	Background

		CBP Is the Lead Federal Agency Responsible for Stemming the Flow of Bulk Cash Leaving the U.S. at Land Ports of Entry

CBP is the lead federal agency charged with securing our nation’s borders  while facilitating legitimate travel and commerce. While CBP does not know the  number of travelers that leave the United States through land ports of  entry, it estimates that it inspected over 360 million travelers who entered  the country in fiscal year 2009 through land, air, and sea ports of entry. CBP’s Process for Inspecting Travelers Leaving the Country

The process used by CBP to inspect travelers leaving the country differs  from the inspection process for those entering the United States at land  ports of entry. Within FinCEN, the  Regulatory Policy and Programs Division is responsible for, among other  things, BSA compliance in the financial industry and for issuing  regulations for U.S. financial institutions. CBP Has Established an Outbound Enforcement Program, but Further Actions Are Needed to Address Program Challenges

		CBP Has Created an Outbound Enforcement Program and Seized about $41 Million in Bulk Cash Leaving the Country Since March 2009

In March 2009, CBP reestablished an Outbound Enforcement Program  within its Office of Field Operations (OFO). As a result of its outbound enforcement activities, CBP seized about $41  million in illicit bulk cash leaving the country at land ports of entry from  March 2009 through June 2010. Stemming the Flow of Bulk Cash Is a Challenging Task

CBP has succeeded in establishing an Outbound Enforcement Program,  but the program is in its early phases and there is a general recognition by  CBP managers and officers that the agency’s ability to stem the flow of  bulk cash is limited because of the difficulty in detecting bulk cash. For example, our investigators tested  outbound operations at three ports of entry on the southwest border. Had the 9/11 terrorists  used prepaid  cards to cover their expenses, none of  these financial footprints would have been available.”

			FinCEN Does Not Require MSBs to Report Suspicious Transactions Involving Stored Value

While depository institutions are required to file suspicious activity reports  (SAR) for stored value transactions, FinCEN does not require MSBs to do  so.82,,83 84  Although some MSBs may file SARs related to stored value as part  of their anti-money laundering programs or on a voluntary basis, the fact  that suspicious activity involving stored value does not have to be reported  by all financial institutions heightens the risk that cross-border currency  smuggling or the illegal use of stored value may go undetected or  unreported. Efforts Are Under Way to Address Regulatory Gaps Related to Stored Value, but Much Work Remains

		FinCEN Is in the Process of Developing and Issuing Regulations that Require Anti-Money Laundering Practices for Stored Value

At the time of our review, FinCEN was in the process of developing and  issuing regulations, as required by the Credit CARD Act, to address the  risk associated with the illicit use of stored value. § 5316 which applies to the transport of monetary  instruments. A project management plan that is consistent with best practices could  help FinCEN better manage its rulemaking effort. More Work Remains to Ensure Agencies Enforce Cross-Border Currency Smuggling and Industry Complies with the Final Rule

While issuing the final rule on stored value will be a major step toward  addressing regulatory gaps, much work remains to ensure enforcement by  law enforcement agencies to identify cross-border currency smuggling  with the use of stored value and to ensure issuers, sellers, and redeemers  of such devices implement anti-money laundering requirements after the  final rule is issued. Beyond these tasks, federal law enforcement agencies and  FinCEN face other challenges as well. Among other  things, FinCEN faces challenges in areas such as monitoring MSBs,  addressing gaps in anti-money laundering practices of off-shore issuers  and sellers of stored value, and educating industry about the new anti- money laundering requirements. FinCEN has not set a date for completion of this effort as its  plans have not been finalized. By developing a  management plan with timelines for issuing final rules, FinCEN could be  better positioned to manage its rulemaking efforts and to reduce the risk  of cross-border smuggling and other illicit uses of stored value by drug  trafficking organizations and others. Develop a performance measure that informs CBP management,  Congress, and other stakeholders about the extent to which the  Outbound Enforcement Program is effectively stemming the flow of  bulk cash, weapons, and other goods that stem from criminal activities  by working with other federal law enforcement agencies involved in  developing assessments on bulk cash and other illegal goods leaving  the country.
Why GAO Did This Study

U.S. Customs and Border Protection (CBP) is the lead federal agency responsible for inspecting travelers who seek to smuggle large volumes of cash--called bulk cash--when leaving the country through land ports of entry. It is estimated that criminals smuggle $18 billion to $39 billion a year in bulk cash across the southwest border. The Financial Crimes Enforcement Network (FinCEN) is responsible for reducing the risk of cross-border smuggling of funds through the use of devices called stored value, such as prepaid cards. GAO was asked to examine (1) the extent of actions taken by CBP to stem the flow of bulk cash leaving the country and any challenges that remain, (2) the regulatory gaps, if any, of cross-border reporting and other anti-money laundering requirements of stored value, and (3) if gaps exist, the extent to which FinCEN has addressed them. To conduct its work, GAO observed outbound operations at five land ports of entry. GAO also reviewed statutes, rules, and other information for stored value. This is a public version of a law enforcement sensitive report that GAO issued in September 2010. Information CBP deemed sensitive has been redacted.

What GAO Found

In March 2009, CBP created an Outbound Enforcement Program aimed at stemming the flow of bulk cash leaving the country, but further actions could be taken to address program challenges. Under the program, CBP inspects travelers leaving the country at all 25 land ports of entry along the southwest border. On the Northern border, inspections are conducted at the discretion of the Port Director. From March 2009 through June 2010, CBP seized about $41 million in illicit bulk cash leaving the country at land ports of entry. Stemming the flow of bulk cash, however, is a difficult and challenging task. For example, CBP is unable to inspect every traveler leaving the country at land ports of entry and smugglers of illicit goods have opportunities to circumvent the inspection process. Other challenges involve limited technology, infrastructure, and procedures to support outbound operations. CBP is in the early phases of this program and has not yet taken some actions to gain a better understanding of how well the program is working, such as gathering data for measuring program costs and benefits. By gathering data for measuring expected program costs and benefits, CBP could be in a better position to weigh the costs of any proposed expansion of the outbound inspection program against likely outcomes. Regulatory gaps of cross-border reporting and other anti-money laundering requirements exist with the use of stored value. For example, travelers must report transporting more than $10,000 in monetary instruments or currency at one time when leaving the country, but FinCEN does not have a similar requirement for travelers transporting stored value. Similarly, certain anti-money laundering regulations, such as reports on suspicious activities, do not apply to the entire stored value industry. The nature and extent of the use of stored value for cross-border currency smuggling and other illegal activities remains unknown, but federal law enforcement agencies are concerned about its use. FinCEN is developing regulations, as required by the Credit CARD Act of 2009, to address gaps in regulations related to the use of stored value for criminal purposes, but much work remains. FinCEN has not developed a management plan that includes, among other things, target dates for completing the regulations. Developing such a plan could help FinCEN better manage its rulemaking effort. When it issues the regulations, law enforcement agencies and FinCEN may be challenged in ensuring compliance by travelers and industry. For example, FinCEN will be responsible for numerous tasks including issuing guidance for compliance examiners, revising the way in which it tracks suspicious activities related to stored value, and addressing gaps in anti-money laundering regulations for off-shore entities that issue and sell stored value.

What GAO Recommends

GAO recommends that CBP, among other things, gather data on program costs and benefits and that FinCEN develop a plan, including target dates, to better manage its rulemaking process. CBP and FinCEN concurred with these recommendations.