Bank Secrecy Act:

Financial Institution Regulators' Compliance Examinations

GGD-86-94: Published: Aug 1, 1986. Publicly Released: Sep 3, 1986.

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In response to a congressional request, GAO evaluated regulatory agencies' efforts to ensure that financial institutions comply with the Bank Secrecy Act.

GAO found that regulatory agencies placed a low priority on the act's requirement for examinations of financial institutions, which diminished their ability to ensure compliance with the act. GAO believes that these agencies could improve their ability to ensure compliance by: (1) better targeting of institutions to be examined; (2) improving model examination procedures for depository institutions; (3) consistently applying the model depository institution examination procedures; (4) improving Securities and Exchange Commission (SEC) examination procedures; and (5) preparing sufficient documentation to support examination performance. GAO also found that the Internal Revenue Service (IRS), which had good examination procedures and documentation, had difficulty identifying institutions for its examinations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Treasury established a targeting group that developed an on-line system for data.

    Recommendation: The Secretary of the Treasury should initiate a program to compile and analyze targeting information, including cash flow data on an exception basis from the Federal Reserve System (FRS), and share the results with the regulatory agencies.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: A new quarterly report has been initiated. On June 29, 1988, a working group issued a standard format for the regulatory agencies to use in examinations.

    Recommendation: The Secretary of the Treasury should develop, with the regulatory agencies, an improved set of examination procedures, including tailored examinations for broker-dealers and credit unions, verification that reports are being filed, and review of cash transactions at all currency-handling facilities examined.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Not Implemented

    Comments: The Treasury's Financial Analysis Division of Customs targets geographic areas and the regulatory agencies can use Treasury's on-line database.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, Federal Deposit Insurance Corporation (FDIC), the Comptroller of the Currency, the Chairman, Federal Home Loan Bank Board (FHLBB), the Chairman of the Board, National Credit Union Administration (NCUA), the Chairman, SEC, and the Commissioner of Internal Revenue should institute policies to comprehensively examine constituent institutions on a random basis.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  4. Status: Closed - Implemented

    Comments: IRS established a new automated list of firms to help control audits. It also increased staffing.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, Federal Deposit Insurance Corporation (FDIC), the Comptroller of the Currency, the Chairman, Federal Home Loan Bank Board (FHLBB), the Chairman of the Board, National Credit Union Administration (NCUA), the Chairman, SEC, and the Commissioner of Internal Revenue should institute policies to comprehensively examine constituent institutions on a random basis.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Not Implemented

    Comments: FDIC has adopted new examination procedures. Treasury databases are available for institutions to examine.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, Federal Deposit Insurance Corporation (FDIC), the Comptroller of the Currency, the Chairman, Federal Home Loan Bank Board (FHLBB), the Chairman of the Board, National Credit Union Administration (NCUA), the Chairman, SEC, and the Commissioner of Internal Revenue should institute policies to comprehensively examine constituent institutions on a random basis.

    Agency Affected: Federal Deposit Insurance Corporation

  6. Status: Closed - Not Implemented

    Comments: FHLBB agreed with this recommendation and procedures were revised. Treasury databases are available for institutions to examine.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, Federal Deposit Insurance Corporation (FDIC), the Comptroller of the Currency, the Chairman, Federal Home Loan Bank Board (FHLBB), the Chairman of the Board, National Credit Union Administration (NCUA), the Chairman, SEC, and the Commissioner of Internal Revenue should institute policies to comprehensively examine constituent institutions on a random basis.

    Agency Affected: Federal Home Loan Bank Board

  7. Status: Closed - Implemented

    Comments: The agencies adopted new examination procedures, and FRS membership is small enough to conduct more comprehensive examinations.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, Federal Deposit Insurance Corporation (FDIC), the Comptroller of the Currency, the Chairman, Federal Home Loan Bank Board (FHLBB), the Chairman of the Board, National Credit Union Administration (NCUA), the Chairman, SEC, and the Commissioner of Internal Revenue should institute policies to comprehensively examine constituent institutions on a random basis.

    Agency Affected: Federal Reserve System

  8. Status: Closed - Implemented

    Comments: NCUA reviews credit union policies for compliance as part of regular examinations. NCUA does not undertake random testing.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, Federal Deposit Insurance Corporation (FDIC), the Comptroller of the Currency, the Chairman, Federal Home Loan Bank Board (FHLBB), the Chairman of the Board, National Credit Union Administration (NCUA), the Chairman, SEC, and the Commissioner of Internal Revenue should institute policies to comprehensively examine constituent institutions on a random basis.

    Agency Affected: National Credit Union Administration

  9. Status: Closed - Implemented

    Comments: SEC has revised its procedures.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, Federal Deposit Insurance Corporation (FDIC), the Comptroller of the Currency, the Chairman, Federal Home Loan Bank Board (FHLBB), the Chairman of the Board, National Credit Union Administration (NCUA), the Chairman, SEC, and the Commissioner of Internal Revenue should institute policies to comprehensively examine constituent institutions on a random basis.

    Agency Affected: United States Securities and Exchange Commission

  10. Status: Closed - Implemented

    Comments: OCC issued circulars to examiners to improve documentation.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, FDIC, the Comptroller of the Currency, the Chairman, FHLBB, the Chairman of the Board, NCUA, the Chairman, SEC, and the Commissioner of Internal Revenue should direct field examiners to fully document the examinations performed, using GAO audit standards as a guide.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  11. Status: Closed - Implemented

    Comments: IRS revised examiner procedures and training.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, FDIC, the Comptroller of the Currency, the Chairman, FHLBB, the Chairman of the Board, NCUA, the Chairman, SEC, and the Commissioner of Internal Revenue should direct field examiners to fully document the examinations performed, using GAO audit standards as a guide.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  12. Status: Closed - Implemented

    Comments: Results are documented in accordance with FDIC guidance.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, FDIC, the Comptroller of the Currency, the Chairman, FHLBB, the Chairman of the Board, NCUA, the Chairman, SEC, and the Commissioner of Internal Revenue should direct field examiners to fully document the examinations performed, using GAO audit standards as a guide.

    Agency Affected: Federal Deposit Insurance Corporation

  13. Status: Closed - Implemented

    Comments: Results are documented in accordance with FHLBB guidance.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, FDIC, the Comptroller of the Currency, the Chairman, FHLBB, the Chairman of the Board, NCUA, the Chairman, SEC, and the Commissioner of Internal Revenue should direct field examiners to fully document the examinations performed, using GAO audit standards as a guide.

    Agency Affected: Federal Home Loan Bank Board

  14. Status: Closed - Implemented

    Comments: FRS issued a policy statement to examiners.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, FDIC, the Comptroller of the Currency, the Chairman, FHLBB, the Chairman of the Board, NCUA, the Chairman, SEC, and the Commissioner of Internal Revenue should direct field examiners to fully document the examinations performed, using GAO audit standards as a guide.

    Agency Affected: Federal Reserve System

  15. Status: Closed - Implemented

    Comments: When NCUA finds a credit union has no program, it must document this in the examination report.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, FDIC, the Comptroller of the Currency, the Chairman, FHLBB, the Chairman of the Board, NCUA, the Chairman, SEC, and the Commissioner of Internal Revenue should direct field examiners to fully document the examinations performed, using GAO audit standards as a guide.

    Agency Affected: National Credit Union Administration

  16. Status: Closed - Implemented

    Comments: SEC advised field examiners to more fully document findings and work.

    Recommendation: The Chairman of the Board of Governors, FRS, the Chairman, FDIC, the Comptroller of the Currency, the Chairman, FHLBB, the Chairman of the Board, NCUA, the Chairman, SEC, and the Commissioner of Internal Revenue should direct field examiners to fully document the examinations performed, using GAO audit standards as a guide.

    Agency Affected: United States Securities and Exchange Commission

 

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