Money Laundering: FinCEN Needs to Better Communicate Regulatory Priorities and Time Lines

U.S. Government Accountability Office

Money Laundering:

FinCEN Needs to Better Communicate Regulatory Priorities and Time Lines

GGD-98-18: Published: Feb 6, 1998. Publicly Released: Apr 1, 1998.

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Pursuant to a congressional request, GAO reviewed the regulatory role of the Financial Crimes Enforcement Network (FinCEN), focusing on the: (1) process FinCEN followed for developing and issuing Bank Secrecy Act (BSA) regulations; and (2) status of FinCEN's efforts to develop and issue BSA regulations.

GAO noted that: (1) FinCEN's process for developing and issuing regulations generally consisted of determining what regulations were required or needed, establishing priorities for which regulations it would promulgate first, and then promulgating the regulations within the context of applicable statutory and executive branch guidance; (2) overall, FinCEN's regulatory process was designed to reflect the Administrative Procedure Act (APA) standardized procedures that federal agencies are to follow when developing and issuing regulations; (3) moreover, FinCEN follows a partnership strategy, which emphasizes frequent consultations with representatives of the law enforcement, regulatory, and financial services communities; (4) regarding the status of FinCEN's efforts to develop and issue regulations, as of December 1997, more than 3 years since passage of the Money Laundering Suppression Act (MLSA), FinCEN had not promulgated final regulations for five of eight regulatory initiatives related to the 1994 BSA amendments; (5) FinCEN has issued final regulations for three initiatives, has proposed regulations for four initiatives, and has not yet taken regulatory action on one initiative; (6) generally, until final regulations are promulgated, many of the intended benefits of the MLSA cannot be fully achieved; (7) FinCEN officials said that they recognized that the emphasis on issuing quality regulations has the effect of extending the time needed to develop and issue regulations; (8) thus, FinCEN followed a regulation-development process that emphasized quality over timeliness; (9) a majority of the members of the BSA Advisory Group with whom GAO spoke generally concurred with this characterization of FinCEN's regulatory process; (10) GAO believes that FinCEN could better inform appropriate congressional committees of its rulemaking plans, especially when those plans will result in FinCEN's failing to meet statutory completion dates; (11) although GAO found that FinCEN had presented its fiscal year regulatory priorities in annual plans, which were published in the Federal Register, these plans did not provide stakeholders with FinCEN's estimated dates for issuing final rules for all MLSA-related amendments to the BSA; (12) FinCEN communicated the agency's regulatory plans to Congress by various means, including testimony at congressional hearings; and (13) congressional committees were not in a good position to assess FinCEN's regulatory initiatives, the time lines for issuing final regulations, and the allocation of resources necessary for completing these initiatives.

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Recommendation for Executive Action

Status: Closed - Implemented

Comments: On May 6, 1998, Treasury's Assistant Secretary (Enforcement) provided to the Chairman, House Banking and Financial Services' Subcommittee on General Oversight and Investigations a status report on FinCEN's an updated status report on the agency's regulatory programs.

Recommendation: The Director of FinCEN should provide the appropriate congressional committees with information on the status of FinCEN's implementation of all relevant statutory BSA-related regulatory directives. This information should include its plans, priorities, target dates for issuing notices of proposed rulemaking and final rules, and accomplishments. Furthermore, recognizing that circumstances can change, the Director should periodically update this information and transmit it to the appropriate congressional committees.

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