Asset Forfeiture:

Customs Reports Improved Controls Over Sales of Forfeited Property

GGD-91-127: Published: Sep 25, 1991. Publicly Released: Sep 25, 1991.

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Pursuant to a congressional request, GAO reviewed the adequacy of the Customs Service's controls over the sales of forfeited property, focusing on: (1) contractor compliance with reporting requirements on cash sales of more than $10,000; and (2) whether forfeited property was being sold back to Customs laws violators.

GAO found that: (1) 104 cash transactions totalling about $2.4 million were not reported during fiscal years 1989 and 1990; (2) Customs' previous management contractor did not file Internal Revenue Service (IRS) returns associated with those cash transactions because the contractor believed it was exempt from the reporting requirement, since it did not operate a retail establishment, conduct auctions as a trade or business, or derive its income from selling property or merchandise; (3) IRS officials maintained that even though the previous contractor was not paid a commission based on sales proceeds, it was paid for disposing of property and was, therefore, subject to the reporting requirement; (4) about 28 percent of the records reviewed were missing such key sales data as the purchaser's name, street address, or city; (5) of 26 possible prohibited purchases, 2 may have been made by Customs employees and 24 may have been made by subcontractors or their employees; (6) there was only one instance in which an individual purchased the property that had been seized from him, and while this practice was not prohibited, it could reduce the deterrent value of the forfeiture program; (7) the current management contractor is capturing complete property, purchaser, and payment data and has been reporting cash payments exceeding $10,000 to IRS since taking over the contract in September 1990; and (8) no indications of multiple seizures of the same property were evident.