Bank Secrecy Act: Federal Agencies Should Take Action to Further Improve Coordination and Information-Sharing Efforts
GAO-09-227
Published: Feb 12, 2009. Publicly Released: Mar 16, 2009.
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Highlights
The legislative framework for combating money laundering began with the Bank Secrecy Act (BSA) in 1970 and most recently expanded in 2001with the USA PATRIOT Act. The Financial Crimes Enforcement Network (FinCEN) administers BSA and relies on multiple federal and state agencies to ensure financial institution compliance. GAO was asked to (1) describe how BSA compliance and enforcement responsibilities are distributed, (2) describe how agencies other than FinCEN are implementing those responsibilities and evaluate their coordination efforts, and (3) evaluate how FinCEN is implementing its BSA responsibilities. Among other things, GAO reviewed legislation, past GAO and Treasury reports, and agreements and guidance from all relevant agencies; and interviewed agency, association, and financial institution officials.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | To reduce the potential for duplicative efforts and better leverage limited examination resources, the Commissioner of IRS should work with state agencies to develop a process by which to coordinate MSB examination schedules between IRS and state agencies that conduct BSA examinations of MSBs. |
In May 2011, IRS Small Business/Self Employed (SB/SE) had finalized a process and guidance for conducting joint Bank Secrecy Act (BSA) and state examinations of money services businesses MSBs. The guidance explains how IRS and states will leverage resources to examine MSBs with the goals of providing a consistent approach and preventing duplicative efforts. To help support this effort, IRS worked with state regulators to develop a standard format for pre-examination document requests and for documenting exam findings and recommendations. These efforts will help to maximize the use of IRS and state resources and prevent duplicate efforts.
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| Commodity Futures Trading Commission | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to GAO's recommendation, the Federal Financial Institutions Examination Council (FFIEC) agencies (Federal Reserve, FDIC, OCC, OTS, and NCUA) used the existing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) working group to invite the IRS, the SEC, and CFTC to attend regularly scheduled meetings once a quarter.The first meeting occurred in April 2009.
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| United States Securities and Exchange Commission | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to GAO's recommendation, the Federal Financial Institutions Examination Council (FFIEC) agencies (Federal Reserve, FDIC, OCC, OTS, and NCUA) used the existing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) working group to invite the IRS, the SEC, and CFTC to attend regularly scheduled meetings once a quarter.The first meeting occurred in April 2009.
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| Office of Thrift Supervision | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to our recommendation, SEC has been included in Federal Financial Institutions Examination Council (FFIEC) working group meetings with the federal banking regulators and the Financial Crimes Enforcement Network (FinCEN). SEC accepted an invitation to participate in these meetings once per quarter and attended its first meeting in April 2009.
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| Federal Deposit Insurance Corporation | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to GAO's recommendation, the Federal Financial Institutions Examination Council (FFIEC) agencies (Federal Reserve, FDIC, OCC, OTS, and NCUA) used the existing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) working group to invite the IRS, the SEC, and CFTC to attend regularly scheduled meetings once a quarter.The first meeting occurred in April 2009.
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| Federal Reserve System | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to GAO's recommendation, the Federal Financial Institutions Examination Council (FFIEC) agencies (Federal Reserve, FDIC, OCC, OTS, and NCUA) used the existing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) working group to invite the IRS, the SEC, and CFTC to attend regularly scheduled meetings once a quarter.The first meeting occurred in April 2009.
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| Office of the Comptroller of the Currency | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to GAO's recommendation, the Federal Financial Institutions Examination Council (FFIEC) agencies (Federal Reserve, FDIC, OCC, OTS, and NCUA) used the existing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) working group to invite the IRS, the SEC, and CFTC to attend regularly scheduled meetings once a quarter.The first meeting occurred in April 2009.
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| Financial Crimes Enforcement Network | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
The Federal Financial Institutions Examination Council (FFIEC) Bank Secrecy Act/Anti-Money Laundering (BSA/AML) working group meetings(consisting of FinCEN, the Federal Reserve, FDIC, OCC, OTS, NCUA, and the Conference of State Bank Supervisors) provides an opportunity to use The FFIEC extended invitations the IRS, the SEC, and CFTC to participate in regularly scheduled meetings once a quarter. The first meeting occurred in April 2009.
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| National Credit Union Administration | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to our recommendation, CFTC has been included in Federal Financial Institutions Examination Council (FFIEC) working group meetings with the federal banking regulators and the Financial Crimes Enforcement Network (FinCEN). CFTC has been invited to participate in these meetings once per quarter, with the first such meeting occurring in April 2009. CFTC also participates in a number of other interagency groups including the Data Management Council and the Bank Fraud Working Group, which CFTC believes allows for significant information sharing including information regarding examination procedures.
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| Internal Revenue Service | Further, to build on improvements made in examination processes vital to ensuring BSA compliance, the heads of FinCEN, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), SEC, CFTC, and IRS should direct the appropriate staff to consider developing or using an existing process to share and discuss information on BSA/AML examination procedures and general trends regularly in a nonpublic setting. |
In response to GAO's recommendation, the Federal Financial Institutions Examination Council (FFIEC) agencies (Federal Reserve, FDIC, OCC, OTS, and NCUA) used the existing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) working group to invite the IRS, the SEC, and CFTC to attend regularly scheduled meetings once a quarter.The first meeting occurred in April 2009.
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| United States Securities and Exchange Commission | The heads of SEC and CFTC should consider including the SROs that conduct BSA examinations. |
SEC made a formal request to the AML Working Group of the Federal Financial Institutions Examination Council (FFIEC) to include representatives from the Financial Industry Regulatory Authority (FINRA) (the largest securities firm self-regulatory organization) to in the quarterly meetings SEC is now invited to with the banking regulators. In addition, staff from the SEC and FINRA meet on a quarterly basis to discuss BSA and anti-money laundering issues, and at the invitation of SEC staff, representatives from OCC, and the Federal Reserve recently attended a quarterly meeting. SEC and FINRA plan to continue to invite representatives from each of the federal financial regulators to these quarterly meetings on a regular basis.
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| Commodity Futures Trading Commission | The heads of SEC and CFTC should consider including the SROs that conduct BSA examinations. |
CFTC does not believe including SROs in interagency meetings is advisable because (1) concerns have been raised about whether meetings fall under the Federal Advisory Act and therefore may be subject to access restrictions on SROs, and (2) the CFTC is not aware of any mechanism under the BSA to enforce SAR confidentiality restrictions upon SROs, and discussions of specific SAR details have occurred in past interagency meetings.
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| Financial Crimes Enforcement Network | To improve its efforts to administer BSA, the Director of FinCEN should expeditiously work with the Commissioner of IRS to establish a mutually agreed-upon process that facilitates communication on IRS referrals and ensures timely feedback to IRS-examined institutions |
FinCEN and IRS will meet to establish a mutually agreed-upon process for the timely delivery and resolution of matters of noncompliance. As agreed at an April 2009, meeting, FinCEN and IRS plan to establish a working group to create procedures, including proposed time frames for making appropriate enforcement decisions. In May 2010, FinCEN and IRS finalized a referral process plan which outlines the steps each agency will take to coordinate and process AML deficiency referrals that IRS have sent to FinCEN based on findings from IRS BSA examinations. The plan includes instructions for FinCEN and IRS staff on circumstances and timing for contacting staff from the other agency to discuss referrals and make each other aware of any actions, as well as establishes time frames for making decisions regarding referrals and providing feedback to financial institutions. In addition, the plan also creates mechanisms for FinCEN and IRS staff to communicate on a regular basis to discuss the status of IRS referrals.
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| Financial Crimes Enforcement Network | To improve its efforts to administer BSA, the Director of FinCEN should expeditiously finalize data-access MOUs with SROs conducting BSA examinations, and states agencies conducting anti-money laundering (AML) examinations that currently have no direct access to BSA data. |
Since the issuance of our report in February 2009, FinCEN has signed eight new data access MOUs with state regulatory agencies and also signed 12 expanded data access MOUs with state agencies that previously had more limited access agreements. In 2010, FinCEN began a multi-year information technology modernization program that included the development of FinCEN Query, a new system for authorized users, including regulatory agencies, to query BSA data. FinCEN Query became available in fall 2012. FinCEN is currently in the process of signing MOUs with five additional state regulatory agencies that requested access. After these MOUs are completed, FinCEN estimated that it will have data access agreements with 80 percent of state agencies that conduct BSA examinations. FinCEN stated that it will then contact any state regulatory agencies that have not requested access to BSA data to ascertain their interest. As of early September 2013, FinCEN was in the process of completing a data access MOU with securities SRO, FINRA. Prior to issuance of our report, FinCEN signed a data access MOU with CFTC. FinCEN will not pursue a data access MOU with the commodities SRO - National Futures Association based on CFTC's recommendation.
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