Bank Secrecy Act:

Agencies and Financial Institutions Share Information but Metrics and Feedback Not Regularly Provided

GAO-19-582: Published: Aug 27, 2019. Publicly Released: Sep 26, 2019.

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Michael E. Clements
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The Bank Secrecy Act requires financial institutions to report information to the federal government that law enforcement can use to investigate potential crimes, like money laundering.

Industry representatives told us that generating reports on suspicious activity can be labor intensive, and that they would like more feedback on whether the reports they submitted were useful.

We found the Treasury Department and some law enforcement agencies measured things like how many reports produced investigations. However, these metrics were not consistently communicated.

We made 4 recommendations, including for regular feedback.

Department of the Treasury building

Department of the Treasury building

Additional Materials:

Contact:

Michael E. Clements
(202) 512-8678
clementsm@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The Financial Crimes Enforcement Network (FinCEN)—within the Department of Treasury—supervisory agencies (such as banking, securities, and futures regulators), and law enforcement agencies collaborate on implementing Bank Secrecy Act/anti-money laundering (BSA/AML) regulations, primarily through cross-agency working groups, data-sharing agreements, and liaison positions.

Key Bank Secrecy Act/Anti-Money Laundering Collaboration Mechanisms

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FinCEN and law enforcement agencies provided some metrics and institution-specific feedback on the usefulness of BSA reporting (such as suspicious activity reports) to the financial industry but not regularly or broadly.

  • FinCEN and some agencies have metrics on the usefulness of BSA reports. One law enforcement agency annually publishes aggregate metrics on BSA reports that led to investigations and indictments. But FinCEN did not consistently communicate available metrics; it generally did so on an ad-hoc basis such as through published speeches. In 2019, FinCEN began a study to identify measures on the value and usefulness of BSA reporting—to be completed by the end of 2019. By consistently communicating currently available metrics (summary data), and any later identified by the study, FinCEN may assist financial institutions in more fully understanding the importance of their efforts.

Industry associations GAO interviewed noted financial institutions would like to receive more institution-specific feedback on the usefulness of their BSA reporting; they also identified suspicious activity reports as labor-intensive. In 2017, FinCEN began providing such feedback and some law enforcement agencies have ongoing efforts to provide institution-specific briefings. But these efforts have not been regularly made and involved relatively few institutions. Additional and more regular feedback, designed to cover different types of financial institutions and those with significant financial activity, may enhance the ability of the U.S. financial industry to effectively target efforts to identify suspicious activity and provide quality BSA reporting.

Why GAO Did This Study

Illicit finance activity, such as terrorist financing and money laundering, can pose threats to national security and the integrity of the U.S. financial system. FinCEN is responsible for administering BSA and has delegated examination responsibility to supervisory agencies. FinCEN also is to collect and disseminate BSA data. BSA requires that financial institutions submit reports, which may be used to assist law enforcement investigations. Industry perspectives on BSA reporting have included questions about its usefulness.

This report examines, among other objectives, how FinCEN and supervisory and law enforcement agencies (1) collaborate and (2) provide metrics and feedback on the usefulness of BSA reporting. GAO reviewed related laws and regulations; agency documentation; examination and enforcement action data; and interviewed FinCEN, supervisory agencies, and a nongeneralizable selection of six law enforcement agencies and seven industry associations.

What GAO Recommends

GAO makes four recommendations, including that FinCEN review options to consistently communicate summary data and regularly provide institution-specific feedback on its BSA reporting. FinCEN concurred with the recommendation on summary data and agreed with the spirit of the recommendation on feedback. FinCEN raised concerns with the need for the two other recommendations. GAO continues to believe the recommendations have merit, as discussed in the report.

For more information, contact Michael E. Clements at (202) 512-8678 or clementsm@gao.gov.

Recommendations for Executive Action

  1. Status: Open

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

    Recommendation: The Director of FinCEN, after consulting with the Commodity Futures Trading Commission (CFTC), should consider prioritizing the inclusion of the primary SRO conducting BSA examinations in the futures industry in the Bank Secrecy Act Advisory Group (BSAAG) on a more consistent basis and also making the primary futures industry association a concurrent member. (Recommendation 1)

    Agency Affected: Department of the Treasury: Financial Crimes Enforcement Network

  2. Status: Open

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

    Recommendation: The Director of FinCEN, after consulting with CFTC, should take steps to explore providing direct BSA data access to the National Futures Association. (Recommendation 2)

    Agency Affected: Department of the Treasury: Financial Crimes Enforcement Network

  3. Status: Open

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

    Recommendation: The Director of FinCEN should review options for FinCEN to more consistently and publicly provide summary data on the usefulness of BSA reporting. This review could either be concurrent with FinCEN's BSA value study or through another method. (Recommendation 3)

    Agency Affected: Department of the Treasury: Financial Crimes Enforcement Network

  4. Status: Open

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

    Recommendation: The Director of FinCEN should review options for establishing a mechanism through which law enforcement agencies may provide regular and institution-specific feedback on BSA reporting. Options should take into consideration providing such feedback to cover different types of financial institutions and those with significant financial activity. This review could either be part of FinCEN's BSA value study or through another method. (Recommendation 4)

    Agency Affected: Department of the Treasury: Financial Crimes Enforcement Network

 

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