Many Agencies Are Responsible for Combating Money Laundering and Terrorist Financing

Agencies under the Departments of the Treasury, Justice, and Homeland  Security are to coordinate with each other and with financial regulators in  combating money laundering. Early Benefit of the NMLS Was Affected by Certain Factors and Events

The Treasury, Justice, and regulatory agency officials we interviewed said  that the NMLS was initially beneficial but, over time, certain factors and  events affected its development and implementation. 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. They also said that issuance of the 2003  NMLS has been delayed by the same disruptions. NMLS Generally Has Not Been as Useful as Envisioned for Guiding the Coordination of Law Enforcement Efforts

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 and—according to the evidence we  reviewed and the officials we contacted—generally has not been as useful  as envisioned by the Strategy Act. 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. As of July 2003, this initiative had not yet been  completed, but efforts were still ongoing. 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. Financial Regulators Said Factors Other Than the NMLS Exerted a Greater Influence on Their Anti- Money Laundering Efforts

Most financial regulators we interviewed said that the NMLS had some  influence on their anti-money laundering efforts because it has provided a  forum for enhanced coordination, particularly with law enforcement  agencies, but that it has had less influence than other factors. They did not, however, attribute this to the strategy but, rather, to legal  requirements. They said they would do so with or without the strategy. The Annual NMLS Has Not Reflected Critical Components Identified by GAO as Key to Developing and Implementing National Strategies

In recent years, our work in reviewing national strategies for various  crosscutting issues has identified several critical components needed for  their development and implementation; however, key components have  not been well reflected in the NMLS. These components include clearly  defined leadership, with the ability to marshal necessary resources; setting  clear priorities and focusing resources on the greatest areas of need, as  identified by threat and risk assessments; and established accountability  mechanisms to provide a basis for monitoring and assessing program  performance. 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. Recommendations for Executive Action

If Congress reauthorizes the requirement for an annual NMLS, we  recommend that the Secretary of the Treasury, working with the Attorney  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. 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. 4. 5. Money Laundering: FinCEN Needs to Better Manage Bank Secrecy Act  Civil Penalties. Money Laundering: U.S. Efforts to Combat Money Laundering Overseas. Money Laundering:  State Efforts to Fight It Are Increasing but More  Federal Help Is Needed.
Why GAO Did This Study

Money laundering is a serious crime, with hundreds of billions of dollars laundered annually. Congress passed the Money Laundering and Financial Crimes Strategy Act of 1998 to better coordinate the efforts of law enforcement agencies and financial regulators in combating money laundering. This act required the issuance of an annual National Money Laundering Strategy for 5 years, ending with the issuance of the 2003 strategy. To help with deliberations on reauthorization, GAO determined (1) agency perspectives on the benefit of the strategy 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, (3) the role of the strategy in influencing the activities of federal financial regulators, and (4) whether the strategy has reflected key critical components.

What GAO Found

Treasury, Justice, and financial regulatory officials with whom GAO spoke said that the National Money Laundering Strategy was initially beneficial but that, over time, certain factors and events affected its development and implementation. They endorsed the concept of a strategy to coordinate the federal government's efforts to combat money laundering and related financial crimes. They also said that the strategy initially had a positive effect on promoting interagency planning and communication, but different agency views emerged over the scope and commitment required, and other events affected the strategy, such as the September 11 terrorist attacks and the creation of the Department of Homeland Security. The strategy generally has not served as a useful mechanism for guiding the coordination of federal law enforcement agencies' efforts to combat money laundering and terrorist financing. While Treasury and Justice made progress on some strategy initiatives designed to enhance interagency coordination of money laundering investigations, most have not achieved the expectations called for in the annual strategies. Also, the 2002 strategy did not address agency roles in investigating terrorist financing, thus, it did not help resolve potential duplication of efforts and disagreements over which agency should lead investigations. In May 2003, Justice and Homeland Security reached an agreement aimed at resolving these problems. Most financial regulators GAO interviewed said that the strategy had some influence on their anti-money laundering efforts because it provided a forum for enhanced coordination, particularly with law enforcement agencies. However, they said that it has had less influence than other factors. They 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 2001 to fight terrorist financing and increase anti-money laundering efforts. GAO's work reviewing national strategies has identified several critical components needed for development and implementation; however, key components have not been well reflected in the strategy. The first is clearly defined leadership, with the ability to marshal necessary resources. However, the leadership for the strategy has not agreed on the strategy's scope or ensured that target dates for completing initiatives were met. The second is clear priorities, as identified by threat and risk assessments, to help focus resources on the greatest needs. Each strategy contained more priorities than could be realistically achieved and none of the strategies was linked to a threat and risk assessment. The third is that established accountability mechanisms provide a basis for monitoring and assessing program performance. While later strategies contained several initiatives designed to establish performance measures, as of July 2003, none had yet been completed. Officials attributed this to the difficulty in establishing such measures for combating money laundering.