Since then, the suspicious transaction reports have taken on a number of different formats that are filed with various law enforcement and regulatory agencies at both the state and federal levels. Although the implementing regulations of the act require four types of reports, the report filed most frequently is the Currency Transaction Report (CTR). CTRs are filed on an Internal Revenue Service (IRS) form 4789, which is to be sent to the IRS Detroit Computing Center in Michigan. Objectives, Scope, and Methodology

We were requested by the then Chairman of the Permanent Subcommittee on Investigations, Senate Governmental Affairs Committee, to review the manner in which suspicious activities that relate to possible money laundering are reported by determining how banks and other financial institutions report suspicious transactions, to whom the transactions are reported, the volume of reports made, how the reports are used, and whether the process can be improved. Consequently, there is no way to determine why the transaction was considered suspicious. However, table 2.3 provides additional information concerning these institutions. 1, p. 14)
Each of the financial regulatory agencies requires its own form be used for the report. IRS Has Had Success in Using Reports of Suspicious Transactions

As discussed in chapter 2, district offices of IRS’ Criminal Investigation Division receive reports of suspicious transactions in several different ways. IRS does not keep records on how useful suspicious transaction reports have been in this regard. Consequently, states can use the data only on a reactive basis—that is, when they already have the name of a suspect. Nine of these states said they use the information to initiate criminal investigations. However, the lack of overall direction and control over the reporting of suspicious transactions has led to a situation where reports are filed with different agencies on different forms that vary as to the amount of useful information they contain. Because IRS cannot be certain the information is used and managed consistently, it has no assurance that the information is being used to its full potential throughout the Service.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on money laundering activities, focusing on: (1) how suspicious transactions are reported; (2) how currency transactions reports are used by law enforcement agencies; and (3) whether the reporting process can be improved.

What GAO Found

GAO found that: (1) financial institutions file reports of suspicious transactions each year on various forms to various agencies, leading to the initiation of major investigations into various types of criminal activity; (2) there is no way of ensuring that the information is being used to its full potential, since there is no overall control or coordination of the reports; (3) the form that is filed most frequently is filed with the Internal Revenue Service (IRS) and kept on a centralized database, but the form is only useful in providing additional information on an investigation that has already been initiated; (4) other forms used to report suspicious transactions contain more useful information but, since they are filed with six different agencies and are not kept on a centralized database, they cannot be used on a reactive basis; (5) IRS has not developed agencywide procedures for managing suspicious transaction reports, resulting in varied use of the reports among 35 district offices; (6) 9 of the 15 states that receive copies of suspicious transaction reports use the information to initiate criminal investigations; and (7) the Department of the Treasury and IRS have agreed to substantial changes regarding how suspicious transactions are to be reported, how the information is to be used, and how to improve the reports' contributions at both the federal and state levels.