Combating Money Laundering:

Opportunities Exist to Improve the National Strategy

GAO-03-813: Published: Sep 26, 2003. Publicly Released: Oct 27, 2003.

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Money laundering is a serious crime, with hundreds of billions of dollars laundered annually. Congress passed the Money Laundering and Financial Crimes Strategy Act of 1998 to better coordinate the efforts of law enforcement agencies and financial regulators in combating money laundering. This act required the issuance of an annual National Money Laundering Strategy for 5 years, ending with the issuance of the 2003 strategy. To help with deliberations on reauthorization, GAO determined (1) agency perspectives on the benefit of the strategy and factors that affected its development and implementation, (2) whether the strategy has served as a useful mechanism for guiding the coordination of federal law enforcement agencies' efforts, (3) the role of the strategy in influencing the activities of federal financial regulators, and (4) whether the strategy has reflected key critical components.

Treasury, Justice, and financial regulatory officials with whom GAO spoke said that the National Money Laundering Strategy was initially beneficial but that, over time, certain factors and events affected its development and implementation. They endorsed the concept of a strategy to coordinate the federal government's efforts to combat money laundering and related financial crimes. They also said that the strategy initially had a positive effect on promoting interagency planning and communication, but different agency views emerged over the scope and commitment required, and other events affected the strategy, such as the September 11 terrorist attacks and the creation of the Department of Homeland Security. The strategy generally has not served as a useful mechanism for guiding the coordination of federal law enforcement agencies' efforts to combat money laundering and terrorist financing. While Treasury and Justice made progress on some strategy initiatives designed to enhance interagency coordination of money laundering investigations, most have not achieved the expectations called for in the annual strategies. Also, the 2002 strategy did not address agency roles in investigating terrorist financing, thus, it did not help resolve potential duplication of efforts and disagreements over which agency should lead investigations. In May 2003, Justice and Homeland Security reached an agreement aimed at resolving these problems. Most financial regulators GAO interviewed said that the strategy had some influence on their anti-money laundering efforts because it provided a forum for enhanced coordination, particularly with law enforcement agencies. However, they said that it has had less influence than other factors. They described several other influences on their efforts, particularly their ongoing oversight responsibilities in ensuring compliance with the Bank Secrecy Act and, more recently, the USA PATRIOT Act, which was passed in October 2001 to fight terrorist financing and increase anti-money laundering efforts. GAO's work reviewing national strategies has identified several critical components needed for development and implementation; however, key components have not been well reflected in the strategy. The first is clearly defined leadership, with the ability to marshal necessary resources. However, the leadership for the strategy has not agreed on the strategy's scope or ensured that target dates for completing initiatives were met. The second is clear priorities, as identified by threat and risk assessments, to help focus resources on the greatest needs. Each strategy contained more priorities than could be realistically achieved and none of the strategies was linked to a threat and risk assessment. The third is that established accountability mechanisms provide a basis for monitoring and assessing program performance. While later strategies contained several initiatives designed to establish performance measures, as of July 2003, none had yet been completed. Officials attributed this to the difficulty in establishing such measures for combating money laundering.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: No action taken by Congress or agency.

    Recommendation: If Congress reauthorizes the requirement for an annual National Money Laundering Strategy (NMLS), the Secretary of the Treasury, working with the Attorney General and the Secretary of Homeland Security, should take appropriate steps to strengthen the leadership structure responsible for strategy development and implementation by establishing a mechanism that would have the ability to marshal resources to ensure that the strategy's vision is achieved, resolve disputes between agencies, and ensure accountability for strategy implementation.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: In November 2003, Senator Charles Grassley introduced a bill (S. 1837, the "Combating Money Laundering and Terrorist Financing Act of 2003") that, among other purposes would extend the requirement for an annual strategy to 2006. The bill was referred to committee; but, as of August 2004, there had been no further action. Thus, as of August 2004, the requirement for the national money laundering and related financial crimes strategy (contained in 31 U.S.C. 5341) had not been reauthorized.

    Recommendation: If Congress reauthorizes the requirement for an annual NMLS, the Secretary of the Treasury, working with the Attorney General and the Secretary of Homeland Security, should take appropriate steps to link the strategy to periodic assessments of threats and risks, which would provide a basis for ensuring that clear priorities are established and focused on the areas of greatest need.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Implemented

    Comments: In September 2003, we reported that none of the four National Money Laundering Strategies issued to date was preceded or guided by an assessment of threats or risks to assist in establishing priorities. We recommended that the strategy be linked to periodic assessments of threats and risks, which would provide a basis for ensuring that clear priorities are established and focused on the areas of greatest needs. On January 11, 2006, the Treasury Department and its partner agencies released the U.S. Money Laundering Threat Assessment. According to the Department of Treasury, the assessment was the first government-wide analysis of money laundering trends and vulnerabilities in the United States. Its purpose is to inform the law enforcement community, policy makers, and regulators in their efforts to combat money laundering strategically.

    Recommendation: If Congress reauthorizes the requirement for an annual NMLS, the Secretary of the Treasury, working with the Attorney General and the Secretary of Homeland Security, should take appropriate steps to establish accountability mechanisms, such as (1) requiring the principal agencies to develop outcome-oriented performance measures that must be linked to the NMLS's goals and objectives and that also must be reflected in the agencies' annual performance plans and (2) providing Congress with periodic reports on the strategy's results.

    Agency Affected: Department of the Treasury

 

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