rulemaking                    money laundering programs under Section 352.                                                                  February 24, 2003
 Applies to:
 Businesses engaged in vehicle sales

 Advance notice of                      Solicits comments on how to define travel agency and whether such persons should be required to adopt         Effective date:
 proposed rulemaking                    anti-money laundering programs under Section 352.                                                             February 24, 2003
 Applies to:
 Travel agencies

 Advance notice of                      Solicits comments on how to define persons involved in real estate closings and settlements and whether       Issuance date:
 proposed rulemaking                    certain of these persons should be exempt from having anti-money laundering programs under section            April 10, 2003
 Applies to:                            352.
 Persons involved in real estate
 closings and settlements

 Proposed rule                          Would require certain investment advisers that manage client assets to establish programs reasonably          Issuance date:
                                        designed to detect and prevent money laundering and the financing of terrorism. Would delegate authority      May 5, 2003
 Applies to:                            to examine certain investment advisers for compliance with such programs to SEC.
 Investment advisers that manage
 client assets

 Proposed rule                          Would require certain commodity trading advisors to establish programs reasonably designed to detect          Issuance date:
                                        and prevent money laundering and the financing of terrorism. Would delegate the authority to examine          May 5, 2003
 Applies to:                            such commodity trading advisers to the CFTC.
 Commodity trading advisors

Suspicious activity reporting
(Section 356)
Requires all U.S. securities firms to report suspicious financial activity to U.S. law enforcement under regulations to be published by July 1, 2002.
Authorizes Treasury to issue regulations requiring suspicious activity reporting by commodity firms; and requires a report and recommendations by
October 2002 on effective regulations applying anti-money laundering reporting and other requirements to investment companies.
 Final rule                             Requires brokers or dealers in securities to report suspicious transactions.                                  Effective date:
                                                                                                                                                      July 31, 2002
 Applies to:
 Brokers and dealers




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                       PATRIOT Act and Rules




  Proposed rule                         Would require mutual funds to file suspicious activity reports.                                        Issuance date:
                                                                                                                                               January 21, 2003
  Applies to:
  Mutual funds


  Proposed rule                         Would add futures commission merchants and introducing brokers in commodities to the regulatory        Issuance date:
                                        definition of "financial institution'' and would require them to report suspicious transactions.       May 5, 2003
  Applies to:
  Futures commission merchants and
  introducing brokers in commodities

  Proposed rule                         Would require insurance companies to file suspicious activity reports.                                 Issuance date:
                                                                                                                                               October 17, 2002
  Applies to:
  Insurance companies


  Report to Congress                    Report to Congress recommending additional regulations applicable to investment companies.             Issuance date:
                                                                                                                                               December 31, 2002
  Applies to:
  Investment companies

 Reporting of suspicious activities by underground banking systems
 (Section 359)
 Amends the definition of "financial institution" in 31 U.S.C.§ 5312(a)(2)(r) to include a licensed sender of money or any other person who engages as
 a business in the transmission of funds. Also directs the Secretary of the Treasury to issue a report to Congress on or before October 26, 2002,
 detailing the need for any additional legislation regarding the regulation of informal banking networks.
  Report to Congress                    Report to Congress discussing informal value transfer systems and suggesting methods for minimizing    Issuance date:
                                        potential abuse of such systems.                                                                       November 22, 2002

 Reports relating to coins and currency received in nonfinancial trade or business
 (Section 365)
 Adds new section 5331 to title 31 of the U.S. Code and requires any person who is engaged in a trade or business and who, in the course of such
 trade or business, receives more than $10,000 in coins or currency in one transaction (or two or more related transactions) to file a report with
 FinCEN.
  Interim final rule                    Deems the filing of form 8300 with the Internal Revenue Service to satisfy the requirement to file a   Issuance date:
                                        currency report with FinCEN.                                                                           December 31, 2001



(2) Anti-Money Laundering Investigations, Civil and Criminal Proceedings, and Forfeitures

 Money laundering designations
 (Section 311)
 Amends 31 U.S.C. § 5318 by authorizing Treasury to designate specific foreign financial institutions, jurisdictions, transactions or accounts to be of
 "primary money laundering concern." Mandates special measures to restrict or prohibit access to the U.S. market.
  Designation of Ukraine and Nauru as                                                                                                          Issuance date:
  jurisdictions of primary money                                                                                                               December 20, 2002
  laundering concern




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                  Laundering Provisions in Title III of the USA
                  PATRIOT Act and Rules




 Revocation of designation of Ukraine                                                                                                         Effective date:
 as jurisdiction of primary money                                                                                                             April 17, 2003
 laundering concern

 Proposed rule                          Would impose special measures against Nauru, requiring U.S. financial institutions to terminate all   Issuance date:
                                        correspondent accounts involving Nauru.                                                               April 17, 2003

Foreign corruption
(Section 315)
Amends 18 U.S.C. § 1956(c)(7) by expanding the list of crimes that can trigger U.S. money laundering prosecutions to include foreign corruption
crimes such as bribery and misappropriation of funds. Also, expands the list of crimes that can trigger U.S. money laundering prosecutions to include
weapons smuggling, export control violations, certain computer crimes, bribery, and other extraditable offenses.

Antiterrorist forfeiture protection
(Section 316)
Authorizes any person whose property is confiscated as terrorist assets to contest the confiscation through civil proceedings in the United States.

Long arm jurisdiction over foreign money launderers antiterrorist forfeiture protection
(Section 317)
Amends 18 U.S.C. § 1956(b) by giving U.S. courts jurisdiction over persons who commit a money laundering offense through financial transactions
that take place in whole or in part in the United States, over foreign banks with U.S. accounts, and over foreign persons who convert to their personal
use property that is the subject of a forfeiture order. Allows U.S. prosecutors and federal and state regulators to use court-appointed receivers in
criminal and civil money laundering proceedings to locate and take custody of a defendant’s assets wherever located. Requires U.S. banks to respond
within 120 hours to a request by a federal banking agency for money laundering information.

Laundering money through a foreign bank
(Section 318)
Amends 18 U.S. C. § 1956(c) by prohibiting conducting a transaction involving a financial institution if the transaction involves criminally derived
property. Explicitly includes foreign banks within the definition of "financial institution."

Forfeiture of funds in United States interbank accounts
(Section 319(a))
Amends 18 U.S.C. § 981 by closing a forfeiture loophole so that depositors’ funds in a foreign bank housing a U.S. bank account are subject to the
same forfeiture rules as depositors’ funds in other U.S. bank accounts.

Proceeds of foreign crimes
(Section 320)
Amends 18 U.S.C. § 981(a)(1)(B) to authorize the forfeiture of both the proceeds of, and any property used to facilitate, offenses listed in section
1956(c)(7)(B), if the offense would be a felony if committed within the jurisdiction of the United States.

Corporation represented by a fugitive
(Section 322)
Amends 18 U.S.C. § 2466 by applying the fugitive disentitlement doctrine to claims filed by corporations if any majority shareholder, or individual filing
the claim on behalf of the corporation is disqualified from contesting the forfeiture. It clarifies that a natural person who is a fugitive may not file, or
have another person file, a claim on behalf of a corporation that the fugitive controls.




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                  Laundering Provisions in Title III of the USA
                  PATRIOT Act and Rules




Enforcement of foreign judgments
(Section 323)
Amends 28 U.S.C. § 2467 by allowing the government to apply for and the court to issue a restraining order to preserve the availability of property
subject to a foreign forfeiture or confiscation judgment.

Consideration of anti-money laundering record
(Section 327)
Amends 12 U.S.C. § 1842(e) by requiring U.S. bank regulators to consider when approving a bank merger or acquisition the anti-money laundering
records of the banks involved.

International cooperation on identification of originators of wire transfers
(Section 328)
Requires Treasury to consult with the U.S. Attorney General and the Secretary of State to take all reasonable steps to encourage foreign governments
to require the inclusion of the name of the originator in wire transfer instructions sent to the United States.

Criminal penalties
(Section 329)
Any person who is an official or employee of any federal agency who, in connection with administration of the anti-money laundering provisions in the
Patriot Act, corruptly receives anything of value in return for being influenced in the performance of any official act will be fined, or imprisoned for 15
years, or both.

Amendments relating to reporting of suspicious activities
(Section 351)
Amends 31 U.S.C. § 5318(g)(3) so that any financial institution that makes a voluntary disclosure of any possible violation of a law or regulation
relating to money laundering is not liable to any other person for such disclosure.

Penalties for violations of geographic targeting orders
(Section 353)
Amends 31 U.S.C. § 5321(a)(1), 5322, 5324(a), 5326(d). Under prior law Treasury has had the authority to issue orders requiring any domestic
financial institution in a geographic area to perform additional record keeping and reporting requirements if reasonable grounds exist for concluding
that additional requirements are necessary to carry out anti-money laundering requirements. These amendments expand civil and criminal penalties
to include violations of geographic targeting orders issued and violations of regulations.

Authorization to include suspicions of illegal activity in written employment references
(Section 355)
Amends 12 U.S.C. § 1828 to authorize certain depository institutions to disclose in a written employment reference information concerning a possible
involvement in potentially unlawful activity.

Banks secrecy provisions and activities of United States intelligence agencies to fight international terrorism
(Section 358)
Amends the Right to Financial Privacy Act of 1978, 12 U.S.C. § 3412(a), to allow law enforcement authorities to obtain financial data related to
intelligence or counterintelligence activities, investigations, or analysis in an effort to protect against international terrorism.




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                  Laundering Provisions in Title III of the USA
                  PATRIOT Act and Rules




Increase in civil and criminal penalties for money laundering
(Section 363)
Amends 31 U.S.C. § 5321(a) & 5322 by increasing from $100,000 to $1,000,000 the maximum civil and criminal penalties for a violation of provisions
added to the Bank Secrecy Act by sections 311 and 312 of the Patriot Act.

Bulk cash smuggling
(Section 371)
Adds section 5332 to Title 31 of the U.S. Code, which makes smuggling large amounts of cash across U.S., borders a crime.

Forfeiture in currency reporting cases
(Section 372)
Amends 31 U.S.C. § 5317(c), and allows forfeiture of undeclared cash whose source and intended use cannot be established.

Illegal money transmitting businesses
(Section 373)
Amends 18 U.S.C. § 1960 -- which prohibits operation of an unlicensed money transmission business -- to abolish any requirement that the defendant
be aware of the laws requiring money transmitting licenses.

Counterfeiting domestic currency and 0bligations
(Section 374)
Amends 18 U.S.C. § 470, which prohibits the use of electronic images in counterfeiting.

Counterfeiting foreign currency and obligations
(Section 375)
Amends 18 U.S.C. § 478 by providing that the penalties for counterfeiting are increased (generally to allow a maximum term of imprisonment of 20
years).

Laundering the proceeds of terrorism
(Section 376)
Amends 18 U.S.C. § 1956(c)(7)(D) which provides material support to designated foreign terrorist organizations, as a predicate offense for a money
laundering prosecution.

Extraterritorial jurisdiction
(Section 377)
Amends 18 U.S.C. § 1029. Enhances the applicability of computer fraud by covering offenses committed outside the United States that involves an
access device issued by a U.S. entity.

Terrorism
(Sections 801 to 817)
Modernizes anti-terrorism criminal statutes by, among other provisions, making it clear the crime includes bioterrorism, mass transit terrorist acts,
cyberterrorism, harboring of terrorists and support for terrorists; that all terrorist crimes serve as predicate offenses for money laundering
prosecutions; and that anti-money laundering provisions apply to all terrorists assets, including legally obtained funds, if intended for use in planning,
committing or concealing a terrorist act.




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                    Laundering Provisions in Title III of the USA
                    PATRIOT Act and Rules




  Exclusion of aliens
  (Section 1006)
  Permits the United States to exclude any alien engaged in money laundering from the United States and requires establishment of a money
  laundering watch list for officials admitting aliens into the United States.


(3) Required Reports by Treasury

  Report and recommendation
  (Section 324)
  Requires Treasury within 30 months of enactment of the Patriot Act to make a report on operations respecting the provisions relating to international
  counter-money laundering measures and any recommendations to Congress as to advisable legislative action.

  Anti-money laundering strategy
  (Section 354)
  Amends 31 U.S.C. § 5341(b) by directing the Secretary of the Treasury to consider data regarding the funding of terrorism and efforts directed at the
  prevention, detection and prosecution of such funding as topics for the Anti-Money Laundering Strategy.

  Special report on administration of bank secrecy provisions
  (Section 357)
  Treasury must submit a report to Congress relating to the role of the IRS in the administration of the records and reports on monetary instrument
  transactions within 6 months of enactment of the Patriot Act. Report submitted on April 26, 2002.

  Efficient use of currency transaction report system
  (Section 366)
  Directs Treasury to review the cash transaction reporting system to make it more efficient, possibly by expanding the use of exemptions to reduce the
  volume of reports, and to submit a report by October 25, 2002. Report submitted on October 25, 2002.


(4) Miscellaneous Provisions

  Use of authority of United States executive directors
  (Section 360)
  Allows Treasury to instruct the United States Executive Director of each international financial institution to use the voice and vote of the Executive
  Director to support loans and use of funds of respective institutions or public and private entities within the country if the President determines that a
  foreign country has taken actions supporting the United State's effort to combat terrorism.

  Financial crimes enforcement network
  (Section 361)
  Amends 31 U.S.C. § 310 by specifying the responsibilities of FinCEN's director, expanding the duties of FinCEN, and, giving it statutory authority to
  perform its functions.




  Establishment of highly secure network
  (Section 362)
  Directs Treasury to establish within FinCEN a highly secure electronic network through which reports (including SARs) may be filed and information
  regarding suspicious activities warranting immediate and enhanced scrutiny may be provided to financial institutions.

  Uniform protection authority for Federal Reserve facilities
  (Section 364)
  Amends 12 U.S.C. § 248 by allowing law enforcement officers to protect and safeguard Federal Reserve facilities.

Source: GAO.




                    Page 65                                                                  GAO-03-813 Combating Money Laundering
Appendix IV: Comments from the
Department of the Treasury




             Page 66        GAO-03-813 Combating Money Laundering
Appendix IV: Comments from the Department
of the Treasury




Page 67                                     GAO-03-813 Combating Money Laundering
Appendix V: Comments from the Department
of Justice




             Page 68       GAO-03-813 Combating Money Laundering
Appendix V: Comments from the Department of Justice




            Page 69                                   GAO-03-813 Combating Money Laundering
Appendix VI: Comments from the 

Department of Homeland Security 





              Page 70        GAO-03-813 Combating Money Laundering
Appendix VI: Comments from the Department
of Homeland Security




Page 71                                     GAO-03-813 Combating Money Laundering
Appendix VI: Comments from the Department
of Homeland Security




Page 72                                     GAO-03-813 Combating Money Laundering
Appendix VI: Comments from the Department
of Homeland Security




Page 73                                     GAO-03-813 Combating Money Laundering
Appendix VII: GAO Contacts and Staff
Acknowledgments

                    Davi M. D’Agostino, (202) 512-8678
GAO Contacts 	      Richard M. Stana, (202) 512-8777


                    In addition to those named above, Allison Abrams, Thomas Conahan, Eric
Acknowledgments 	   Erdman, Barbara Keller, Marc Molino, Jan Montgomery, Robert Rivas,
                    Barbara Roesmann, and Sindy Udell made key contributions to this report.




                    Page 74                              GAO-03-813 Combating Money Laundering
Related GAO Products 



              Internet Gambling: An Overview of the Issues. GAO-03-89. Washington,
              D.C.: December 2, 2002.

              Interim Report on Internet Gambling. GAO-02-1101R. Washington, D.C.:
              September 23, 2002.

              Money Laundering: Extent of Money Laundering through Credit Cards
              is Unknown. GAO-02-670. Washington, D.C.: July 22, 2002.

              Money Laundering: Oversight of Suspicious Activity Reporting at Bank-
              Affiliated Broker-Dealers Ceased. GAO-01-474. Washington, D.C.: March
              22, 2001.

              Suspicious Banking Activities: Possible Money Laundering by U.S.
              Corporations Formed for Russian Entities. GAO-01-120. Washington,
              D.C.: October 31, 2000.

              Money Laundering: Observations on Private Banking and Related
              Oversight of Selected Offshore Jurisdictions. GAO/T-GGD-00-32.
              Washington, D.C.: November 9, 1999.

              Private Banking: Raul Salinas, Citibank, and Alleged Money
              Laundering. GAO/T-OSI-00-3. Washington, D.C.: November 9, 1999.

              Private Banking: Raul Salinas, Citibank, and Alleged Money Laundering.
              GAO/OSI-99-1. Washington, D.C.: October 30, 1998.

              Money Laundering: Regulatory Oversight of Offshore Private Banking
              Activities. GAO/GGD-98-154. Washington, D.C.: June 29, 1998.

              Money Laundering: FinCEN’s Law Enforcement Support Role Is
              Evolving. GAO/GGD-98-117. Washington, D.C.: June 19, 1998.

              Money Laundering: FinCEN Needs to Better Manage Bank Secrecy Act
              Civil Penalties. GAO/GGD-98-108. Washington, D.C.: June 15, 1998.

              Money Laundering: FinCEN’s Law Enforcement Support, Regulatory,
              and International Roles. GAO/T-GGD-98-83. Washington, D.C.: April 1,
              1998.

              Money Laundering: FinCEN Needs to Better Communicate Regulatory
              Priorities and Timelines. GAO/GGD-98-18. Washington, D.C.: February 6,
              1998.


              Page 75                               GAO-03-813 Combating Money Laundering
Related GAO Products




Private Banking: Information on Private Banking and Its Vulnerability
to Money Laundering. GAO/GGD-98-19R. Washington, D.C.: October 30,
1997.

Money Laundering: A Framework for Understanding U.S. Efforts
Overseas. GAO/GGD-96-105. Washington, D.C.: May 24, 1996.

Money Laundering: U.S. Efforts to Combat Money Laundering Overseas.
GAO/T-GGD-96-84. Washington, D.C.: February 28, 1996.

Money Laundering: Stakeholders View Recordkeeping Requirements for
Cashier’s Checks As Sufficient. GAO/GGD-95-189. Washington, D.C.: July
25, 1995.

Money Laundering: U.S. Efforts to Fight It Are Threatened by Currency
Smuggling. GAO/GGD-94-73, Washington, D.C.: March 9, 1994.

Money Laundering: Characteristics of Currency Transaction Reports
Filed in Calendar Year 1992. GAO/GGD-94-45FS. Washington, D.C.:
November 10, 1993.

Money Laundering: Progress Report on Treasury’s Financial Crimes
Enforcement Network. GAO/GGD-94-30. Washington, D.C.: November 8,
1993.

Money Laundering: The Use of Bank Secrecy Act Reports by Law
Enforcement Could Be Increased. GAO/T-GGD-93-31. Washington, D.C.:
May 26, 1993.

Money Laundering: State Efforts to Fight It Are Increasing but More
Federal Help Is Needed. GAO/GGD-93-1. Washington, D.C.: October 15,
1992.

Money Laundering: Civil Penalty Referrals for Violations of the Bank
Secrecy Act Have Declined. GAO/T-GGD-92-57. Washington, D.C.: June
30, 1992.

Tax Administration: Money Laundering Forms Could Be Used to Detect
Nonfilers. GAO/T-GGD-92-56. Washington, D.C.: June 23, 1992.

Money Laundering: Treasury Civil Case Processing of Bank Secrecy Act
Violations. GAO/GGD-92-46. Washington, D.C.: February 6, 1992.



Page 76                              GAO-03-813 Combating Money Laundering
                  Related GAO Products




                  Money Laundering: The Use of Cash Transaction Reports by Federal
                  Law Enforcement Agencies. GAO/GGD-91-125. Washington, D.C.:
                  September 25, 1991.

                  Money Laundering: The U.S. Government Is Responding to the Problem.
                  GAO/NSIAD-91-130. Washington, D.C.: May 16, 1991.

                  Money Laundering: Treasury’s Financial Crimes Enforcement Network.
                  GAO/GGD-91-53. Washington D.C.: March 18, 1991.




(440144/250117)
                  Page 77                            GAO-03-813 Combating Money Laundering
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