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Money Laundering: FinCEN Needs to Better Manage Bank Secrecy Act Civil Penalty Cases

 (Letter Report, 06/15/98, GAO/GGD-98-108).

Pursuant to a congressional request, GAO reviewed the Department of the
Treasury's Financial Crimes Enforcement Network's (FinCEN) efforts to
process civil penalty referrals for violations of the Bank Secrecy Act
(BSA), focusing on: (1) whether Treasury has changed its policies and
procedures for processing civil penalty cases since 1992; (2) Treasury's
performance in processing civil penalty cases during calender years 1992
through 1997; and (3) the status of FinCEN's efforts to develop and
issue a final regulation delegating the authority to assess civil
penalties for BSA violations to the federal banking regulatory agencies,
as required by the Money Laundering Suppression Act.

GAO noted that: (1) except for the May 1994 delegation to FinCEN,
Treasury's policies and procedures for processing civil penalty cases
generally have not changed since 1992; (2) also, the number of staff
processing civil penalty cases has remained fairly constant, at about
six, before and after the May 1994 delegation to FinCEN; (3) the problem
of lengthy processing times for civil penalty cases is growing worse;
(4) for example, according to FinCEN's data for cases closed in calendar
years 1985 through 1991, the average processing time to close a case was
1.77 years, and the most lengthy time was 6.44 years; (5) in comparison,
FinCEN's data for calendar years 1992 through 1997 indicate an average
processing time was 3.02 years, and the most lengthy time was 10.14
years; (6) for cases closed in the 2 most recent years, 1996 and 1997,
the average processing times were 3.57 years and 4.23 years,
respectively; (7) lengthy processing can negatively affect the public's
perception of the government's efforts to enforce the BSA, thereby
lessening the credibility and deterrent effects of the act's provisions;
(8) another result is that the 6-year statute of limitations for BSA
civil penalties could expire; (9) according to FinCEN's data, for the
period January 1, 1992, through March 27, 1998, a total of 16 cases had
one or more BSA violations that could not be pursued because the statute
of limitations had expired; (10) insufficient management attention is a
significant cause of the lengthy processing times for civil penalty
cases; (11) FinCEN officials told GAO, for example, that the agency has
never set timeliness goals for processing civil penalty cases; (12)
FinCEN has issued neither a notice of proposed rulemaking nor a final
regulation to delegate civil penalty assessment authority to the banking
regulatory agencies; (13) FinCEN officials told GAO they have been
working with the federal banking regulatory agencies for some time to
devise an appropriate plan for delegating civil penalty assessment
authority, but some issues still required resolution; (14) FinCEN's
current strategic plan indicates that such delegation may not occur
before 2002; and (15) for several more years, FinCEN could still be
responsible for processing civil penalty referrals.

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

 REPORTNUM:  GGD-98-108
     TITLE:  Money Laundering: FinCEN Needs to Better Manage Bank 
             Secrecy Act Civil Penalty Cases
      DATE:  06/15/98
   SUBJECT:  Money laundering
             White collar crime
             Statutory limitation
             Banking law
             Banking regulation
             Fines (penalties)
             Law enforcement

             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on General Oversight and
Investigations, Committee on Banking and Financial Services, House of
Representatives

June 1998

MONEY LAUNDERING - FINCEN NEEDS TO
BETTER MANAGE BANK SECRECY ACT
CIVIL PENALTY CASES

GAO/GGD-98-108

BSA Civil Penalty Case Processing

(182053)


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

  BSA - Bank Secrecy Act
  FDIC - Federal Deposit Insurance Corporation
  FinCEN - Financial Crimes Enforcement Network
  FRS - Board of Governors of the Federal Reserve System
  IRS - Internal Revenue Service
  MLSA - Money Laundering Suppression Act of 1994
  NCUA - National Credit Union Administration
  OCC - Office of the Comptroller of the Currency
  OCRE - Office of Compliance and Regulatory Enforcement
  OTS - Office of Thrift Supervision
  SEC - Securities and Exchange Commission

Letter
=============================================================== LETTER


B-279254

June 15, 1998

The Honorable Spencer Bachus
Chairman
Subcommittee on General Oversight
 and Investigations
Committee on Banking and Financial Services
House of Representatives

Dear Mr.  Chairman: 

This report responds to your request regarding efforts of the
Department of the Treasury's Financial Crimes Enforcement Network
(FinCEN) to process civil penalty referrals for violations of the
Bank Secrecy Act (BSA).  At a recent hearing held by this
Subcommittee, we testified on FinCEN's various roles, including the
processing of civil penalty cases.\1 This report provides a more
detailed analysis of BSA civil penalty cases and FinCEN's related
efforts. 

FinCEN receives civil penalty referrals for BSA violations from
various sources, including the Federal Deposit Insurance Corporation
(FDIC), the Office of the Comptroller of the Currency (OCC), other
federal banking regulatory agencies, and the Internal Revenue
Service's (IRS) Examination Division.  In February 1992, after
analyzing statistics for calendar years 1985 through 1991 (as of
October 24, 1991), we reported that civil penalty cases had not been
processed in a timely manner by the then-responsible Treasury
component, the Office of Financial Enforcement.\2 In May 1994,
Treasury's Assistant Secretary for Enforcement transferred this
responsibility within the Department from the Office of Financial
Enforcement to FinCEN.  In September 1994, Congress passed and the
President signed the Money Laundering Suppression Act (MLSA).\3

Among other provisions, the MLSA required the Secretary of the
Treasury to delegate authority to impose civil penalties for BSA
violations to the appropriate federal banking regulatory agencies. 
The purpose of this delegation requirement was to increase efficiency
by allowing these agencies to impose civil penalties directly, rather
than referring violations to FinCEN. 

As agreed with your office, in developing updated information on
civil penalties for BSA violations, we focused our work on the
following questions: 

  -- How, if at all, has Treasury changed its policies and procedures
     for processing civil penalty cases since 1992? 

  -- Based upon workload and related statistics, what was Treasury's
     performance in processing civil penalty cases during calendar
     years 1992 through 1997? 

  -- What is the status of FinCEN's efforts to develop and issue a
     final regulation delegating the authority to assess civil
     penalties for BSA violations to the federal banking regulatory
     agencies, as required by the MLSA? 

In addressing these questions, we interviewed cognizant FinCEN
officials and reviewed relevant documentation on FinCEN's policies
and procedures for processing civil penalty cases.  Also, we reviewed
civil penalty case inventory and processing timeliness data for
calendar years 1985 through 1997.  Further, to determine the status
of the delegation of civil penalty authority, we interviewed Treasury
and FinCEN officials to obtain their views on (1) when a final
regulation is expected to be issued and (2) if applicable, whether
any substantive or procedural issues must be resolved before a final
rule can be promulgated. 

We performed our work from December 1997 to May 1998 in accordance
with generally accepted government auditing standards.  Appendix I
provides more details about our objectives, scope, and methodology. 

We requested comments on a draft of this report from the Acting
Director, FinCEN.  A reprint of FinCEN's written comments can be
found in appendix IV, and our evaluation of those comments follows
our recommendation. 


--------------------
\1 Money Laundering:  FinCEN's Law Enforcement Support, Regulatory,
and International Roles (GAO/T-GGD-98-83, Apr.  1, 1998). 

\2 Money Laundering:  Treasury Civil Case Processing of Bank Secrecy
Act Violations (GAO/GGD-92-46, Feb.  6, 1992). 

\3 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). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Except for the May 1994 delegation to FinCEN, Treasury's policies and
procedures for processing civil penalty cases generally have not
changed since 1992.  Also, the number of staff processing civil
penalty cases has remained fairly constant, at about six, before and
after the May 1994 delegation to FinCEN. 

The problem of lengthy processing times for civil penalty cases is
growing worse.  For example, according to FinCEN's data for cases
closed in calendar years 1985 through 1991, the average processing
time to close a case was 1.77 years, and the most lengthy time was
6.44 years.  In comparison, FinCEN's data for calendar years 1992
through 1997 indicate an average processing time was 3.02 years, and
the most lengthy time was 10.14 years.  For cases closed in the 2
most recent years, 1996 and 1997, the average processing times were
3.57 years and 4.23 years, respectively. 

Lengthy processing can negatively affect the public's perception of
the government's efforts to enforce the BSA, thereby lessening the
credibility and deterrent effects of the act's provisions.  Another
result is that the 6-year statute of limitations for BSA civil
penalties could expire.  According to FinCEN's data, for the period
January 1, 1992, through March 27, 1998, a total of 16 cases had one
or more BSA violations that could not be pursued because the statute
of limitations had expired.  Insufficient management attention is a
significant cause of the lengthy processing times for civil penalty
cases.  FinCEN officials told us, for example, that the agency has
never set timeliness goals for processing civil penalty cases. 

FinCEN has issued neither a notice of proposed rulemaking nor a final
regulation to delegate civil penalty assessment authority to the
banking regulatory agencies.  FinCEN officials told us they have been
working with the federal banking regulatory agencies for some time to
devise an appropriate plan for delegating civil penalty assessment
authority, but some issues still required resolution.  FinCEN's
current strategic plan indicates that such delegation may not occur
before 2002.  Thus, for several more years, FinCEN could still be
responsible for processing civil penalty referrals.  Therefore, to
better manage the processing of such referrals, we are recommending
that FinCEN set timeliness goals for evaluating and disposing of each
civil penalty case, based on the complexity of the case, and monitor
the progress of managers and staff responsible for meeting those
goals. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The BSA and its implementing regulations, in general, require
financial institutions to maintain certain records and to file
certain reports (e.g., currency transaction reports) that are useful
in criminal, tax, or regulatory investigations, such as money
laundering cases.  Failure to file BSA reports can result in criminal
and/or civil penalties, depending on the nature of the violation. 
Criminal investigations are the responsibility of IRS' Criminal
Investigation Division.  Civil penalties are currently assessed by
FinCEN, and the agency is to send each referral to IRS for review
before any administrative or civil enforcement action is taken. 

Treasury has issued guidelines to assist regulatory agencies in
determining which BSA violations warrant referral to Treasury for
consideration of criminal and/or civil penalties.\4 For example,
according to the guidelines, violations customarily warranting
referral include a pattern of failing to file currency transaction
reports on applicable transactions. 

After receiving a referral, FinCEN's role includes evaluating the
circumstances of the alleged violation and determining whether some
type of civil action, including seeking the imposition of a civil
monetary penalty, should be taken against the person or financial
institution.  Generally, FinCEN disposes of the majority of its civil
penalty cases with 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.  Civil monetary penalties generally can range from
$25,000 to $100,000 per willful violation.  In addition, civil
monetary penalties may be assessed for each negligent violation of
the BSA up to $500.  Appendix II provides more information about
FinCEN's procedures. 


--------------------
\4 U.S.  Department of the Treasury, Office of Financial Enforcement,
"Bank Secrecy Act Referral Guidelines for Financial Institutions,"
October 31, 1990.  At the time of our review, FinCEN officials told
us that these guidelines were still applicable. 


   TREASURY'S POLICIES AND
   PROCEDURES GENERALLY UNCHANGED
   SINCE 1992
------------------------------------------------------------ Letter :3

Except for the delegation of responsibility to FinCEN in 1994,
Treasury's policies and procedures for processing civil penalty
referrals for BSA violations generally have remained unchanged since
our 1992 report. 

Treasury's Office of Financial Enforcement was established in 1985
to, among other things, develop referrals of alleged civil violations
of the BSA and make recommendations as to whether civil penalties
should be assessed against noncompliant financial institutions and
their officers, directors, employees, and individuals, and if so, the
amounts of the penalties.  Treasury's Assistant Secretary for
Enforcement was responsible for making the final decision to assess a
penalty. 

In May 1994, the Assistant Secretary for Enforcement delegated civil
penalty authority to FinCEN.  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 six staff work on civil penalty referrals on a full-time or
exclusive basis; rather, they spend about one-half of their time
performing other mission functions and responsibilities. 

As a result of the merger, several staffing changes occurred.  For
example, four former Office of Financial Enforcement senior analysts
who had worked on referral cases were transferred into other
divisions within FinCEN, while four other FinCEN staff members, with
no experience in administering the BSA, were transferred into OCRE. 

FinCEN officials told us that there have been several personnel
departures during the past year, which have affected the management
and expertise in this area.  For example, OCRE's chief and deputy
chief left the agency.  As of May 1998, these positions were still
vacant. 


   THE PROBLEM OF LENGTHY
   PROCESSING TIMES FOR CIVIL
   PENALTY CASES IS GROWING WORSE
------------------------------------------------------------ Letter :4

In the past, 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.  Our
current work, which analyzed case inventory data provided by FinCEN
for 1992 through 1997, shows that the problem of lengthy processing
times is growing worse. 


      FEWER CASES CLOSED IN RECENT
      YEARS
---------------------------------------------------------- Letter :4.1

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 remaining 218 cases were
closed during 1992 through 1997 (a 6-year period). 

Our analyses show that relatively few cases have been closed in
recent years, particularly after 1994. 

  -- Case closures in each of the 3 most recent years, 1995 through
     1997, dropped below 30 for the first time since 1985 (see fig. 
     1). 

  -- Civil penalty cases closed represented 22 percent, 8 percent,
     and 13 percent, respectively, of FinCEN's annual workloads in
     1995, 1996, and 1997 (see fig.  2). 

  -- During each of these 3 years, the number of cases closed was
     fewer than the number of referrals received, which represented a
     reversal of the trend in 1990 through 1994 (see fig.  3).  For
     example, in 1997, 19 cases were closed while 34 referrals were
     received.  In contrast, in 1990, 103 cases were closed while 65
     referrals were received. 

   Figure 1:  Civil Penalty Annual
   Workload and Number of Civil
   Penalty Cases Closed, Calendar
   Years 1985 Through 1997

   (See figure in printed
   edition.)

Note:  Annual workload consists of beginning inventory (as of Jan. 
1) plus referrals received during the year. 

Source:  GAO analysis of data from FinCEN's civil penalty tracking
system.  See table III.1 in appendix III. 

   Figure 2:  Civil Penalty Cases
   Closed as a Percentage of
   Annual Workload, Calendar Years
   1985 Through 1997

   (See figure in printed
   edition.)

Source:  GAO analysis of data from FinCEN's civil penalty tracking
system.  See table III.1 in appendix III. 

   Figure 3:  Number of Civil
   Penalty Referrals Received and
   Cases Closed, Calendar Years
   1985 Through 1997

   (See figure in printed
   edition.)

Source:  GAO analysis of data from FinCEN's civil penalty tracking
system.  See table III.1 in appendix III. 


      PROCESSING TIMES SLOWER IN
      RECENT YEARS
---------------------------------------------------------- Letter :4.2

For 1985 through 1991, Treasury's data show that the average
processing time to close a case was 1.77 years.  Processing times for
the 430 cases closed during this 7-year period ranged from 4 days to
6.44 years.  According to FinCEN's data, the processing times have
slowed during the more recent period, 1992 through 1997 (see fig. 
4).  Specifically, the average processing time to close a case was
3.02 years.  Processing times for the 218 cases closed during this
period ranged from 8 days to 10.14 years. 

For cases closed in each of the 4 most recent years, 1994 through
1997, figure 4 shows that average processing times were 3 years or
higher, a threshold not reached in any of the previous years. 

   Figure 4:  Average Processing
   Times for Civil Penalty Cases
   That Were Closed, Calendar
   Years 1985 Through 1997

   (See figure in printed
   edition.)

Source:  GAO analysis of data from FinCEN's civil penalty tracking
system.  See table III.2 in appendix III. 

Lengthy processing times for civil penalty cases potentially can have
various negative effects.  For example, in 1992 congressional
testimony, we stated that: 

     "Officials at 2 of...[the primary referring] agencies...told us
     that they believed--although it could not be proved or
     measured--that the lengthy processing times resulted in a
     decrease in enforcement efforts.... 

     "We think it would be reasonable to assume that the
     effectiveness of any penalty as a deterrent to prevent future
     violations would be directly related to the length of time
     between the violation and the action taken.  Given this
     assumption, lengthy processing times for civil penalty referrals
     could affect compliance with the Bank Secrecy Act. 

     "Perhaps the most serious result of civil penalty cases
     remaining inactive for lengthy periods of time can be the
     expiration of the statute of limitations...."\5

According to FinCEN's data for the period January 1, 1992, through
March 27, 1998, a total of 16 cases had one or more BSA violations
that could not be pursued because the statute of limitations had
expired. 


--------------------
\5 Money Laundering:  Civil Penalty Referrals for Violations of the
Bank Secrecy Act Have Declined (GAO/T-GGD-92-57, June 30, 1992), pp. 
9-10. 


   INSUFFICIENT MANAGEMENT
   ATTENTION TO CIVIL PENALTY CASE
   PROCESSING
------------------------------------------------------------ Letter :5

Our 1992 report, which analyzed civil penalty case inventories
between 1985 and 1991, concluded that cases had not been processed in
a timely manner.  More recently, as shown in figure 4, the average
processing times for civil penalty cases closed since 1994 are higher
than the average times for previous years. 

There may be several reasons for this trend.  Regarding recent years,
for example, FinCEN officials mentioned staff inexperience and
personnel departures as being reasons.  Further, the officials noted
a change in the kinds of cases being referred to FinCEN. 
Specifically, the officials said the majority of cases referred to
FinCEN now involve nonbank financial institutions (i.e., casinos,
check cashers, and currency exchangers).  According to FinCEN
officials, it generally is more difficult to obtain records and
documentary evidence and to reconstruct transactions for these
entities than for banks. 

In addition, we believe that insufficient management attention has
been a significant cause of the lengthy processing times for civil
penalty cases.  First, FinCEN and its predecessor, Treasury's Office
of Financial Enforcement, did not (1) set timeliness goals for civil
penalty case processing and (2) monitor or measure performance
against those goals.  FinCEN officials told us that the agency has
never set timeliness goals for civil penalty processing.  The
officials also said that any such goals would prove arbitrary since
each case varies significantly based on complexity, volume of
transactions, and other factors.  However, those goals can be
valuable performance management tools for improving overall results
and can take into account the differences in cases.  Moreover, goal
setting and performance measurement are widely considered to be good
management practices, and these practices are reflected in the
Government Performance and Results Act of 1993.\6 Implementing such
practices should help FinCEN (1) better identify the key factors that
determine the timeliness of processing civil penalty cases and (2)
find ways to streamline the management and processing of cases to
reverse the trend of increasingly lengthy processing times. 

Second, FinCEN's civil penalty tracking system, which resides on a
stand-alone microcomputer, has not been an effective management tool,
according to a 1990 report by Treasury's Inspector General. 
Generally, the tracking system has remained unchanged since 1990,
even though the Inspector General reported that database improvements
were needed to assist in prioritizing, managing, and controlling
civil penalty cases.  The Inspector General's report noted, for
example, that the database was not being used to track the age of
referrals and cases nor to track statute of limitation expiration
dates. 

Third, as previously mentioned, according to FinCEN's data for the
period January 1, 1992, through March 27, 1998, a total of 16 cases
were affected by expiration of the statute of limitations.  However,
FinCEN did not close several of these cases until months or years
after expiration of the statute of limitations.  In fact, since our
inquires about the status of case processing, FinCEN has closed 15 of
these 16 cases involving expiration of the statute of limitations. 
For example, FinCEN's data for the 16 cases show the following. 

  -- One case had a statute of limitations expiration date in 1993,
     but FinCEN did not close the case until November 1995. 

  -- Two cases had statute of limitations expiration dates in 1995,
     and FinCEN closed one case in February 1998 and one case in
     March 1998. 

  -- Five cases had statute of limitations expiration dates in 1996,
     but FinCEN did not close the cases until February 1998. 

  -- Four cases had statute of limitations expiration dates in 1997,
     and FinCEN closed two cases in February 1998 and the other two
     cases in March 1998. 

  -- Four cases had statute of limitations expiration dates in either
     January 1998 or February 1998, and FinCEN closed one case in
     February 1998 and the other three cases in March 1998. 


--------------------
\6 Government Performance and Results Act of 1993, Public Law 103-62,
107 Stat.  285 (1993). 


   FINCEN HAS NOT ISSUED A
   REGULATION TO DELEGATE CIVIL
   PENALTY AUTHORITY
------------------------------------------------------------ Letter :6

Section 406 of the MLSA directed the Secretary of the Treasury to
delegate to appropriate federal banking regulatory agencies the
authority to assess civil penalties for BSA violations.  This
statutory section further specified that the Secretary shall
prescribe by regulation the terms and conditions that shall apply to
any such delegation.  The intent of such delegation, as described in
the MLSA's conference report, is to increase efficiency by allowing
the federal banking agencies to impose civil penalties directly
rather than to make referrals to FinCEN.  The conference report also
noted that, after the delegation, FinCEN "would still be able to
oversee the process and ensure that penalties are consistently
imposed."\7

In February 1998, we reported to the Subcommittee that a notice of
proposed rulemaking still had not been issued, and FinCEN had not
established a projected issuance date.\8 In April 1998, a senior
FinCEN official provided us the status of the agency's efforts
substantially as follows: 

  -- FinCEN has had numerous meetings with federal bank regulators to
     begin the process of delegating some or all of FinCEN's civil
     penalty enforcement authority.  Much progress has been made, but
     some serious issues are unresolved. 

  -- One issue is whether violations will be enforced under BSA
     provisions or under the bank regulators' general examination
     powers granted by Title 12 of the U.S.  Code.  According to
     FinCEN, the bank regulators may be less inclined to assess BSA
     penalties and may instead use their non-BSA authorities under
     the general examination powers of Title 12.  FinCEN prefers that
     the BSA provisions be used to ensure consistency of
     interpretation and sanctions for similar violations. 

  -- Another issue involves oversight or monitoring by FinCEN.  The
     details of Treasury's continued oversight responsibility for BSA
     penalties, even after the delegation, have not yet been worked
     out. 

  -- Further, while not required by the MLSA, FinCEN is studying the
     possibility of also delegating BSA civil penalty authority to
     IRS, which conducts BSA compliance examinations of nonbank
     financial institutions.  FinCEN and IRS have engaged in several
     discussions concerning such a delegation.  As a result, IRS is
     currently studying the relevant policy and resource
     considerations. 

FinCEN's current strategic plan indicates that delegation of civil
penalty authority to the banking regulatory agencies may not occur
before 2002. 


--------------------
\7 H.R.  Conf.  Rep.  No.  103-652, at 190 (1994). 

\8 Money Laundering:  FinCEN Needs to Better Communicate Regulatory
Priorities and Time Lines (GAO/GGD-98-18, Feb.  6, 1998), p.  15. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

Except for the delegation of civil penalty authority to FinCEN in
1994, Treasury's policies and procedures for processing civil penalty
referrals for BSA violations generally have not changed since our
1992 report.  Also, the number of staff processing civil penalty
referrals has remained fairly constant, at about six, before and
after the May 1994 delegation to FinCEN.  However, FinCEN officials
noted that over the past year, personnel departures--including OCRE's
chief and deputy chief--have affected management and expertise in
this area.  As of May 1998, these positions remained vacant. 

The problem of lengthy processing times for civil penalty cases has
grown worse since our 1992 report.  Overall, FinCEN's data showed a
smaller percentage of civil penalty cases being closed between 1992
and 1997 than 1985 and 1991, and the annual workload was smaller
during the more recent years.  Also, in the more recent years, the
average processing times to close civil penalty cases are higher than
in previous years.  Among other reasons, insufficient management
attention--as indicated by the absence of timeliness goals and
monitoring, ineffective civil penalty tracking system, and 16 cases
that could not be pursued because the statute of limitations had
expired--contributed to lengthy processing times in recent years. 
Goal setting and performance measurement are widely considered to be
good management practices, and implementing such practices may help
FinCEN focus its attention on better managing and processing civil
penalty cases and reverse the trend of increasingly lengthy
processing times. 

FinCEN's current strategic plan indicates that delegation of civil
penalty authority to federal banking regulatory agencies may not
occur for another 3 or 4 years.  Pending such delegation, FinCEN is
still responsible for processing civil penalties. 


   RECOMMENDATION TO THE ACTING
   DIRECTOR, FINCEN
------------------------------------------------------------ Letter :8

To reduce the lengthy processing times associated with civil
penalties, we recommend that the Acting Director, FinCEN, set average
timeliness goals for evaluating and disposing of civil penalty cases,
taking into account the varying complexity of the cases, and monitor
the progress of managers and staff responsible for meeting those
goals.  We recognize that setting timeliness goals, by themselves,
may not necessarily lead FinCEN to resolve all the problems that may
have contributed to the lengthy processing times for evaluating and
disposing of civil penalty cases.  However, setting and managing to
meet such goals should help FinCEN better focus its attention on
processing civil penalty cases and provide a means to determine what
corrective actions might be needed to decrease processing times in
the future. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :9

In a letter dated May 20, 1998, FinCEN's Acting Director provided
written comments on a draft of this report (see app.  IV).  The
Acting Director concurred that greater or more diligent management
oversight is needed to ensure that civil penalty cases are processed
in an expeditious, yet thorough manner.  To address the timeliness
issue, the Acting Director noted that FinCEN has taken or has plans
to take definitive steps, such as

  -- working with OCRE staff to identify individual training needs;

  -- assigning two non-OCRE employees the tasks of analyzing open
     civil penalty referrals, highlighting cases that warrant
     immediate attention, and providing oversight to ensure that
     progress continues on those referrals; and

  -- developing civil penalty referral procedures that include time
     lines and due dates. 

The Acting Director commented that FinCEN plans to establish strict
time lines for the initial assessment of civil penalty referrals,
where such guidelines are practicable and predictable.  Regarding the
adjudicative or disposition phase of case processing, the Acting
Director said that FinCEN favored more diligent management oversight
(e.g., case reviews by the OCRE Assistant Director) rather than the
establishment of strict or arbitrary time lines.  However, to provide
further management oversight, the Acting Director said that FinCEN
had recently reinstated the use of quarterly reports showing the
status of BSA referrals, including the number of cases received and
closed during the reporting period.  Moreover, we note that, at the
April 1, 1998, hearing held by this Subcommittee, FinCEN agreed to
provide quarterly reports to the Subcommittee. 

Generally, if they are fully implemented, we believe that the various
steps or initiatives presented by the Acting Director collectively
meet the substantive intent of our recommendation.  As this report
indicates, our principal concern is that insufficient management
attention has been a significant cause of the lengthy processing time
for civil penalty cases.  Agency recognition of the need for greater
or more diligent management oversight, including the use of
timeliness goals, is a key to corrective action.  Nonetheless, we
still believe that FinCEN should consider opportunities for using
timeliness goals as guides for managing and monitoring all phases of
civil case processing, not just the initial case assessment phase. 


---------------------------------------------------------- Letter :9.1

We are sending copies of this report to the Subcommittee's Ranking
Minority Member; the Chairman and Ranking Minority Member, House
Committee on Banking and Financial Services; the Secretary of the
Treasury; the Acting Director, FinCEN; and other interested parties. 
We will also make copies available to others on request. 

Major contributors to this report are listed in appendix V.  Please
contact me on (202) 512-8777 if you or your staff have any questions. 

Sincerely yours,

Richard M.  Stana
Associate Director
Administration of Justice Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

The Chairman, Subcommittee on General Oversight and Investigations,
House Committee on Banking and Financial Services, asked us for
information regarding efforts of the Treasury Department's Financial
Crimes Enforcement Network (FinCEN) to process civil penalty
referrals for violations of the Bank Secrecy Act (BSA).  Generally,
the request involved two objectives.  The first was to update the BSA
civil penalty case inventory and processing timeliness statistics
that we presented in our 1992 report.\1

The second was to determine the status of FinCEN's efforts regarding
a provision of the Money Laundering Suppression Act of 1994 (MLSA). 

More specifically, as agreed with the Chairman's office, we focused
our work on the following questions: 

  -- How, if at all, has Treasury changed its policies and procedures
     for processing civil penalty cases since 1992? 

  -- Based upon workload and related statistics, what was Treasury's
     performance in processing civil penalty cases during calendar
     years 1992 through 1997? 

  -- What is the status of FinCEN's efforts to develop and issue a
     final regulation delegating the authority to assess civil
     penalties for BSA violations to the federal banking regulatory
     agencies, as required by the MLSA? 

Preliminarily, in addressing the Chairman's request, we reviewed our
February 1992 report and our subsequent congressional testimony in
June 1992 before the Subcommittee on Oversight, House Committee on
Ways and Means.\2 Also, we reviewed a relevant 1990 report by
Treasury's Inspector General.\3 In response to our inquiry, FinCEN
officials told us that our 1992 report and the Inspector General's
1990 report were the only previous studies conducted of BSA civil
penalty processing. 

To address the first question, we interviewed officials in FinCEN's
Office of Compliance and Regulatory Enforcement (OCRE), and we
reviewed relevant documentation on policies and procedures (see app. 
II).  Also, we reviewed guidelines that Treasury issued to assist
regulatory agencies in determining which BSA violations warranted
referral for possible assessment of civil penalties.\4 Further, we
obtained information about the number of OCRE staff involved in
processing BSA civil penalty cases. 

Regarding Treasury's performance in processing BSA civil penalty
cases, we reviewed and compared data for two time periods covering a
total of 13 years--(1) calendar years 1985 through 1991 and (2)
calendar years 1992 through 1997.  In so doing, we developed
statistical tables showing annual workload (i.e., beginning inventory
plus referrals received), cases closed, processing times, closures by
type of action taken, penalty dollar amounts, and referral sources
(see app.  III). 

For the more recent (1992 through 1997) of the two time periods, we
selectively verified the data that FinCEN provided to us from its
computerized civil penalty tracking system.  Specifically, we
judgmentally selected and reviewed 15 percent of the cases that were
closed by type of action taken in this time period.  In our
judgmental selections, we included cases representing all three types
of case-closure dispositions--(1) cases closed with no contact, (2)
cases closed with a letter of warning, and (3) cases closed with a
monetary penalty assessed.  For each of the selected cases, we
reviewed OCRE's hard copy case files to verify that applicable data
had been accurately input into the computerized civil penalty
tracking system.  Further, we checked the accuracy of the specific
query statements that OCRE used in providing us requested data from
the computerized civil penalty tracking system.  Our verification
efforts found three minor discrepancies in the data contained in
FinCEN's civil penalty tracking system.  The correction of these
discrepancies did not change the results of our analysis. 

Also, according to FinCEN, a total of 16 cases during the period
January 1, 1992, through March 27, 1998, were affected by expiration
of the statute of limitations.  We did not independently verify this
total nor did we analyze these cases. 

Regarding the last question (delegation of civil penalty authority),
we interviewed FinCEN officials to update the status of information
presented in our

  -- February 1998 report to the Subcommittee's Chairman and Ranking
     Minority Member\5 and

  -- April 1998 testimony at a hearing held by the Subcommittee.\6

Also, we reviewed FinCEN's multiyear strategic plan, which briefly
discusses the delegation issue.\7


--------------------
\1 GAO/GGD-92-46.  The report presented statistics covering calendar
years 1985 through 1991, as of October 24, 1991. 

\2 GAO/T-GGD-92-57. 

\3 Department of the Treasury, Office of the Inspector General, Audit
Report on the Office of Financial Enforcement's Implementation of the
Bank Secrecy Act (OIG 90-024), January 10, 1990. 

\4 U.S.  Department of the Treasury, Office of Financial Enforcement,
"Bank Secrecy Act Referral Guidelines for Financial Institutions,"
October 31, 1990.  At the time of our review, FinCEN officials told
us that these guidelines were still applicable. 

\5 GAO/GGD-98-18. 

\6 GAO/T-GGD-98-83. 

\7 FinCEN, Strategic Plan, 1997 - 2002 (undated), pp.  28 and 36. 


PROCEDURES FOR PROCESSING BSA
CIVIL PENALTY CASES
========================================================== Appendix II

In May 1994, Treasury's Assistant Secretary for Enforcement delegated
BSA civil penalty authority to FinCEN.  As a result, the Director of
FinCEN is responsible for assessing civil penalties for BSA
violations by banks and by certain nonbank financial institutions. 
Following is a description of the process of identifying and
assessing penalties for the violations. 


   FINCEN RECEIVES BSA VIOLATION
   REFERRALS FROM VARIOUS SOURCES
-------------------------------------------------------- Appendix II:1

FinCEN does not conduct BSA compliance examinations at either banks
or nonbank financial institutions.  Rather, such examinations are
conducted by the following agencies: 

  -- Compliance examinations of "banks" are conducted by the five
     federal bank supervisory or regulatory agencies:  the Federal
     Deposit Insurance Corporation (FDIC), the Board of Governors of
     the Federal Reserve System (FRS), the Office of the Comptroller
     of the Currency (OCC), the Office of Thrift Supervision (OTS),
     and the National Credit Union Administration (NCUA). 

  -- IRS' Examination Division conducts compliance examinations of
     nonbanks.  This category includes casinos; money transmitters;
     check cashers; currency exchangers; security brokers and
     dealers; issuers or redeemers of money orders, traveler's
     checks, and other similar instruments; and individuals who
     attempt to evade the BSA's reporting requirements. 

  -- Securities and Exchange Commission (SEC) conducts compliance
     examinations of securities brokers and dealers. 

If warranted by the results of their examinations, these agencies
refer their preliminary findings to FinCEN for appropriate action and
disposition. 

According to FinCEN officials, in addition to BSA violations referred
by the various federal agencies, FinCEN also initiates civil
investigations based on other sources, such as (1) voluntary
disclosures from financial institutions or individuals; (2) formal
advisories from IRS' Detroit Computing Center, which processes
currency transaction reports and other BSA-related information; and
(3) reports of investigations from state and local law enforcement
agencies. 


   EACH REFERRAL IS REVIEWED BY
   IRS FOR CRIMINAL POTENTIAL
-------------------------------------------------------- Appendix II:2

Initially, before any administrative or civil enforcement action is
taken, FinCEN's procedures call for sending each incoming matter to
IRS' Criminal Investigation Division for review of criminal
potential.  According to specified procedures, FinCEN should not
proceed with evaluating a BSA civil penalty referral until IRS or a
U.S.  Attorney's Office provides written approval for such action. 
By agreement, IRS has 120 days to complete its review of the matter. 

FinCEN officials told us that FinCEN generally receives a clearance
to proceed within 30 days.  Further, the officials noted that, in
cases requiring special or expeditious attention, FinCEN contacts a
designated IRS official by telephone to obtain clearance from the
Criminal Investigation Division. 

After FinCEN receives a clearance from IRS, the matter is assigned a
formal case number and given to a financial enforcement specialist
within FinCEN's OCRE. 


   FINCEN DEVELOPS INFORMATION TO
   EVALUATE THE CASE
-------------------------------------------------------- Appendix II:3

The duties of the financial enforcement specialist are to conduct a
preliminary review of the information presented in the referral and,
if needed, to contact other sources to develop further information on
the circumstances of the violation and/or the subject of the
referral.  According to FinCEN, these sources may include one or more
of the following: 

  -- the law enforcement or regulatory agency that discovered and
     referred the alleged BSA violations to FinCEN,

  -- any law enforcement or regulatory authority that has
     jurisdictional concerns or relevant information on the subject,

  -- the financial institution's primary regulator,

  -- IRS' Detroit Computing Center (to obtain BSA records and
     background on the subject),

  -- the local U.S.  Attorney's Office or IRS office, and

  -- the financial institution or person who is the subject of the
     alleged BSA violations. 

According to FinCEN, the financial enforcement specialist is to
consider the results of any internal or external audits, any
corrective action taken, the institution's written compliance program
and training and instructional materials, and other information
relevant to the questioned transactions.  Also, FinCEN noted that, to
obtain a fuller perspective on the alleged BSA violation, the
specialist may ask for and review relevant information that goes
beyond just the specific transactions cited in the referral.  That
is, the specialist may review other account and transaction activity
information regarding the subject institution or individual. 


   DISPOSITION OF CASES
-------------------------------------------------------- Appendix II:4

On the basis of the information in the referral and that developed by
OCRE, the financial enforcement specialist is to recommend a course
of civil or administrative action to the Assistant Director, OCRE,
who reviews and decides whether to approve the recommended action. 
The case is disposed of with one or a combination of the following
administrative or civil actions. 

  -- The federal regulator may issue a cease and desist order or
     other sanction. 

  -- The subject financial institution may make corrections to any
     deficient BSA systems and/or backfile any delinquent BSA
     reports. 

  -- FinCEN may close the case without further action or contact with
     the subject institution or individual. 

  -- FinCEN may issue a letter of warning. 

  -- FinCEN may assess a civil monetary penalty. 

FinCEN officials told us that, if a civil monetary penalty seems
appropriate, FinCEN grants the subject institution or individual an
opportunity to dispute the allegations and offer a defense of the
alleged actions.  The officials added that financial institutions and
individuals are encouraged to submit any available mitigating
evidence in advance of BSA case settlement negotiations with FinCEN. 
Also, the officials noted that FinCEN's final disposition of a BSA
case, including the dollar amount of the civil penalty, is to be
determined by considering the following factors: 

  -- the severity, volume, and longevity of the BSA violations;

  -- the subject's overall BSA compliance program;

  -- self discovery and acknowledgment of the BSA violations to
     Treasury versus external discovery and notification;

  -- cooperation with FinCEN and other applicable agencies;

  -- prompt correction of the BSA deficiencies that caused the
     violations;

  -- the outcomes of any prior or subsequent BSA compliance
     examinations; and

  -- any other valid aggravating or mitigating factors, including the
     subject's ability to pay the BSA penalty. 

According to FinCEN officials, due to the complex nature of BSA
cases, FinCEN does not use rigid formulas to determine the
appropriate BSA penalty.  Rather, all such decisions are to be made
on a case-by-case basis and are to reflect consideration of the
factors presented above.  Also, FinCEN officials noted that the
agency does not set timeliness goals for processing civil penalty
cases. 

According to FinCEN, if a subject refuses to settle the case, FinCEN
formally assesses the maximum BSA civil monetary penalty allowed by
law for the violations.  The matter is then to be referred for
internal legal review.  Thereafter, if deemed warranted, procedures
call for FinCEN to submit the matter to the Department of Justice's
Civil Division to seek collection of the unpaid penalty.  After
FinCEN assesses a BSA civil penalty, the government has 2 years to
initiate collection litigation against the subject.  FinCEN officials
told us that, to avoid litigation and exposure to the maximum penalty
allowed by law, subjects of a BSA action are almost always amenable
to settling their BSA liability with FinCEN. 


DATA ON BSA CIVIL PENALTY CASES
========================================================= Appendix III

This appendix presents various tables of BSA penalty statistics for
calendar years 1985 through 1997.  More specifically, the tables show
annual workload (i.e., beginning inventory plus referrals received)
and cases closed (table III.1); processing times (tables III.2,
III.3, and III.4); closures by type of action taken (table III.5);
penalty dollar amounts (table III.6); and referral sources (table
III.7). 



                                   Table III.1
                     
                      BSA Civil Penalty Annual Workload and
                        Cases Closed, Calendar Years 1985
                                   Through 1997

                    Case workload
          ----------------------------------
                                                                           Cases
                                                                       closed as
                                                                               a
                                                              Ending  percentage
Calendar   Beginning   Referrals      Annual       Cases  inventory\   of annual
year       inventory    received  workload\a    closed\b           c    workload
--------  ----------  ----------  ----------  ----------  ----------  ----------
1985               3         101         104          11          93         11%
1986              93         137         230          73         157          32
1987             157         111         268          77         191          29
1988             191          47         238          59         179          25
1989             179          75         254          59         195          23
1990             195          65         260         103         157          40
1991             157          27         184          48         136          26
1992             136          67         203          82         121          40
1993             121          27         148          39         109          26
1994             109          30         139          39         100          28
1995             100          32         132          29         103          22
1996             103          25         128          10         118           8
1997             118          34         152          19         133          13
================================================================================
Total                        778                     648
--------------------------------------------------------------------------------
\a Annual workload consists of beginning inventory (as of January 1)
plus referrals received during the year. 

\b For the 648 cases that were closed during calendar years
1985-1997, tables III.2, III.3, and III.4 present processing time
statistics.  Table III.5 shows type of disposition for the closed
cases, and table III.6 shows penalty dollar amounts. 

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

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



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

                                    Cases closed
              --------------------------------------------------------
                            Average time
                                to close
Calendar                            case
year                Number  (in years)\a  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 for           430          1.77  4 days to 6.44 years
 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 for           218          3.02  8 days to 10.14 years
 1992-1997
Overall                648          2.19  4 days to 10.14 years
----------------------------------------------------------------------
\a The median response times for the periods 1985-1991 and 1992-1997
were similar to the average response times for these periods.  For
instance, the median response time for 1985-1991 was 1.34 years, and
the median response time for 1992-1997 was 2.78 years. 

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



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

            1985 through 1991       1992 through 1997       1985 through 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 Percentages do not add to 100 percent due to rounding. 

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



                                   Table III.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 through 1991       1992 through 1997       1985 through 1997
          ----------------------  ----------------------  ----------------------
                    Processing              Processing              Processing
                  time for cases          time for cases          time for cases
                      closed                  closed                  closed
                  --------------          --------------          --------------
Action
taken on          Averag                  Averag                  Averag
cases              e (in                   e (in                   e (in
closed    Number  years)   Range  Number  years)   Range  Number  years)   Range
--------  ------  ------  ------  ------  ------  ------  ------  ------  ------
No           147    2.09      12      65    2.73      17     212    2.36      12
 contact                    days                    days                    days
 made                         to                      to                      to
                            5.36                    7.64                    7.64
                           years                   years                   years
Warning      235    1.69       5      95    2.94       8     330    2.05       5
 letter                     days                    days                    days
 sent                         to                      to                      to
                            6.44                   10.14                   10.14
                           years                   years                   years
Penalty       48    1.18       4      58    3.22      41     106    2.30       4
 assessed                   days                    days                    days
                              to                      to                      to
                            4.58                    8.65                    8.65
                           years                   years                   years
--------------------------------------------------------------------------------
Source:  GAO analysis of data from FinCEN's civil penalty tracking
system. 



                              Table III.5
                
                 Closed Penalty Cases by Type of Action
                Taken, Calendar Years 1985 Through 1997

                                        Number of cases closed
                                --------------------------------------
                                            Letter
                                      No        of
                                 contact   warning   Penalty
Calendar year                       made    issued  assessed     Total
------------------------------  --------  --------  --------  ========
1985                                   0         0        11        11
1986                                   4        56        13        73
1987                                  19        46        12        77
1988                                  14        40         5        59
1989                                  34        21         4        59
1990                                  46        55         2       103
1991                                  30        17         1        48
======================================================================
Subtotal for 1985-1991
Number                               147       235        48       430
Percentage of cases closed           34%       55%       11%      100%
1992                                  32        37        13        82
1993                                   9        17        13        39
1994                                   6        16        17        39
1995                                   6        14         9        29
1996                                   3         3         4        10
1997                                   9         8         2        19
======================================================================
Subtotal for 1992-1997
Number                                65        95        58       218
Percentage of cases closed           30%       44%       27%    101%\a

Overall:
----------------------------------------------------------------------
Number                               212       330       106       648
Percentage of cases closed           33%       51%       16%      100%
----------------------------------------------------------------------
\a Percentages do not add to 100 percent due to rounding. 

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



                                   Table III.6
                     
                       Average and Range of Penalty Dollar
                       Amounts, Calendar Years 1985 Through
                                       1997

                                                        Range of penalty dollar
                                                                 amount
                                                        ------------------------
Ca
le    Number of
nd        cases        Total      Average       Median
ar  closed with      penalty       dollar       dollar
ye      penalty       dollar   amount per   amount per
ar     assessed       amount      penalty      penalty       Lowest      Highest
--  -----------  -----------  -----------  -----------  -----------  -----------
19           11   $5,117,640     $465,240     $269,940     $121,750   $2,250,000
 85
19           13    9,274,160      713,397      220,000        3,000    4,750,000
 86
19           12    1,542,980      128,582      143,000       32,000      295,000
 87
19            5    3,287,000      657,400       95,000       22,000    3,010,000
 88
19            4    1,121,000      280,250      270,500       80,000      500,000
 89
19            2      378,000      189,000      189,000       10,000      368,000
 90
19            1       54,600       54,600       54,600       54,600       54,600
 91
================================================================================
Su           48  $20,775,380     $432,820     $196,000       $3,000   $4,750,000
 b
 t
 o
 t
 a
 l
 f
 o
 r
 1
 9
 8
 5
 -
 1
 9
 9
 1
19           13   $2,637,930     $202,918      $65,000       $5,000     $950,000
 92
19           13    2,315,389      178,107       80,000       15,000    1,182,639
 93
19           17    3,094,300      182,018       20,000        2,000    1,950,000
 94
19            9      405,600       45,067       20,000          600      115,000
 95
19            4      195,000       48,750       20,000        5,000      150,000
 96
19            2      188,000       94,000       94,000       88,000      100,000
 97
================================================================================
Su           58   $8,836,219     $152,349      $50,000         $600   $1,950,000
 b
 t
 o
 t
 a
 l
 f
 o
 r
 1
 9
 9
 2
 -
 1
 9
 9
 7
Ov          106  $29,611,599     $279,355      $92,500         $600   $4,750,000
 e
 r
 a
 l
 l
--------------------------------------------------------------------------------
Source:  GAO analysis of data from FinCEN's civil penalty tracking
system. 



                                    Table III.7
                      
                        Number of Civil Penalty Referrals by
                      Source, Calendar Years 1985 Through 1997

                             Sources of referrals
    ----------------------------------------------------------------------
    Federal banking regulatory agencies            Other entities
    ------------------------------------  --------------------------------
Ca
le
nd
ar
ye                                                        Voluntar  Other\
ar    FDIC   FRS    NCUA     OCC     OTS   IRS\a     SEC       y\b       c   Total
--  ------  ----  ------  ------  ------  ------  ------  --------  ------  ======
19       3     0       0      14       1       1       0        70      12     101
 85
19       0     0       0      73       0       0       0        36      28     137
 86
19       9     1       0      41       0       8       2        21      29     111
 87
19       3     1       0       8       0      12       4         6      13      47
 88
19       4     0       0       8       3      39       4         7      10      75
 89
19       3     0       0       7       4      39       1         5       6      65
 90
19       6     0       0       4       0       8       1         4       4      27
 91

Subtotal for 1985-1991
----------------------------------------------------------------------------------
Nu      28     2       0     155       8     107      12       149     102     563
 m
 b
 e
 r
Pe    5.0%  0.4%      0%   27.5%    1.4%   19.0%    2.1%     26.5%   18.1%    100%
 r
 c
 e
 n
 t
19      10     2       0      13       3      17       0        16       6      67
 92
19       7     1       0       4       1       8       0         4       2      27
 93
19      12     0       0       2       1       8       0         3       4      30
 94
19       6     0       0       3       0      17       0         2       4      32
 95
19       5     0       0       1       0      18       0         0       1      25
 96
19       1     0       0       0       0      29       1         1       2      34
 97

Subtotal for 1992-1997
----------------------------------------------------------------------------------
Nu      41     3       0      23       5      97       1        26      19     215
 m
 b
 e
 r
Pe   19.1%  1.4%      0%   10.7%    2.3%   45.1%    0.5%     12.1%    8.8%    100%
 r
 c
 e
 n
 t

Overall:
----------------------------------------------------------------------------------
Nu      69     5       0     178      13     204      13       175     121     778
 m
 b
 e
 r
Pe    8.9%  0.6%      0%   22.9%    1.7%   26.2%    1.7%     22.5%   15.6%    100%
 r
 c
 e
 n
 t
----------------------------------------------------------------------------------
\a IRS' Examination Division conducts compliance examinations of
nonbank financial institutions. 

\b Voluntary disclosures from financial institutions or individuals. 

\c This category includes referrals from U.S.  Attorney Offices, the
Customs Service, and IRS' Criminal Investigation Division.  Also,
according to FinCEN officials, the agency initiates civil
investigations based on other sources, such as reports of
investigations from state and local law enforcement agencies. 

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




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE FINANCIAL CRIMES
ENFORCEMENT NETWORK
========================================================= Appendix III



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Danny R.  Burton, Assistant Director
Patricia J.  Scanlon, Evaluator-in-Charge
David P.  Alexander, Senior Social Science Analyst
Michael H.  Little, Communications Analyst

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Geoffrey R.  Hamilton, Senior Attorney

*** End of document. ***