Also, as an additional means of enhancing public visibility, FinCEN presented its fiscal year regulatory priorities in annual plans, pursuant to Executive Order 12866 requirements. This strategy emphasized frequent interaction and consultation with affected public and private sector representatives in the law enforcement, regulatory, and financial services communities. A majority of the members commented that FinCEN’s process, rather than focusing on timeliness, was properly focused on quality—specifically, on developing and issuing substantively effective regulations. As of December 1997, FinCEN had not issued final rules for five regulatory initiatives related to the MLSA. For example, FinCEN’s fiscal year 1995 regulatory agenda did not provide estimated dates for issuing final rules for any of the eight MLSA-related regulatory initiatives we reviewed. Another mechanism that FinCEN has used to inform Congress of its regulatory agenda has been congressional hearings. Conclusions

FinCEN’s process for developing and issuing BSA regulations was generally designed to reflect applicable procedures set forth in the APA and Executive Order 12866. We note in this report that the intended law enforcement benefits of the MLSA amendments cannot be fully achieved until all of the regulations are implemented. FinCEN also said that it communicated the agency’s regulatory plans through various other means, including testimony at congressional hearings. Thus, congressional committees have not been in a good position to assess FinCEN’s regulatory program, including the agency’s prioritization of regulatory initiatives, the time lines for issuing final regulations, and the allocation of resources necessary for completing these initiatives. Purposes and Membership of the Bank Secrecy Act Advisory Group

The Annunzio-Wylie Anti-Money Laundering Act (1992 Act) directed that the Secretary of the Treasury establish (within 90 days after the date of the act’s enactment) a Bank Secrecy Act (BSA) Advisory Group consisting of representatives from the Department of the Treasury, the Department of Justice, the Office of National Drug Control Policy, and other interested persons and financial institutions subject to the currency reporting requirements of the BSA or section 6050I of the Internal Revenue Code. As agreed with the requesters’ offices, we focused our work on the following questions, particularly in reference to the Money Laundering Suppression Act of 1994 (MLSA) amendments to the BSA:
What process did FinCEN follow for developing and issuing BSA regulations? What is the current status of FinCEN’s efforts to develop and issue BSA regulations? Scope and Methodology of Our Work Regarding FinCEN’s Regulatory Process

As a preparatory step, we familiarized ourselves with selected portions of the Administrative Procedure Act and Executive Order 12866 that prescribe procedures federal agencies are to follow when developing and issuing regulations. In determining the status of FinCEN’s efforts to develop and issue relevant regulations, we (1) interviewed appropriate FinCEN officials, (2) reviewed applicable Federal Register notices of proposed and final rulemaking, and (3) developed a time line of FinCEN’s regulatory issuances.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the regulatory role of the Financial Crimes Enforcement Network (FinCEN), focusing on the: (1) process FinCEN followed for developing and issuing Bank Secrecy Act (BSA) regulations; and (2) status of FinCEN's efforts to develop and issue BSA regulations.

What GAO Found

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