Money Laundering:

FinCEN Needs to Better Manage Bank Secrecy Act Civil Penalty Cases

GGD-98-108: Published: Jun 15, 1998. Publicly Released: Jun 15, 1998.

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Norman J. Rabkin
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Pursuant to a congressional request, GAO reviewed the Department of the Treasury's Financial Crimes Enforcement Network's (FinCEN) efforts to process civil penalty referrals for violations of the Bank Secrecy Act (BSA), focusing on: (1) whether Treasury has changed its policies and procedures for processing civil penalty cases since 1992; (2) Treasury's performance in processing civil penalty cases during calender years 1992 through 1997; and (3) the status of FinCEN's efforts to develop and issue a final regulation delegating the authority to assess civil penalties for BSA violations to the federal banking regulatory agencies, as required by the Money Laundering Suppression Act.

GAO noted that: (1) except for the May 1994 delegation to FinCEN, Treasury's policies and procedures for processing civil penalty cases generally have not changed since 1992; (2) also, the number of staff processing civil penalty cases has remained fairly constant, at about six, before and after the May 1994 delegation to FinCEN; (3) the problem of lengthy processing times for civil penalty cases is growing worse; (4) for example, according to FinCEN's data for cases closed in calendar years 1985 through 1991, the average processing time to close a case was 1.77 years, and the most lengthy time was 6.44 years; (5) in comparison, FinCEN's data for calendar years 1992 through 1997 indicate an average processing time was 3.02 years, and the most lengthy time was 10.14 years; (6) for cases closed in the 2 most recent years, 1996 and 1997, the average processing times were 3.57 years and 4.23 years, respectively; (7) lengthy processing can negatively affect the public's perception of the government's efforts to enforce the BSA, thereby lessening the credibility and deterrent effects of the act's provisions; (8) another result is that the 6-year statute of limitations for BSA civil penalties could expire; (9) according to FinCEN's data, for the period January 1, 1992, through March 27, 1998, a total of 16 cases had one or more BSA violations that could not be pursued because the statute of limitations had expired; (10) insufficient management attention is a significant cause of the lengthy processing times for civil penalty cases; (11) FinCEN officials told GAO, for example, that the agency has never set timeliness goals for processing civil penalty cases; (12) FinCEN has issued neither a notice of proposed rulemaking nor a final regulation to delegate civil penalty assessment authority to the banking regulatory agencies; (13) FinCEN officials told GAO they have been working with the federal banking regulatory agencies for some time to devise an appropriate plan for delegating civil penalty assessment authority, but some issues still required resolution; (14) FinCEN's current strategic plan indicates that such delegation may not occur before 2002; and (15) for several more years, FinCEN could still be responsible for processing civil penalty referrals.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: On June 29, 1998, the Acting Director, FinCEN, informed the Chairman, House Banking and Financial Services, Subcommittee on General Oversight and Investigations, that FinCEN had revised its procedures to "establish strict timelines for processing all incoming items and civil penalty referrals and incorporate increased management oversight of the process." Additionally, the Acting Director noted that, both before and after the April 1, 1998, congressional hearing, FinCEN had taken steps to address this problem and, as of June 26, 1998, the inventory of cases had been reduced to about 70 cases, down significantly from the 1997 calendar yearend total of 133.

    Recommendation: To reduce the lengthy processing times associated with civil penalties, the Acting Director, FinCEN, should set average timeliness goals for evaluating and disposing of civil penalty cases, taking into account the varying complexity of the cases, and monitor the progress of managers and staff responsible for meeting those goals. Setting and managing to meet such goals should help FinCEN better focus its attention on processing civil penalty cases and provide a means to determine what corrective actions might be needed to decrease processing times in the future.

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


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