Money Laudering

The Treasury Department needs to improve its enforcement of laws to detect and deter criminal financial activities, the GAO said in a report to Congress. Thirty-six years after passage of the Bank Secrecy Act (BSA), Treasury’s Financial Crimes Enforcement Network (FinCEN) and the IRS still face challenges in fulfilling the law’s mandates, the GAO said. The IRS has not identified and examined all nonbank financial institutions (NBFIs) such as check-cashing and money-transmitting businesses, as required under BSA, the GAO said. And FinCEN was unable to complete a planned data system despite spending $14 million on the project—$6 million over its original budget, the GAO said. FinCEN also lacked a comprehensive plan for taking over BSA data management from the IRS, according to the report.

FinCEN regulations defining NBFIs are confusing, making it harder for the IRS to identify them, the GAO said. But the IRS has not developed a statistically valid, risk-based method of selecting NBFIs for examination from among those it has identified, the GAO said. The report recommends the agencies develop a strategy to clarify rules, strengthen data management and better coordinate their activities.

The BSA, also known as the Currency and Foreign Transactions Reporting Act, was enacted to prevent banks and other financial service providers from being unwitting intermediaries in the concealment, transfer or deposit of money deriving from criminal activity.

FinCEN and the SEC announced an agreement for the routine exchange of examination and enforcement information aimed at identifying, deterring and interdicting terrorist financing and money laundering. The agreement is intended to improve monitoring of SEC-regulated firms’ compliance with the BSA and identify institutions with BSA violations or deficiencies.

The pact calls for the SEC to provide FinCEN quarterly with detailed information about anti-money-laundering examination and enforcement activities. The commission and FinCEN will meet regularly to continue efforts to improve anti-money-laundering and anti-terrorist-financing compliance.

FinCEN and federal banking agencies revised the format for the Suspicious Activity Report by Depository Institutions (SAR-DI) to support a new joint filing initiative, which will reduce the number of duplicate SARs filed for a single suspicious transaction. Filers may begin using the new format June 30, 2007; they will be required to file in the new format by Dec. 31, 2007.

Financial institutions can review and download the PC fill-in version from FinCEN’s Web site at under “What’s New.”




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