Bank Secrecy Act Reporting Requirements Have Not Yet Met Expectations, Suggesting Need for Amendment

GGD-81-80: Published: Jul 23, 1981. Publicly Released: Jul 23, 1981.

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The implementation of the Bank Secrecy Act's reporting requirements and their usefulness to law enforcement efforts were reviewed. Congress envisioned that the reporting requirements of the act would be useful for tracking the financial resources associated with criminal activities and the profits gained from these illegal activities. However, GAO found that the reports required under the act are not widely used and their potential utility as an investigative tool is unknown. The Department of the Treasury, responsible for implementing the act, has initiated actions along with other agencies to correct many of the problems hindering the use of the reports. However, GAO believes that further improvements are needed if the act is to be effectively implemented. GAO also believes that it is time for an overall assessment of the costs and benefits of the act's reporting requirements to determine their usefulness.

GAO found that, after 10 years, the act has not been used sufficiently to demonstrate whether the demands it places on the private sector, especially financial institutions, are commensurate with the benefits obtained by the federal government. GAO believes that the next 2 to 3 years will be crucial to demonstrating the cost-effectiveness of the act's reporting requirements. Recent actions taken by Treasury and the regulatory agencies to improve implementation and compliance, coupled with a greater emphasis on financial investigations by law enforcement agencies, suggest that the act's requirements may now be receiving the attention that Congress envisioned. However, as law enforcement agencies focus more on detecting the financial resources of organized criminals, and as more attention is given to the effects of federal regulatory activities on the national economy, Treasury will have to demonstrate better that the usefulness of the act reports justifies the costs. If this cannot be demonstrated, then GAO believes that the act's reporting requirements should be repealed.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The intent was to provide a mechanism for continued periodic congressional oversight to ensure proper attention to administration and use of the act's reporting requirements by officials. On July 13, 1982, the House Subcommittee on General Oversight concluded that progress had been made in administering and using the act's provisions. The Subcommittee Chairman pledged continued oversight.

    Matter: Congress should amend the Bank Secrecy Act to require a reauthorization of the act's reporting requirements in 1984. On the basis of current progress, GAO believes that Treasury should be able to provide sufficient data before then for Congress to make a decision on the act's continuation, modification, or elimination.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Treasury rejected this recommendation on the basis that it was not feasible to implement.

    Recommendation: The Secretary of the Treasury, through the Assistant Secretary for Enforcement and Operations, on a test basis, should obtain and distribute the names of retail businesses exempted from filing currency transaction reports to determine if such data are useful to law enforcement agencies.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Treasury, through the Assistant Secretary for Enforcement and Operations, should develop, in cooperation with Customs' Reports Analysis Branch and the financial institutions' regulatory agencies, the capability to identify financial institutions which may not be complying, so that the regulatory agencies can most effectively focus their limited examination resources.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Implemented

    Comments: Treasury adopted part one of this recommendation while rejecting parts two and three without explanation.

    Recommendation: The Secretary of the Treasury, through the Assistant Secretary for Enforcement and Operations, should work with the financial institution regulatory agencies in: (1) developing a workable compliance enforcement policy specifying penalties to be applied for noncompliance; (2) establishing effective compliance monitoring procedures that provide for each regulatory agency to extensively test some portion, perhaps as much as 10 percent, depending on resource availability, of the institutions examined each year; and (3) designating a single supervisory examiner in each district or region to review act examinations.

    Agency Affected: Department of the Treasury

  4. Status: Closed - Implemented

    Comments: The Assistant Secretary of Treasury for Enforcement issued guidelines to all agencies involved in the administration of the Bank Secrecy Act. These were issued on June 12, 1986, and are called Dissemination Policies and Guidelines for Release of Information Reported Under the Provisions of the Bank Secrecy Act.

    Recommendation: The Secretary of the Treasury, through the Assistant Secretary for Enforcement and Operations, should revise Treasury's data dissemination guidelines to provide law enforcement investigators easier access to act report data and regulatory examiners' data to verify financial institutions' report filings.

    Agency Affected: Department of the Treasury

  5. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Treasury, through the Assistant Secretary for Enforcement and Operations, should allocate, within Treasury, the staff necessary to effectively implement, monitor, and evaluate the act's reporting requirements and ensure that Customs' commitments to increase staff in its Reports Analysis Branch are fulfilled.

    Agency Affected: Department of the Treasury

  6. Status: Closed - Not Implemented

    Comments: Treasury rejected this recommendation, but did not give any rationale.

    Recommendation: The Secretary of the Treasury should initiate, and submit to Congress within 2 years, a comprehensive assessment of the act's reporting requirements. Such an assessment should include: (1) the administrative and respondent costs of the reporting requirements; (2) the report's value to criminal, tax, and regulatory investigations; and (3) recommendations for legislative or program changes.

    Agency Affected: Department of the Treasury

  7. Status: Closed - Not Implemented

    Comments: Treasury rejected this recommendation, but did not give any rationale.

    Recommendation: The Secretary of the Treasury, through the Assistant Secretary for Enforcement and Operations, should establish a system to obtain the data necessary to make a comprehensive assessment of the costs and benefits of the act's reporting requirements.

    Agency Affected: Department of the Treasury

 

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