Under the BSA  regulatory scheme, FinCEN is responsible for the overall administration  and enforcement of BSA and may take enforcement actions, but federal  and state regulators and SROs conduct day-to-day compliance and  enforcement activities. FinCEN has retained  enforcement authority and may impose civil penalties for violations. Further, across  financial industries, agencies have not established a formal mechanism  through which they could discuss compliance processes and trends  without industry present. Unlike SEC, CFTC had not provided the examination modules to  FinCEN for its review because the agencies did not have an information- sharing MOU in place until January 2009. IRS Has Improved Its BSA Compliance Efforts; However, It Does Not Fully Coordinate Examination Schedules with States

Since our 2006 report, IRS has made improvements in its BSA/AML  compliance program by revising guidance, identifying additional NBFIs,  and coordinating with FinCEN and the states; however, IRS and state  agencies have missed opportunities to better leverage examination  resources by not coordinating their examination schedules. Therefore,  some financial institutions have multiple regulators from various  institutions. Regulators with Enforcement Authority Took BSA-Related Enforcement Actions, and Federal Banking Regulators Reported Improved Coordination of Enforcement Actions

The BSA/AML examinations that federal banking regulators, SEC, CFTC,  and their SROs conducted resulted in the citation of violations and the  taking of informal (in the case of the federal banking regulators) and  formal enforcement actions. FinCEN also has been discussing  how to improve analytical support with the regulators. However, some  state, securities, and futures regulators have limited electronic access to  BSA data, which impedes their risk scoping for examinations and ability to  independently verify audit information. While FinCEN and IRS recently have been meetin more frequently to discuss IRS referrals, no formal agreed-upon proces exists to address IRS referral issues and provide more timely feedback to  IRS-examined institutions on their AML efforts. FinCEN and CFTC signed a data- access MOU concurrently with their information-sharing MOU in January  2009. FinCEN  officials said they finalized a regulatory data-access template in July 2008  and have begun providing additional state regulators with direct electronic  access, and anticipate providing expanded access to the federal financial  regulators. Recommendations for Executive Action

To reduce the potential for duplicative efforts and better leverage limited  examination resources, we recommend that the Commissioner of IRS  work with state agencies to develop a process by which to coordinate  MSB examination schedules between IRS and state agencies that conduct  BSA examinations of MSBs. Appendix I: Objectives, Scope and Methodology

Our objectives were to (1) describe how Bank Secrecy Act (BSA)  compliance and enforcement efforts are distributed among federal and  state regulators, self-regulatory organizations (SRO), and the Financial  Crimes Enforcement Network (FinCEN); (2) describe how federal  agencies other than FinCEN are implementing their BSA activities and  evaluate their coordination efforts; and (3) evaluate how FinCEN is  executing its BSA responsibilities and coordinating BSA efforts among the  various agencies. In addition, to better understand how  BSA/AML authorities were delegated and interrelate with other financial  regulatory authorities, we interviewed officials from the federal agencies  included in the BSA/AML compliance and enforcement regulatory  framework—FinCEN; the federal banking regulators: the Board of  Governors of the Federal Reserve System (Federal Reserve), Federal  Deposit Insurance Corporation (FDIC), Office of the Comptroller of the  Currency (OCC), Office of Thrift Supervision (OTS), and National Credit  Union Administration (NCUA); Securities and Exchange Commission  (SEC), Commodity Futures Trading Commission (CFTC), and the SROs  they regulate; Internal Revenue Service (IRS); and Department of Justice  (Justice).
Why GAO Did This Study

The legislative framework for combating money laundering began with the Bank Secrecy Act (BSA) in 1970 and most recently expanded in 2001with the USA PATRIOT Act. The Financial Crimes Enforcement Network (FinCEN) administers BSA and relies on multiple federal and state agencies to ensure financial institution compliance. GAO was asked to (1) describe how BSA compliance and enforcement responsibilities are distributed, (2) describe how agencies other than FinCEN are implementing those responsibilities and evaluate their coordination efforts, and (3) evaluate how FinCEN is implementing its BSA responsibilities. Among other things, GAO reviewed legislation, past GAO and Treasury reports, and agreements and guidance from all relevant agencies; and interviewed agency, association, and financial institution officials.

What GAO Found

FinCEN is responsible for the administration of the BSA regulatory structure, and has delegated examination responsibility to the federal banking regulators (Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Office of Thrift Supervision, and National Credit Union Administration), the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Internal Revenue Service (IRS). The federal banking regulators, SEC, CFTC, securities and futures self-regulatory organizations (SRO), and state agencies also have their own separate authorities to examine for compliance among institutions they supervise and take enforcement actions for noncompliance. FinCEN has retained enforcement authority for BSA and may take enforcement actions independently or concurrently with the regulators. While federal agencies have enhanced their BSA compliance programs, opportunities exist to improve interagency and state examination coordination. The federal banking regulators issued an interagency examination manual; SEC, CFTC, and their respective SROs developed BSA examination modules; and FinCEN and IRS, which examines nonbank financial institutions (NBFI), issued an examination manual for money services businesses (MSB). However, IRS has not fully coordinated MSB examination schedules with the states that also examine MSBs, potentially missing opportunities to reduce duplication and leverage resources. The federal financial regulators traditionally have different compliance approaches for their industries. With respect to BSA, multiple regulators are examining for compliance with the same legislation across industries and, for some larger holding companies, within the same institution. However, they do not have a mechanism through which all regulators discuss (without industry present) how to promote greater consistency, reduce unnecessary regulatory burden, and identify concerns across industries. Federal banking regulators reported improved transparency and coordination of enforcement actions. While FinCEN has increased regulatory resources, provided examination support, and made advances in outreach, it could improve its informationsharing efforts. FinCEN improved its system for tracking referrals but lack of a process for communication between IRS and FinCEN for IRS referrals, coupled with IRS's limited enforcement authority, may delay timely feedback to IRS-examined institutions. FinCEN completed more information-sharing memorandums of understanding (MOU) with federal and state agencies, but did not sign its MOU with CFTC until January 2009, which limited their information-sharing efforts. Some state regulators and securities and futures regulators continue to have no electronic access to BSA data. Lack of direct access to BSA data impedes their ability to identify potential risk areas on which to focus their examinations and effectively leverage resources. FinCEN officials said they finalized a data-access template in July 2008, and had begun providing more electronic access.