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USA Patriot Act: Better Interagency Coordination and Implementing Guidance for Section 311 Could Improve U.S. Anti-Money Laundering Efforts

GAO-08-1058 Published: Sep 30, 2008. Publicly Released: Oct 30, 2008.
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Highlights

Since September 11, 2001, the United States has established tools to address the threat to the U.S. financial system of money laundering and terrorist financing. One such tool is Section 311 of the USA PATRIOT Act of 2001, which authorizes the Secretary of the Treasury (Treasury) to prohibit U.S. financial institutions from maintaining certain accounts for foreign banks if they involve foreign jurisdictions or institutions found to be of primary money laundering concern. To make this finding, Treasury examines several factors and generally issues a proposed rule announcing its intent to apply Section 311 restrictions. GAO was asked to examine (1) the process used to implement Section 311 restrictions, (2) the process Treasury follows to finalize or withdraw a proposed rule, and (3) how Treasury assesses the impact of Section 311. GAO reviewed financial and investigative U.S. government documents and met with government officials and representatives of affected banks.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Treasury In order to improve implementation of the Section 311 process, the Secretary of the Treasury should establish implementing guidance for Section 311 of the USA PATRIOT Act. This guidance should specify the responsibilities and activities of offices within Treasury, including the Office of Terrorist Financing and Financial Crime and the Financial Crimes Enforcement Network, for implementing and finalizing Section 311 actions.
Closed – Not Implemented
In response to this recommendation, Treasury circulated a memo in October 2008 from then-Under Secretary Levey to the organizations within the office of Terrorism and Financial Intelligence (TFI). According to Treasury, this memo clarified TFI's processes for combating vulnerabilities in the financial system when Section 311 is determined to be an effective tool. Treasury asserted that this memo, which also included their comments on the draft GAO report, responded directly to the report's recommendation that Treasury establish guidance specifying the responsibilities and activities of offices within Treasury for implementing and finalizing Section 311 actions. However, internally circulating Treasury's comments on our draft report does not address our recommendation. This memo contained no implementing guidance to specify the responsibilities and activities of offices within Treasury for implementing and finalizing Section 311 actions. As we reported in 2008, lacking written operational guidelines to clarify when to complete the Section 311 actions or clear lines of authority for which office is responsible for completing the action, Treasury has taken years to complete the Section 311 process for certain cases. Because a proposed rule applying Section 311 in practice has had the same effect as a final rule, Treasury may lack incentive to finalize or withdraw such rules. More expeditious completion of Section 311 cases could be an important counterbalance to concerns about the Section 311 process by affected jurisdictions, financial institutions, and other parties.

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Topics

Banking lawCrimesFederal intelligence agenciesFederal regulationsFinancial institutionsFinancial managementFinancial management systemsFinancial regulationForeign financial assistanceForeign governmentsHomeland securityInteragency relationsInternal controlsInternational cooperationInternational lawInternational relationsJurisdictional authorityLaw enforcementLending institutionsMoney launderingNational banksNational defense operationsRegulatory agenciesSecurity threatsTerrorismProgram implementation