As a result, the BSA helps  to provide a paper trail of the activities of money launderers for law  enforcement officials in pursuit of criminal activities. Institutions  file these forms with the Financial Crimes Enforcement Network  (FinCEN) at Treasury. In October 2001, Congress again amended the BSA through passage of the  USA PATRIOT Act, specifically through Title III of this act. The division  agreed with the recommendation. Past Reports

In 1998, we issued two reports regarding FinCEN’s role in administering  the BSA. In both of these reports, we discussed the Secretary of the  Treasury’s mandate to delegate the authority to assess civil penalties for  BSA violations to federal banking regulatory agencies and noted that this  delegation had not been made. One purpose of this work was to update  information on civil penalties for BSA violations. At that time,  FinCEN officials told us that they were concerned that the banking  regulators might be less inclined to assess BSA penalties and instead use  their non-BSA authorities under their own statutes. Also in 1998, we reported on the activities of Raul Salinas, the brother of  the former President of Mexico. Mr. Salinas was allegedly involved in  laundering money from Mexico, through Citibank, to accounts in Citibank  affiliates in Switzerland and the United Kingdom. We determined that Mr.  Salinas was able to transfer $90 - $100 million between 1992 and 1994 by  using a private banking relationship structured through Citibank New York  in 1992 and effectively disguise the funds’ source and destination, thus  breaking the funds’ paper trail. In 2001, we issued a report on changes in BSA examination coverage for  certain securities broker-dealers. At the time, there was no requirement  that all broker-dealers file SARs; however, broker-dealer subsidiaries of  depository institutions and their holding companies were required to file  SARs and were examined by banking regulators for compliance. We  determined that with the passage of the 1999 Gramm-Leach-Bliley Act,  these broker-dealers were no longer being examined to assess their  compliance with SAR requirements, although they were being examined  for compliance with reporting currency transactions and other  requirements Treasury had specifically placed on broker-dealers. However, with the passage of the USA PATRIOT Act and the issuance of a  final rule that became effective on July 31, 2002, all broker-dealers were  required to report such activity. How do the regulators’ risk-focused examinations of depository  institutions assess BSA and AML program compliance? To what extent do the banking regulators identify BSA and AML  program violations and take supervisory actions for such violations? How consistent are BSA examination procedures and interpretation of  BSA violations across the banking regulators? We will also try to ascertain the implications of “risk- focused” examinations for BSA compliance and to determine whether and  to what extent the regulators curtail such compliance reviews in their  examinations. Additionally, we plan to track supervisory  actions taken by the regulators to correct the violations they identified. Key legal issues we will be examining are the ramifications, if any, of the  lack of delegation of authority to assess BSA penalties by Treasury to the  federal banking regulators, as mandated by statute in 1994. In addition, we will meet with government officials at the federal and state  levels and from the banking and credit union industries to gain their  perspectives on the risk-focused BSA examination process and post- examination follow-up activities. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

The U.S. government's framework for preventing, detecting, and prosecuting money laundering has been expanding through additional pieces of legislation since its inception in 1970 with the Bank Secrecy Act (BSA). The purpose of the BSA is to prevent financial institutions from being used as intermediaries for the transfer or deposit of money derived from criminal activity and to provide a paper trail for law enforcement agencies in their investigations of possible money laundering. The most recent changes arose in October 2001 with the passage of the USA PATRIOT Act, which, among other things, extends antimoney laundering (AML) requirements to other financial service providers previously not covered under the BSA. GAO was asked to testify on its previous work and the ongoing work it is doing for the Senate Committee on Banking, Housing, and Urban Affairs on the depository institution regulators' BSA examination and enforcement process.

What GAO Found

In recent years, GAO has issued a number of reports dealing with regulatory oversight of anti-money laundering activities of financial institutions. In 1998, GAO issued a report regarding Treasury's Financial Crimes Enforcement Network's (FinCEN) role in administering the BSA, which updated information on civil penalties for BSA violations. One focus was the Secretary of the Treasury's 1994 mandate to delegate the authority to assess civil money penalties for BSA violations to federal banking regulatory agencies. GAO noted that this delegation had not been made and said that FinCEN was concerned that bank regulators may be less inclined to assess BSA penalties and may prefer to use their non-BSA authorities under their own statutes. Also in 1998, GAO reported on the activities of Raul Salinas, the brother of the former President of Mexico. Mr. Salinas was allegedly involved in laundering money from Mexico, through Citibank, to accounts in Citibank affiliates in Switzerland and the United Kingdom. GAO determined that Mr. Salinas was able to transfer $90 - $100 million between 1992 and 1994 by using a private banking relationship structured through Citibank New York in 1992 and effectively disguise the funds' source and destination, thus breaking the funds' paper trail. In 2001, GAO issued a report on changes in BSA examination coverage for certain securities broker-dealers. At the time, there was no requirement that all broker-dealers file Suspicious Activity Reports (SARs); however, brokerdealer subsidiaries of depository institutions and their holding companies were required to file SARs and were examined by banking regulators for compliance. GAO determined that with the passage of the 1999 Gramm-Leach-Bliley Act, these broker-dealers were no longer being examined to assess their compliance with SAR requirements. However, with the passage of the USA PATRIOT Act and the issuance of a final rule that was effective on July 31, 2002, all broker-dealers were required to report such activity. GAO is currently studying the depository institution regulators' BSA examination and enforcement process for the Senate Committee on Banking, Housing, and Urban Affairs. The objectives include determining how the regulators' risk-focused examinations assess BSA compliance, the extent to which the regulators identify BSA and AML violations and take supervisory actions, and the consistency of BSA compliance examination procedures and interpretation of violations across regulators. GAO plans to determine whether and to what extent regulators curtailed BSA compliance examinations and the bases for these decisions. GAO plans to track supervisory actions taken to correct violations identified. GAO will also examine the ramifications, if any, of the lack of delegation of authority to assess BSA compliance penalties by Treasury to the banking regulators, as mandated by statute. GAO will meet with government and industry officials to gain their perspective on the BSA compliance examination process.