Moving Illegal Proceeds: Challenges Exist in the Federal Government's Effort to Stem Cross-Border Currency Smuggling

We found that U.S. Customs and Border Protection (CBP) was in the early phases of its Outbound Enforcement Program and that CBP had limited data on the expected costs and benefits of the program. As a result we recommended that CBP collect cost and benefit data that would enable a cost/benefit analysis of the Outbound Enforcement Program to better inform decisions on where scarce resources should be applied. On January 2, 2013, CBP reported to GAO that it has conducted studies of Southwest Border outbound crossings and, using data from those studies, developed a cost-benefit analysis report. As this cost and benefit data will enable CBP to better inform decisions on where scarce resources should be applied, we are closing the recommendation as implemented.

We found that U.S. Customs and Border Protection (CBP) had not yet developed policies and procedures to help ensure officer safety in conducting outbound operations. As a result, we recommended that CBP direct and ensure that managers at land ports of entry develop policies and procedures that address officer safety. In August 2012, CBP issued a management directive on outbound enforcement operations. As such, we are closing this recommendation as implemented.

We found that U.S. Customs and Border Protection (CBP) recognized that obtaining better data on the threat of bulk cash smuggling and other illegal activities is one key to understanding the effectiveness of its Outbound Enforcement Program. However, CBP had yet to develop a performance measure that showed the degree to which its efforts were stemming the flow of bulk cash leaving the country. Therefore, we recommended that CBP develop a performance measure that informs CBP management, Congress, and other stakeholders about the extent to which the Outbound Enforcement Program is effectively stemming the flow of bulk cash, weapons, and other goods that stem from criminal activities. In June 2011, CBP reported that it had developed 3 performance measures to measure the extent to which the Outbound Enforcement Program is stemming the flow of bulk cash, weapons, and other goods that stem from criminal activities. The 3 measures were: (1) The amount of currency seized on exit from the United States, (2) The number of weapons seized on exit from the United States, and (3) The number of persons arrested for violating U.S. laws and regulations while attempting to exit the United States. These performance measures are consistent with our recommendation.

The Credit CARD Act of 2009 requires that the Financial Crimes Enforcement Network (FinCEN) develop regulations related to the use of stored value cards for criminal purposes. We found that FinCEN was in the process of developing and issuing regulations and had developed initial plans for issuing the final rules for stored value. However, its plans were missing key elements consistent with best practices for project management. Therefore, we recommended FinCEN update its plan by describing, at a minimum, target dates for implementing all of the requirements under the Credit CARD Act to include FinCEN's overall strategy and risk mitigation plans and target dates for issuing notices of proposed rulemaking and final rules. In February 2011, in response to our recommendation, FinCEN provided GAO with a management plan that described, among other things, FinCEN's overall strategy for implementing the anti-money laundering requirements under the Credit CARD Act, target dates for issuing proposed and final rules, and potential risks and plans to mitigate these risks. This management plan is consistent with our recommendation.

The Credit CARD Act of 2009 requires that the Financial Crimes Enforcement Network (FinCEN) develop regulations related to the use of stored value cards for criminal purposes. In October 2010, we found that FinCEN was developing regulations, as required by the Act, to address gaps in regulations related to the use of stored value for criminal purposes. However, FinCEN had not developed a management plan that includes, among other things, target dates for completing the regulations. We concluded that developing such a plan could help FinCEN better manage its rulemaking effort. In particular, we found that when it issues the regulations, law enforcement agencies and FinCEN may be challenged in ensuring compliance by travelers and the money services business (MSB) industry. For example, FinCEN will be responsible for numerous tasks including issuing guidance for Internal Revenue Service (IRS) examiners responsible for ensuring MSB compliance with the new regulations. Therefore, we recommended that FinCEN revise its guidance manual to include specific examination policies and procedures for IRS examiners to follow at a MSB that issues, sells, and/or redeems stored value. In December 2010, FinCEN reported that it planned to update the MSB examination manual once draft regulations were finalized. As of July 2012, FinCEN stated that it had formed a working group consisting of the IRS, the Conference of State Bank Supervisors, the Money Transmitter Regulators Association, and select state representatives, to begin developing a workplan for drafting the prepaid access sections of the revised manual. Development of updates to the MSB Examination Manual to incorporate FinCEN's revised prepaid access regulation has proven to be more complicated than originally anticipated given some of the unique aspects of the prepaid access industry. In the meantime, FinCEN was engaging with regulators who are utilizing existing examination guidance to conduct initial examinations of providers of prepaid access, and, according to FinCEN, the experience gained through these initial examinations would inform the development of appropriate revisions to the Manual, including in the area of transaction testing. In June 2013, FinCEN reported to us that detailed procedures for IRS personnel would be added to the Internal Revenue Manual (IRM) by September 2013, and that higher level procedures would be added to the MSB Examination Manual at a later date. In October 2014, the IRS told us it planned to update the relevant IRM section by late 2015, along with several other sections at the same time, to avoid reissuing the IRM multiple times in the interim. To fully address this recommendation, IRS needed to complete the planned revisions to the IRM. In July 2015, IRS told us that the update to the IRM was still planned for late 2015. In March 2016, IRS told us that the IRM was still being updated and the agency expected the revised manual to be published by June 2016. In June 2016, IRS told us that sections of the manual specific to this recommendation were still under review and that the new projected publishing date was December 31, 2016. In April 2017, IRS issued interim guidance conveying the new IRM section on prepaid access, which contains an overview of and procedures for addressing prepaid access issues encountered in Bank Secrecy Act examination cases.