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Money Laundering: FinCEN's Law Enforcement Support, Regulatory, and International Roles (Testimony, 04/01/98, GAO/T-GGD-98-83).

GAO discussed the various anti-money laundering roles of the Department
of the Treasury's Financial Crimes Enforcement Network (FinCEN).

GAO noted that: (1) FinCEN was established in 1990 to support law
enforcement agencies by analyzing and coordinating financial
intelligence information to combat money laundering; (2) in supporting
law enforcement, FinCEN has issued fewer analytical products in fewer
years; (3) a primary reason FinCEN officials gave for this change is
that FinCEN's staffing levels have remained fairly constant, while its
overall mission has expanded; (4) also, FinCEN has been encouraging and
training other federal, state, and local law enforcement agencies to
access and analyze source data directly either through FinCEN resources
or their own; (5) federal and state officials GAO interviewed indicated
general satisfaction with FinCEN's products and services; (6) most
nonusers told GAO that they rely on in-house capabilities or use
intelligence or analytical support centers other than FinCEN; (7) GAO's
recent report on FinCEN's regulatory role concluded that FinCEN needs to
better communicate its regulatory priorities and time lines,
particularly regarding regulations authorized or required by the Money
Laundering Suppression Act (MLSA) of 1994; (8) FinCEN did not meet any
of the three statutory deadlines imposed by the 1994 act, and final
regulations for several provisions of the act are still pending; (9) the
intended law enforcement benefits of the MLSA amendments cannot be fully
achieved until all of the regulations are implemented; (10) in 1992, GAO
reported that Treasury was taking about 21 months, on average, to
process civil penalty referrals for Bank Security Act violations; (11)
since then, the average has grown to about 3 years, according to FinCEN
data; (12) GAO is working with FinCEN to identify reasons for the
increase in processing time; (13) FinCEN's principal international
efforts include: (a) working with international organizations to promote
the development of effective anti-money laundering controls; and (b)
helping other nations establish financial intelligence units, which
serve as the central focal points for these countries' anti-money
laundering efforts; and (14) FinCEN's Office of International Programs
is the agency's second largest organizational component.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-98-83
     TITLE:  Money Laundering: FinCEN's Law Enforcement Support, 
             Regulatory, and International Roles
      DATE:  04/01/98
   SUBJECT:  Agency missions
             Money laundering
             Banking law
             Regulatory agencies
             Law enforcement
             White collar crime
             International relations
             Federal/state relations
IDENTIFIER:  Treasury Project Gateway
             ONDCP High Intensity Drug Trafficking Area Program
             
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Cover
================================================================ COVER


Before the Subcommittee on General Oversight and Investigations,
Committee on Banking and Financial Services, House of Representatives

For Release on Delivery
Expected at
1:00 p.m.
on Wednesday
April 1, 1998

MONEY LAUNDERING - FINCEN'S LAW
ENFORCEMENT SUPPORT, REGULATORY,
AND INTERNATIONAL ROLES

Statement of Norman J.  Rabkin
Director, Administration of Justice Issues
General Government Division

GAO/T-GGD-98-83

GAO/GGD-98-83T


(182046)


Abbreviations
=============================================================== ABBREV

  BSA - Bank Secrecy Act
  FATA - Financial Action Task Force
  FinCEN - Financial Crimes Enforcement Network
  FIU - Financial Intelligence Units
  HIDTA - High Intensity Drug Trafficking Areas
  Interpol - International Criminal Police Organization
  MLSA - Money Laundering Suppression Act of 1994
  OCRE - Office of Compliance and Regulatory Enforcement

MONEY LAUNDERING:  FINCEN'S LAW
ENFORCEMENT SUPPORT, REGULATORY,
AND INTERNATIONAL ROLES
====================================================== Chapter Summary

The Financial Crimes Enforcement Network (FinCEN) was established in
1990 to support law enforcement agencies by analyzing and
coordinating financial intelligence information to combat money
laundering.  This Subcommittee has asked GAO to review aspects of
FinCEN's law enforcement role; its regulatory role, including the
processing of civil penalties for Bank Secrecy Act (BSA) violations;
and its international role. 

In supporting law enforcement, FinCEN has issued fewer analytical
products in recent years.  A primary reason FinCEN officials gave for
this change is that FinCEN's staffing levels have remained fairly
constant (at about 160 staff), while its overall mission has
expanded.  Also, FinCEN has been encouraging and training other
federal, state, and local law enforcement agencies to access and
analyze source data directly either through FinCEN resources or their
own.  Federal and state officials GAO interviewed indicated general
satisfaction with FinCEN's products and services.  Most nonusers told
GAO that they rely on in-house capabilities or use intelligence or
analytical support centers other than FinCEN. 

GAO's recent report on FinCEN's regulatory role concluded that FinCEN
needs to better communicate its regulatory priorities and time lines,
particularly regarding regulations authorized or required by the
Money Laundering Suppression Act (MLSA) of 1994.  FinCEN did not meet
any of the three statutory deadlines imposed by the 1994 act, and
final regulations for several provisions of the act are still
pending.  The intended law enforcement benefits of the MLSA
amendments cannot be fully achieved until all of the regulations are
implemented. 

In 1992, GAO reported that Treasury was taking about 21 months, on
average, to process civil penalty referrals for BSA violations. 
Since then, the average has grown to about 3 years, according to
FinCEN data.  GAO is working with FinCEN to identify reasons for the
increase in processing time. 

FinCEN's principal international efforts include (1) working with
international organizations to promote the development of effective
anti-money laundering controls; and (2) helping other nations
establish financial intelligence units, which serve as the central
focal points for these countries' anti-money laundering efforts. 
FinCEN's Office of International Programs is the agency's second
largest organizational component. 

This hearing provides an excellent opportunity to focus on FinCEN's
future directions.  Relevant questions include:  (1) Has FinCEN
appropriately defined and given proper priority to its missions?  and
(2) Does FinCEN have adequate resources to carry out its missions? 
The Results Act provides a framework for assessing FinCEN's
operations and its ability to meet congressional expectations. 


MONEY LAUNDERING:  FINCEN'S LAW
ENFORCEMENT SUPPORT, REGULATORY,
AND INTERNATIONAL ROLES
==================================================== Chapter STATEMENT

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the various anti-money
laundering\1 roles of the Treasury Department's Financial Crimes
Enforcement Network (FinCEN).  My statement will outline both the
results of recently completed work\2 and preliminary results of
ongoing work that we have undertaken at the request of this
Subcommittee. 

Treasury describes FinCEN as a network that links the law
enforcement, financial, and regulatory communities to make the
prevention, detection, and prosecution of money laundering more
effective.  Created in 1990, FinCEN's original mission centered on
providing direct support to law enforcement agencies that investigate
money laundering and other financial crimes.  For example, to support
an investigation of drug trafficking, FinCEN accessed various
computerized databases to identify and analyze financial transactions
that might indicate how the proceeds of crime were concealed.  Such
support still remains FinCEN's primary mission even though, over
time, the agency's responsibilities have become more multifaceted. 
For example, in May 1994, Treasury significantly expanded FinCEN's
role, giving it responsibility for

  -- promulgating regulations under the Bank Secrecy Act (BSA),\3

  -- evaluating violations of BSA requirements and recommending
     appropriate civil penalties, and

  -- leading Treasury's efforts to combat money laundering
     domestically and internationally. 

As its responsibilities increased, FinCEN's staffing levels have
remained fairly constant.  For example, FinCEN had 156 staff on board
in fiscal year 1992 and 162 staff on board in fiscal year 1997.\4
FinCEN's fiscal year 1998 budget is about $24 million. 

Last year, the Subcommittee asked us to review certain aspects of
FinCEN's operations, with particular emphasis on (1) the trends in,
and usefulness of, products and services provided by FinCEN to the
law enforcement community; (2) the process for developing and issuing
BSA regulations; (3) FinCEN's efforts in assessing civil penalties
for BSA violations; and (4) the role FinCEN plays in promoting
international awareness of money laundering.  We have completed our
work and issued a report on the second topic--i.e., FinCEN's
regulatory process--and our work on the other three topics is still
ongoing.  For all four topics, I will now briefly summarize the
results of our work to date, beginning with our current work on
FinCEN's law enforcement support role. 


--------------------
\1 Money laundering, in general, is the disguising or concealing of
illicit income to make it appear legitimate.  U.S.  criminal
anti-money laundering law encompasses the money generated from
numerous different crimes--e.g., drug trafficking, murder for hire,
racketeering, tax evasion, prostitution, and embezzlement. 

\2 Money Laundering:  FinCEN Needs to Better Communicate Regulatory
Priorities and Time Lines (GAO/GGD-98-18, Feb.  6, 1998). 

\3 Public Law 91-508, 84 Stat.  1114 (1970). 

\4 See appendix I for more details on FinCEN's organization. 


   FINCEN'S LAW ENFORCEMENT
   SUPPORT ROLE IS EVOLVING
-------------------------------------------------- Chapter STATEMENT:1

Since its inception in 1990, FinCEN has expanded the types of
products and services it provides to the law enforcement community. 
From 1990 to 1992, FinCEN provided primarily two types of support: 
(1) tactical support, which included information and leads in direct
support of law enforcement investigations; and (2) strategic support,
which included analysis and reports on more broadly scoped topics
related to money laundering.  In 1993, FinCEN initiated its
artificial intelligence system, which provides computerized analyses
of financial data to identify individuals and businesses possibly
involved in financial crimes.  In 1994, to leverage its resources in
aiding law enforcement investigative efforts, FinCEN developed two
self-help programs.  One is a "platform" concept whereby designated
employees of other federal agencies can visit FinCEN to access
databases and conduct research to support their respective agency's
investigations.  The other is Project Gateway, which provides
designated state and local law enforcement officials with direct,
on-line access to BSA financial data. 

To determine the trends in the quantities of support provided by
FinCEN from 1990 to 1997, we obtained and analyzed FinCEN workload
documents and relevant information from FinCEN's computerized
databases.\5 Our preliminary analysis of FinCEN data indicate that in
recent years, FinCEN has issued fewer tactical, strategic, and
artificial intelligence products.  A primary reason FinCEN officials
gave for this change is that FinCEN's staffing levels have remained
fairly constant over the years, while its overall mission has
expanded.  Consequently, FinCEN chose to dedicate fewer staff to
generate these products.  Also, FinCEN has encouraged, trained, and
increasingly relied on agencies to use self-help programs to conduct
research and analysis for cases that do not require FinCEN's
expertise. 

Because of reductions in tactical staff, beginning in 1995, FinCEN
decided to stop accepting certain types of requests that do not
directly support law enforcement functions (e.g., requests involving
background checks for employment or security clearance purposes). 
FinCEN also decided to self-initiate fewer products--particularly
regarding strategic support and artificial intelligence
analyses--because fewer staff supported these activities and because
agencies reportedly often did not take any action as a result of the
products provided. 

At the Subcommittee's request, we surveyed representative samples of
federal and state agency officials to obtain their perceptions about
the usefulness of the tactical support they received from FinCEN.\6
Over 90 percent of the federal respondents said that, overall, the
case-specific products they received from FinCEN were useful.  State
responses were similar to the federal responses.  The survey results
indicated that FinCEN's tactical products assisted law enforcement
investigations in various ways, such as providing investigative leads
or listing assets not previously identified. 

Further, FinCEN's records showed that some federal field offices,
states, and High Intensity Drug Trafficking Areas (HIDTA) requested
little or no tactical support from FinCEN during the period we
reviewed, April 1996 to March 1997.  To determine the reasons why
this support was not requested, we surveyed 129 Treasury and Justice
field offices and each of the 22 HIDTAs that had been designated as
of December 1997.  We also interviewed officials from 9 of the 10
states that, according to FinCEN's records, made either 1 or no
requests for FinCEN's tactical support from April 1996 to March 1997. 
Survey results generally did not indicate dissatisfaction with
FinCEN's products.  Rather, survey respondents cited other reasons
for their limited use of FinCEN.  These reasons included reliance on
in-house capabilities and the availability of intelligence or
analytical support centers other than FinCEN.  However, we found that
some federal officials we surveyed were not aware of the various
products and services offered by FinCEN and that FinCEN has neither
developed nor widely disseminated guidelines specifying when law
enforcement officials should request FinCEN's support. 

In response to feedback from the law enforcement community, FinCEN
began taking steps in 1997 to improve the usefulness of its strategic
and artificial intelligence products.  For example, FinCEN created a
new strategic office that plans to help agencies improve their
money-laundering detection and prevention programs.  This office will
also provide case-specific support to the law enforcement and
regulatory communities.  Also, FinCEN has initiated efforts to
"partner" with the law enforcement community to provide strategic and
artificial intelligence products that are more useful to the relevant
agencies. 

To determine the usefulness of FinCEN's self-help programs, we
conducted (1) in-person or telephone interviews with officials from
three of the four agencies that most frequently used platforms in
1997 and (2) telephone interviews with officials from the four states
that made the most Gateway queries in 1997.  According to the federal
and state officials we interviewed, these self-help programs are
useful to agencies in combating money laundering and other financial
crimes.  FinCEN data show that an increasing number of federal and
state agencies are using these self-help mechanisms.  FinCEN data
also show an increase in the number of times FinCEN used Project
Gateway to alert an agency that another agency had an interest in the
same investigative subject. 

Currently, we are in the process of finalizing our work on FinCEN's
law enforcement support role, and we expect to issue the Subcommittee
a report later this spring. 


--------------------
\5 We did not independently verify the workload data provided by
FinCEN. 

\6 We surveyed by mail statistical samples of federal and state
agency officials who requested tactical support from April 1996
through March 1997 and to whom FinCEN had responded before August
1997. 


   FINCEN NEEDS TO BETTER
   COMMUNICATE REGULATORY
   PRIORITIES AND TIME LINES
-------------------------------------------------- Chapter STATEMENT:2

In September 1994, Congress enacted major legislation, the Money
Laundering Suppression Act of 1994 (MLSA).\7 This act authorized or
required the promulgation of significant new BSA regulations.  BSA
regulations form the core element of Treasury's programs to prevent
and detect money laundering.  Several weeks ago, we issued the
Subcommittee a report on the results of our review of FinCEN's
regulatory role.\8 We reported that FinCEN's process for developing
and issuing BSA regulations was generally designed to reflect
standardized procedures set forth in the Administrative Procedure
Act.  In addition, we reported that FinCEN used a partnering approach
to actively seek input from the law enforcement, regulatory, and
financial services communities. 

FinCEN did not meet any of the three statutory deadlines imposed by
the 1994 act.  We believe that Congress' inclusion of statutory
deadlines with respect to the MLSA provisions shows that it intended
that those initiatives be completed in a timely manner.  Further, at
the time of our review, final regulations to implement several
provisions of the 1994 act were still pending.  Specifically, we
reported that FinCEN had not issued final regulations regarding card
clubs,\9 foreign bank drafts, registration of money services
businesses, discretionary exemptions from filing currency transaction
reports, and delegation of civil penalty authority.  Unquestionably,
the intended law enforcement benefits of the MLSA amendments cannot
be fully achieved until all of the regulations are implemented. 

We concluded that FinCEN needs to better communicate its regulatory
priorities and time lines, particularly regarding regulations
authorized or required by the MLSA.  In commenting on a draft of our
report, the Director, FinCEN, said he believed that his agency had
adequately communicated its rulemaking agenda to the appropriate
congressional committees.  From our perspective, however, information
was not uniformly or routinely communicated by FinCEN to all
interested congressional parties.  Because of the ad hoc approach
FinCEN used in communicating the progress it had made in meeting
regulatory initiatives, congressional committees were not in a good
position to assess FinCEN's regulatory program, including the
agency's prioritization of regulatory initiatives, the time lines for
issuing final regulations, and the allocation of resources necessary
for completing these initiatives.  Thus, we continue to believe that
FinCEN needs to systematically and periodically keep the appropriate
congressional committees informed about its plans, priorities, target
dates, and accomplishments concerning these important statutory
directives. 


--------------------
\7 The Money Laundering Suppression Act is Title IV of the Riegle
Community Development and Regulatory Improvement Act of 1994, Public
Law 103-325, 108 Stat.  2160, 2243 (1994). 

\8 Money Laundering:  FinCEN Needs to Better Communicate Regulatory
Priorities and Time Lines (GAO/GGD-98-18, Feb.  6, 1998). 

\9 On January 13, 1998, a final rule for card clubs was published in
the Federal Register.  The new regulation takes effect on August 1,
1998.  Generally, card clubs are establishments that offer facilities
for gaming by customers who bet against one another rather than
against the establishment. 


   CIVIL PENALTY REFERRALS NOT
   PROCESSED IN A TIMELY MANNER
-------------------------------------------------- Chapter STATEMENT:3

When the MLSA is implemented, one of its provisions may lighten
FinCEN's responsibilities by delegating authority to impose civil
penalties for BSA violations to the appropriate federal banking
regulatory agencies.  The purpose of this delegation is to increase
efficiency by allowing these agencies to impose civil penalties
directly, rather than referring violations to FinCEN.  However,
FinCEN's current strategic plan indicates that such delegation may
not occur before the year 2002. 

FinCEN receives civil penalty referrals from various sources,
including the Internal Revenue Service; the federal banking
regulatory agencies (e.g., Federal Deposit Insurance Corporation);
and other entities.  FinCEN's role in addressing these referrals is
to evaluate the circumstances of each referral and take one of three
courses of action:  (1) close the case without contacting the subject
of the referral, (2) issue a letter of warning to the subject
institution or individual, or (3) assess a civil monetary penalty. 
The Director, FinCEN, makes the final decisions. 

Historically, civil penalty cases have not been processed in a timely
manner.  That was the conclusion we reached in our 1992 report, which
analyzed Treasury's case inventories between 1985 and 1991.\10 Our
ongoing work, which is analyzing case inventory data provided by
FinCEN for 1992 through 1997, suggests that the problem is growing
worse.\11

For the period 1985 through 1997, data from Treasury's Office of
Financial Enforcement and/or FinCEN showed a total of 648 closed
civil penalty cases.  Of this total, 430 cases were closed during
1985 through 1991 (a 7-year period); and the other 218 cases were
closed during 1992 through 1997 (a 6-year period). 

For the first period, 1985 through 1991, Treasury's data indicated
that the average processing time to close a case was 1.77 years.  The
range of processing times for the 430 closed cases was from 4 days to
6.44 years.  According to FinCEN's data, the processing times have
increased during the more recent period, 1992 through 1997. 
Specifically, the average processing time to close a case was 3.02
years.  And the range of processing times for the 218 cases closed
during this period was from 8 days to 10.14 years.\12

Also, the Treasury and FinCEN data indicated that during 1985 through
1991, 162 (or 38 percent) of the 430 cases were closed in less than 1
year.  In contrast, during 1992 through 1997, 40 (or 18 percent) of
the 218 cases were closed in less than 1 year.\13

As of December 31, 1997, FinCEN's inventory of open cases totaled
133.  The average age of the cases in this year-end inventory was 2.7
years, and the range of ages was from 16 days to 7.7 years. 

We are working with FinCEN to determine the reasons for the increase
in processing times in recent years.  However, we note that except
for Treasury's delegation of civil penalty authority to FinCEN in May
1994, there has been no change in the policies and procedures for
processing civil penalty referrals since our 1992 report.  Presently,
civil penalty referrals are processed by FinCEN's Office of
Compliance and Regulatory Enforcement (OCRE).  According to FinCEN,
in processing civil penalty referrals, OCRE staff follow the same
policies and procedures that existed before the 1994 delegation. 
Also, the number of staff processing civil penalty referrals has
remained fairly constant, at about six, before and after the 1994
delegation of authority to FinCEN.  FinCEN officials told us that the
staff of Treasury's Office of Financial Enforcement--the unit
previously responsible for processing civil penalty referrals--was
merged into OCRE in 1994.  FinCEN officials noted, however, that none
of OCRE's current six staff work on civil penalty referrals on a
full-time or exclusive basis; rather, the staff are also involved in
other mission functions and responsibilities.  FinCEN officials told
us that subject to budget and policy considerations, the agency plans
to expand the staffing level of OCRE. 


--------------------
\10 Money Laundering:  Treasury Civil Case Processing of Bank Secrecy
Act Violations (GAO/GGD-92-46, Feb.  6, 1992). 

\11 We did not independently verify the case inventory data provided
by FinCEN. 

\12 See table II.2 in appendix II. 

\13 See table II.3 in appendix II. 


   TREASURY DELEGATED AN
   INTERNATIONAL LEADERSHIP ROLE
   TO FINCEN IN 1994
-------------------------------------------------- Chapter STATEMENT:4

According to the Treasury and FinCEN officials we contacted, the
authority for FinCEN's international role derives from a May 1994
memorandum from Treasury's Assistant Secretary for Enforcement,\14

who delegated to FinCEN the functions of Treasury's Office of
Financial Enforcement.  These functions, in addition to regulatory or
BSA-related matters, include responsibilities for combating money
laundering domestically and internationally.  For example, under the
terms of Treasury guidance\15 incorporated by reference in the May
1994 delegation memorandum, FinCEN was to be responsible for
coordinating with foreign governmental agencies--as well as with
other federal, state, and local agencies--on issues and initiatives
regarding money laundering.  Our work to date shows that other
federal agencies--such as Justice Department components and the
Office of National Drug Control Policy--have favorable impressions
about how FinCEN carries out its international role.  For example,
the Justice Department officials we interviewed commented that FinCEN
is providing a valuable service in promoting international awareness
of money laundering and helping to develop counter measures. 

FinCEN's principal international efforts, according to the agency's
current strategic plan, will continue to focus on initiatives under
five topics: 

  -- The Financial Action Task Force (FATF) was created in 1989 and
     is comprised of 26 countries, the European Commission, and the
     Gulf Cooperation Council.  A main purpose of FATF is to promote
     the development of effective anti-money laundering controls. 
     According to FinCEN officials, in functioning as the lead agency
     for coordinating the U.S.  role within FATF, FinCEN heads the
     U.S.  delegation; serves as a member of the FATF Steering Group;
     and coordinates the U.S.  responses to FATF mandates in
     cooperation with the Departments of Treasury, Justice, and State
     and with law enforcement and regulatory agencies.  According to
     its strategic plan, FinCEN has also provided support to
     development of FATF-type organizations in other areas of the
     world (i.e., the Caribbean, Asia, and Africa). 

  -- Financial intelligence units (FIUs) are FinCEN's counterparts
     abroad.  FinCEN has helped establish these units, which serve as
     the central focal points for other countries' anti-money
     laundering efforts.  As of June 1997, FIUs had been established
     in 27 other countries.\16

According to FinCEN's strategic plan, FinCEN hopes to support the
development of 25 new FIUs within the next 5 years.  Some of the
existing units are referred to as the Egmont Group.  This group,
according to FinCEN officials, is able to share information through a
secure web site developed under FinCEN's leadership. 

  -- The International Criminal Police Organization's (Interpol)
     purpose is to facilitate information sharing and coordination
     worldwide in criminal investigative matters.  FinCEN provides
     database support for Interpol requests and, at the request of
     the Secretary General of Interpol, has also been leading a study
     called "Project Eastwash" to examine the factors that affect
     money laundering in 15 countries in Eastern Europe and the
     former Soviet Union. 

  -- FinCEN is also engaged in efforts related to helping countries
     of the Western Hemisphere take steps to combat money laundering. 
     According to FinCEN, these efforts focus on countries that
     participated in the Summit of the Americas held in Miami in
     1994.  FinCEN, together with Treasury and other agencies, is
     offering coordinated training and assistance to these countries. 
     According to FinCEN's strategic plan, this assistance is
     beginning to take effect in that at least 25 of the 34 Summit
     countries have taken positive steps toward passing, amending, or
     drafting anti-money laundering legislation or issuing related
     regulations. 

  -- FinCEN has also participated in the anti-money laundering
     efforts of the United Nations. 

FinCEN's Office of International Programs is the agency's second
largest organizational component.  As such, FinCEN's international
efforts have commanded significant resource and time commitments. 
For example, FinCEN's current strategic plan mentions that "FinCEN
representatives have visited five continents and more than 50
countries in the past three years urging these countries to take the
money laundering threat seriously and adopt effective anti-money
laundering measures." In addition, the strategic plan anticipates
that FinCEN will participate in multiple international conferences
annually through 2002. 

In response to a specific request, FinCEN recently provided the
Subcommittee detailed data about the domestic and international
travel taken by the FinCEN Director and staff that accompanied him
during the period June 10, 1994, through March 2, 1997.  Our analysis
of the data\17 show that during this period, the FinCEN Director and
accompanying staff made 61 total trips--30 to domestic locations, 29
to foreign locations, and 2 with both domestic and foreign
destinations--and that the travel costs for the 61 trips totaled
about $465,000.\18 According to FinCEN, much of this travel was
directly associated with efforts involving three topics--FATF, the
Egmont Group, and Interpol.  Regarding the first topic, FinCEN noted
that FATF is headquartered in Paris and holds four meetings there
annually. 

Let me now close by presenting some observations regarding future
challenges and issues that confront FinCEN in its various roles. 


--------------------
\14 The Assistant Secretary for Enforcement was later named the Under
Secretary for Enforcement. 

\15 Treasury Directive 27-03, January 19, 1993. 

\16 See appendix III for more detailed information on the financial
intelligence units. 

\17 We did not independently verify the travel data received, nor do
we know that the data represent all travel made by FinCEN
international staff during the period covered. 

\18 More detailed travel data are presented in appendix IV. 


   FUTURE CHALLENGES THAT CONFRONT
   FINCEN
-------------------------------------------------- Chapter STATEMENT:5

Since its inception in 1990, FinCEN's original mission has evolved
far beyond a law enforcement support role.  According to its
strategic plan, FinCEN has an "incredible breadth of responsibility"
that encompasses law enforcement support, regulatory development, and
international leadership roles.  On one hand, our work indicates that
FinCEN justifiably can claim accomplishments in all three areas.  On
the other hand, our work also shows that the breadth of these
responsibilities has presented challenges for FinCEN in setting
priorities and allocating its finite resources to meet expectations
or goals. 

This hearing provides an excellent opportunity for congressional
stakeholders to focus a dialogue on FinCEN's various roles and the
related challenges that may continue to confront the agency in the
future.  For example, relevant questions that may need to be
periodically revisited include the following: 

  -- Given FinCEN's size and breadth of responsibilities, are the
     agency's resources appropriate? 

  -- Is it desirable for FinCEN to have multiple roles, i.e., law
     enforcement support, regulatory development, and international
     leadership roles?  Also, how well does FinCEN handle these
     roles? 

  -- If multiple roles are desirable, how should FinCEN prioritize
     its resources among these roles?  For example, should domestic
     responsibilities, including the need to promulgate BSA
     regulations, or international initiatives have a higher
     priority? 

  -- Has the availability of other intelligence or analytical support
     centers affected FinCEN's customer base and the importance of
     the agency's original mission? 

  -- Given this availability, along with FinCEN's evolution to
     encompass other responsibilities, should FinCEN still have a
     tactical support role?  Or, should FinCEN's future
     responsibilities be oriented exclusively to the policy
     development and the coordination activities associated with a
     leadership role in domestic and international anti-money
     laundering efforts? 

Whatever may be the future role or roles of FinCEN, this Subcommittee
will have a continuing interest in evaluating whether FinCEN's
actions are producing the outcomes expected.  In this regard, the
Results Act\19 offers an excellent framework for assessing FinCEN's
operations and its ability to meet congressional expectations.  Along
these lines, FinCEN's current performance measures appear to be
mainly activity based.  That is, the measures reflect mostly what
FinCEN plans to do with its resources (e.g., number of customers
trained) rather than what it plans to achieve with its resources
(e.g., percent reduction in money laundering activities). 

To prepare for results-based performance measurement, FinCEN's
overriding objective over the next few years--as articulated in its
strategic plan--will be the development of a methodology for
measuring the magnitude of money laundering.  FinCEN anticipates that
such quantification will provide a basis for assessing the results of
anti-money laundering efforts and, in turn, for setting priorities
and allocating resources. 


--------------------
\19 Government Performance and Results Act of 1993, Public Law
103-62, 107 Stat.  285 (1993). 


------------------------------------------------ Chapter STATEMENT:5.1

This concludes my prepared statement, Mr.  Chairman.  I would be
pleased to answer any questions you or other members of the
Subcommittee may have. 


FINCEN ORGANIZATIONAL STRUCTURE
AND ON-BOARD STAFFING
=========================================================== Appendix I

   Figure I.1:  FinCEN
   Organization Chart and On-
   Board Staffing (as of Dec. 
   1997)

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


BSA CIVIL PENALTY STATISTICS
========================================================== Appendix II



                                    Table II.1
                     
                     BSA Civil Penalty Annual Workload, 1985
                                   Through 1997

                Case workload
     ------------------------------------
Cal                                                                 Cases closed
end                                                                         as a
ar                                                                    percentage
yea     Beginning   Referrals      Annual       Cases       Ending     of annual
r       inventory    received  workload\a    closed\b  inventory\c      workload
---  ------------  ----------  ----------  ----------  -----------  ------------
198             3         101         104          11           93           11%
 5
198            93         137         230          73          157            32
 6
198           157         111         268          77          191            29
 7
198           191          47         238          59          179            25
 8
198           179          75         254          59          195            23
 9
199           195          65         260         103          157            40
 0
199           157          27         184          48          136            26
 1
199           136          67         203          82          121            40
 2
199           121          27         148          39          109            26
 3
199           109          30         139          39          100            28
 4
199           100          32         132          29          103            22
 5
199           103          25         128          10          118             8
 6
199           118          34         152          19          133            13
 7
================================================================================
Tot                       778                     648
 al
--------------------------------------------------------------------------------
\a Annual workload consists of beginning inventory (as of January
1st) plus referrals received during the year. 

\b For the 648 cases that were closed during calendar years
1985-1997, tables II.2, II.3, and II.4 present processing time
statistics. 

\c Ending inventory (as of December 31st) consists of annual workload
minus cases closed. 

Source:  GAO analysis of FinCEN's civil penalty tracking system data. 



                               Table II.2
                
                 Average and Range of Processing Times
                  for the 648 Civil Penalty Cases That
                  Were Closed During 1985 Through 1997

                                   Cases closed
            ----------------------------------------------------------
                    Average time
                        to close
Calendar                    case
year        Number    (in years)  Range of time to close case
----------  ------  ------------  ------------------------------------
1985            11          0.45  83 days to 260 days
1986            73          0.57  5 days to 1.51 years
1987            77          1.00  9 days to 2.69 years
1988            59          1.49  4 days to 3.69 years
1989            59          2.25  56 days to 4.92 years
1990           103          2.87  38 days to 5.31 years
1991            48          2.55  138 days to 6.44 years
======================================================================
Subtotal       430          1.77  4 days to 6.44 years
 for 1985-
 1991
1992            82          2.72  8 days to 7.26 years
1993            39          2.60  28 days to 7.64 years
1994            39          3.26  108 days to 6.88 years
1995            29          3.16  41 days to 6.81 years
1996            10          3.57  65 days to 8.65 years
1997            19          4.23  1.31 years to 10.14 years
======================================================================
Subtotal       218          3.02  8 days to 10.14 years
 for 1992-
 1997
Overall        648          2.19  4 days to 10.14 years
----------------------------------------------------------------------
Source:  GAO analysis of FinCEN's civil penalty tracking system data. 



                                    Table II.3
                     
                      Processing Times (by Time Period) for
                      the 648 Civil Penalty Cases That Were
                        Closed During Calendar Years 1985
                                   Through 1997

                1985 -1991              1992-1997               1985-1997
          ----------------------  ----------------------  ----------------------
           Number of               Number of               Number of
Processi       cases                   cases                   cases
ng time       closed     Percent      closed     Percent      closed     Percent
--------  ----------  ----------  ----------  ----------  ----------  ----------
Less             162         38%          40         18%         202         31%
 than 1
 year
1 to             122          28          25          11         147          23
 less
 than 2
 years
2 to              60          14          61          28         121          19
 less
 than 3
 years
3 to              40           9          26          12          66          10
 less
 than 4
 years
4 to              37           9          33          15          70          11
 less
 than 5
 years
5 to               8           2          17           8          25           4
 less
 than 6
 years
6 years            1           0          16           7          17           3
 or over
================================================================================
Total            430        100%         218       99%\a         648      101%\a
--------------------------------------------------------------------------------
\a Details do not add to 100 percent due to rounding. 

Source:  GAO analysis of FinCEN's civil penalty tracking system data. 



                                    Table II.4
                     
                     Average and Range of Processing Times by
                      Type of Action Taken for the 648 Civil
                      Penalty Cases That Were Closed During
                         Calendar Years 1985 Through 1997

           1985 -1991                1992-1997                 1985-1997
    ------------------------  ------------------------  ------------------------
            Processing time           Processing time           Processing time
            for cases closed          for cases closed          for cases closed
            ----------------          ----------------          ----------------
Ac
ti
on
ta
ke
n
on
ca
se
s
cl           Average                   Average                   Average
os               (in                       (in                       (in
ed  Number    years)  Range   Number    years)  Range   Number    years)  Range
--  ------  --------  ------  ------  --------  ------  ------  --------  ------
No     147      2.09  12          65      2.73  17         212      2.36  12
co                    days                      days                      days
nt                    to                        to                        to
ac                    5.36                      7.64                      7.64
t                     years                     years                     years
ma
de

Wa     235      1.69  5 days      95      2.94  8 days     330      2.05  5 days
rn                    to                        to                        to
in                    6.44                      10.14                     10.14
g                     years                     years                     years
le
tt
er
se
nt

Pe      48      1.18  4 days      58      3.22  41         106      2.30  4 days
na                    to                        days                      to
lt                    4.58                      to                        8.65
y                     years                     8.65                      years
as                                              years
se
ss
ed
--------------------------------------------------------------------------------
Source:  GAO analysis of FinCEN's civil penalty tracking system data. 


FINANCIAL INTELLIGENCE UNITS AND
THE EGMONT GROUP
========================================================= Appendix III

Financial globalization, coupled with the rapid pace of technology,
has created a borderless marketplace for money launderers.  FinCEN
hopes to counter this challenge by developing and fostering
multilateral and bilateral initiatives aimed at reducing the number
of countries that are not cooperatively engaged in the fight against
money laundering.  A principal effort FinCEN has undertaken in this
regard is to facilitate the establishment of financial intelligence
units (FIUs).  The FIUs serve as the central focal point for
countries' anti-money laundering efforts. 

Under FinCEN's leadership, a core group of FIUs met for the first
time in Brussels in 1995 and created an organization known as the
Egmont Group.  This group serves as an international network to
foster improved communication and interaction among FIUs in such
areas as information sharing and training coordination.  At its
November 1996 meeting, Egmont Group members agreed on the definition
of an FIU to facilitate the establishment of new units by setting a
minimum standard.  According to the Egmont Group, an FIU is defined
as "a central, national agency responsible for receiving (and, as
permitted, requesting), analyzing and disseminating to the competent
authorities, disclosures of financial information:  (i) concerning
suspected proceeds of crime, or (ii) required by national legislation
or regulation, in order to counter money laundering."

The effort to improve communication among FIUs has been furthered by
FinCEN's development of a secure web site.\1 This web site permits
members of the Egmont Group to access information on FIUs, money
laundering trends, financial analysis tools, and technological
developments.  The web site is not accessible to the public;
therefore, members are able to share this information in a protected
environment. 

According to FinCEN, as of June 24, 1997, 28 countries had FIUs
meeting the Egmont definition.  These countries are:  Aruba,
Australia, Austria, Belgium, Chile, Czech Republic, Denmark, France,
Guernsey, Hong Kong, Hungary, Iceland, Ireland, Isle of Man, Italy,
Luxembourg, Mexico, Monaco, Netherlands, New Zealand, Norway, Panama,
Slovakia, Slovenia, Spain, Sweden, the United Kingdom, and the United
States.  FinCEN is committed to the expansion of FIUs around the
world.  For example, one of FinCEN's performance measure goals is to
support the development of 25 new FIUs within the next 5 years.\2


--------------------
\1 According to FinCEN officials, the web site currently connects 14
Egmont Group countries, as follows:  Aruba, Australia, Austria,
Belgium, Czech Republic, France, Monaco, the Netherlands, Slovakia,
Slovenia, Spain, Sweden, United Kingdom, and the United States. 

\2 FIUs in the following countries are being considered for
recognition as meeting the Egmont Group FIU definition:  Cayman
Islands, Cyprus, Croatia, Finland, Greece, Jersey, Netherlands
Antilles, Paraguay, Portugal, Switzerland, Taiwan, and Turkey. 


DOMESTIC AND INTERNATIONAL TRAVEL
OF THE FINCEN DIRECTOR AND HIS
STAFF
========================================================== Appendix IV

In response to a specific request, FinCEN recently provided the
Subcommittee on General Oversight and Investigations, House Committee
on Banking and Financial Services, detailed data about the domestic
and international travel taken by the FinCEN Director and staff that
accompanied him during the period June 10, 1994, through March 2,
1997.  Our analysis of the data\1 show that during this period, the
FinCEN Director and accompanying staff took 61 trips, covering a
total of 215 work days\2 and costing $464,809.  Of the 61 trips, 30
were to domestic destinations, 29 were to international destinations,
and 2 were to both a domestic and an international destination.  The
number of people on the 30 trips to domestic destinations ranged from
only 1 person (the FinCEN Director) to as many as 60 FinCEN staff. 
The travel costs for the domestic trips totaled $189,000.\3 The
number of people on the 29 trips to international destinations ranged
from 1 person (the FinCEN Director) to as many as 11 FinCEN staff. 
The travel costs for the international travel totaled $275,809. 
Tables IV.1, IV.2, and IV.3 below provide further details. 



                               Table IV.1
                
                 Data on Number of Trips, Travel Days,
                 Work Days, and Costs Spent on Domestic
                  and International Trips, by Purpose
                 Category, Taken by the FinCEN Director
                and Staff Who Accompanied Him During the
                 Period June 10, 1994, Through March 2,
                                  1997

                                             Total    Travel
                                  Number    travel      work
Purpose of travel               of trips      days    days\a   Costs\b
------------------------------  --------  --------  --------  --------
Financial Action Task Force/          16       117        79  $158,408
 Financial Intelligence Unit
 coordination
Asia Pacific Group on                  1         9         5    22,964
 Money Laundering
Caribbean Financial Action             3        12        10    14,977
 Task Force
International Criminal Police          7        55        42    92,290
 Organization
Management and interagency            12        43        37    85,705
 coordination
Regulatory meetings and               19        42        37    71,233
 conferences
Summit of the Americas                 3         8         5    19,232
======================================================================
Totals                                61       286       215  $464,809
----------------------------------------------------------------------
\a We identified work days by excluding weekend days and federal
holidays, although FinCEN staff may have worked on some of these
days. 

\b All costs have been rounded to the nearest whole dollar. 

Source:  Summary of data presented in tables IV.2 and IV.3. 



                               Table IV.2
                
                Domestic and International Travel Days,
                Work Days, and Costs Spent on Travel for
                   the FinCEN Director and Staff Who
                 Accompanied Him During the Period June
                    10, 1994, Through March 2, 1997

                                             Total     Total
                                  Number    travel      work
Purpose/type of travel          of trips      days    days\a   Costs\b
------------------------------  --------  --------  --------  --------
Financial Action Task Force/Financial Intelligence Unit coordination
----------------------------------------------------------------------
Domestic                               1         2         1    $1,125
International                         15       115        78   157,283
======================================================================
Total:                                16       117        79  $158,408

Asia Pacific Group on Money Laundering
----------------------------------------------------------------------
Domestic                               0         0         0         0
International                          1         9         5    22,964
======================================================================
Total:                                 1         9         5   $22,964

Caribbean Financial Action Task Force
----------------------------------------------------------------------
Domestic                               0         0         0         0
International                          3        12        10    14,977
======================================================================
Total:                                 3        12        10   $14,977

International Criminal Police Organization (Interpol)
----------------------------------------------------------------------
Domestic                               2        14        11    35,281
International                          5        41        31    57,008
======================================================================
Total:                                 7        55        42  $92,290\
                                                                     c

Management and interagency coordination
----------------------------------------------------------------------
Domestic                            10\d        30        27    82,293
International                          2        13        10     3,412
======================================================================
Total:                                12        43        37   $85,705

Regulatory meetings and conferences
----------------------------------------------------------------------
Domestic                              17        30        29    68,398
International                          2        12         8     2,835
======================================================================
Total:                                19        42        37   $71,233

Summit of the Americas
----------------------------------------------------------------------
Domestic                             2\e         3         2     1,903
International                          1         5         3    17,329
======================================================================
Total:                                 3         8         5   $19,232

Totals for all trips
----------------------------------------------------------------------
Domestic                            32\f        79        70   189,000
International                         29       207       145   275,809
======================================================================
Total:                                61       286       215  $464,809
----------------------------------------------------------------------
\a We identified work days by excluding weekend days and federal
holidays, although FinCEN staff may have worked on some of these
days. 

\b All costs have been rounded to the nearest whole dollar. 

\c The section total does not equal the sum of the two subtotals due
to rounding. 

\d One trip in this category had a destination in Florida, as well as
Puerto Rico.  Because Puerto Rico is a commonwealth of the United
States and because costs could not be broken out separately, the
trip, all travel days, and costs for this trip are included in the
domestic travel totals. 

\e One trip in this category included both a domestic and an
international destination.  Because costs were not broken out by
destination, we included the trip and total travel costs under the
domestic travel totals.  Further, because the trip lasted 2 days and
2 destinations were listed, 1 day was assigned to the domestic
destination and 1 day to the international destination in our totals. 

\f The domestic trip totals include 2 trips in which there was both a
domestic and an international destination.  Thus, there were 29 trips
with domestic destinations and 2 trips with both a domestic and an
international destination. 

Source:  Summary of data presented in table IV.3. 



                                    Table IV.3
                     
                       Data on the Dates, Destinations, and
                        Purposes of Travel for the FinCEN
                      Director and Staff Who Accompanied Him
                     During the Period June 10, 1994, Through
                                  March 2, 1997

                           Destinations
               -------------------------------------
Dates of                                                 Number of         Total
travel         International      Domestic                   staff       costs\a
-------------  -----------------  ------------------  ------------  ============
Financial Action Task Force/Financial Intelligence Unit coordination
--------------------------------------------------------------------------------
6/10/94 -6/    Paris & Lyon,                                     1        $2,758
19/94          France

9/10/94 -9/    Paris, France;                                    1        $3,535
15/94          and Frankfurt,
               Germany

11/14/94 -     Paris, France                                     2        $4,584
11/18/94

1/7/95 -1/     Paris & Lyon,                                     4        $8,333
13/95          France

6/3/95 -6/8/   The Hague, the                                    4        $7,157
95             Netherlands

6/8/95 -6/     Brussels, Belgium                                11       $24,811
11/95

9/9/95 -9/     Cambridge &                                       8        $9,488
22/95          Swindon, England;
               and Paris, France

11/25/95 -     Paris, France                                     4       $12,084
11/29/95

1/25/96 -2/    Paris, France                                     8       $18,359
3/96

5/3/96 -5/     Sydney &                                          1        $8,621
12/96          Canberra,
               Australia

5/28/96 -6/    Paris, France;                                    1        $2,238
1/96           and Amsterdam,
               the Netherlands

9/7/96 -9/     Cambridge,                                        5       $14,404
19/96          England;
               Guernsey; and
               Paris, France

10/29/96 -     Moscow, Russia                                    1        $3,616
11/2/96

11/17/96 -     Paris, France;                                   11       $25,842
11/24/96       and Rome, Italy

12/6/96 -12/                      New York, NY                   4        $1,125
7/96

2/1/97 -2/8/   Paris & Lyon,                                     6       $11,455
97             France


Asia Pacific Group on Money Laundering
--------------------------------------------------------------------------------
2/22/97 -3/    Bangkok,                                          4       $22,964
2/97           Thailand; and
               Manila,the
               Philippines


Caribbean Financial Action Task Force
--------------------------------------------------------------------------------
5/23/95 -5/    Port of Spain,                                    4        $4,854
25/95          Trinidad

10/8/96 -10/   Costa Rica                                        4        $7,876
11/96

1/8/97 -1/     Cayman Islands                                    2        $2,246
12/97


International Criminal Police Organization (Interpol)
--------------------------------------------------------------------------------
9/26/94 -10/   Rome, Italy                                       2        $8,680
6/94

10/23/94 -     Lyon, France                                      3        $5,079
10/26/94

4/23/95 -4/                       Phoenix, AZ                   13       $11,419
28/95

5/8/95 -5/     The Hague, the                                    6       $11,248
18/95          Netherlands;
               Ljubljana,
               Slovenia; Lyon,
               France; and
               Hinckley, England

10/2/95 -10/   Beijing, China                                    3       $22,258
10/95

4/17/96 -4/                       San Francisco, CA             14       $23,862
24/96

10/23/96 -     Turkey                                            2        $9,743
10/28/96


Management and interagency coordination
--------------------------------------------------------------------------------
6/27/94 -7/    Berlin,Germany;                                   1        $2,441
6/94           Bratislava,
               Slovakia; Prague,
               Czech Republic;
               Budapest,
               Hungary; Krakow,
               Auschwitz, &
               Warsaw, Poland;
               Vilnius,
               Lithuania; Kiev,
               Ukraine; and
               Moscow, Russia

7/28/94 -7/                       Annapolis, MD                 45        $7,104
29/94

8/8/94 -8/     Mexico City,                                      1          $971
10/94          Mexico

10/15/94 -                        Albuquerque, NM                8        $9,701
10/20/94

1/19/95 -1/                       Charlottesville,              43        $8,779
20/95                             VA

7/12/95 -7/                       Shepherdstown, WV             60       $12,883
14/95

10/16/95 -                        Miami, FL                     12       $13,441
10/18/95

10/25/95 -                        New Hampshire                  5        $3,523
10/26/95

2/15/96 -2/                       Annapolis, MD                 56        $8,606
16/96

2/21/96 -2/    Puerto Rico\b      Miami, FL                      4        $3,730
23/96

8/20/96 -8/                       Sacramento, CA                 2        $1,796
24/96

1/16/97 -1/                       Annapolis, MD                 60       $12,730
17/97


Regulatory meetings and conferences
--------------------------------------------------------------------------------
4/2/95 -4/4/                      New Orleans, LA               12       $10,269
95

4/6/95 -4/7/                      Portland, ME                  10        $4,990
95

4/18/95 -4/                       Atlanta, GA                   11        $6,962
18/95

6/20/95 -6/                       Portland, ME                   3          $896
21/95

7/27/95 -7/                       Newark, NJ; and                5        $1,726
28/95                             New York, NY

9/7/95 -9/7/                      Detroit, MI                    4        $1,766
95

9/26/95 -9/                       New York, NY                  21       $10,147
27/95

12/12/95 -                        Phoenix, AZ                   16       $15,939
12/14/95

2/8/96 -2/8/                      New York, NY                   5          $909
96

2/26/96 -2/                       Las Vegas, NV                  3        $1,274
27/96

3/5/96 -3/7/                      San Francisco, CA              3        $3,485
96

3/18/96 -3/                       Orlando, FL                    2        $1,164
18/96

3/28/96 -3/                       New York, NY; and              4        $1,826
29/96                             Boston, MA

4/4/96 -4/4/                      Orlando, FL                    7        $4,567
96

5/1/96 -5/2/   Windsor, Canada                                   2        $1,321
96

6/4/96 -6/4/                      Detroit, MI                    2          $989
96

6/29/96 -7/    London, England                                   1        $1,514
9/96

8/7/96 -8/7/                      New York, NY                   2          $683
96

10/15/96 -                        Athens, OH                     1          $807
10/16/96


Summit of the Americas
--------------------------------------------------------------------------------
11/30/95 -     Buenos Aires,                                     6       $17,329
12/3/95        Argentina

5/14/96 -5/    Jamaica\c          Ft. Lauderdale, FL             2        $1,313
15/96

5/17/96 -5/                       New Orleans, LA                1          $590
18/96
--------------------------------------------------------------------------------
\a All costs have been rounded to the nearest whole dollar. 

\b Because costs could not be broken out separately, all travel costs
for this trip are included in the domestic totals. 

\c Because costs could not be broken out separately, all travel costs
for this trip are included in the domestic totals. 

Source:  Data provided by FinCEN to the Subcommittee on General
Oversight & Investigations, House Committee on Banking & Financial
Services. 

--------------------
\1 We did not independently verify the travel data received, nor do
we know that the data represent all travel made by FinCEN
international staff during the period covered. 

\2 The 215 travel work days represent 31.6 percent of the total work
days during the period June 10, 1994, through March 2, 1997. 

\3 Because costs could not be broken out by destination, the costs
for the two trips that had both domestic and international
destinations were included in the domestic travel totals. 


*** End of document. ***