Law enforcement needs better access to BSA reports, watchdog says

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WASHINGTON — The Financial Crimes Enforcement Network should develop policies enabling more law enforcement agencies to utilize suspicious transaction reports, the Government Accountability Office said Tuesday.

The watchdog released a wide-ranging report on the usefulness and costs to banks of suspicious activity reports and currency transaction reports from 2015 through 2018. The GAO review came as some in the industry and Congress have called for regulatory relief from SAR and CTR requirements, saying the reports have limited benefit for catching money launderers, while law enforcement agencies say the reporting should not be curtailed.

The GAO report also followed the publication of a separate report by the International Consortium of Journalists exposing details of big-bank SARs resulting from a Fincen data leak.

The GAO said Fincen should make efforts to provide information that could be useful to law enforcement agencies that do not have immediate access to the agency's database of Fincen reports.

While more than 85% of federal law enforcement offices have direct access to the database, only 54% of state law enforcement offices and 1% of local law enforcement agencies have such access.

“Fincen lacks written policies and procedures for assessing which agencies without direct access could benefit from greater use of BSA reports, reaching out to such agencies, and distributing educational materials about BSA reports,” the GAO said in its report. “By developing such policies and procedures, Fincen would help ensure law enforcement agencies are using BSA reports to the greatest extent possible to combat money laundering and other crimes.”

In a survey, the GAO found that the Fincen’s Bank Secrecy Act database is considered fairly helpful among federal personnel. Across six federal agencies, including the FBI, IRS and Department of Homeland Security, 59% of personnel reported using BSA data to “start or assist new criminal investigations,” according to the report.

At the same time, however, the GAO found that 21 of the nation’s 50 largest police departments, many of which often investigate crimes related to money laundering, lacked direct access to the database.

The GAO juxtaposed the limited use of Fincen’s database to the cost of compliance for financial institutions subject to the Bank Secrecy Act. The report found that “total direct BSA compliance costs generally tended to be proportionally greater for smaller banks than for larger banks.”

“For example, such costs comprised about 2% of the operating expenses for each of the three smallest banks in 2018 but less than 1% for each of the three largest banks in GAO’s review,” the report noted.

The GAO also reported that roughly 23% of banks were cited for violating the BSA by their regulators each year between 2015 and 2018, though the violations "largely were technical and did not warrant formal enforcement," according to the report. The office found that the most common mistakes by banks revolved around failing to file currency transaction reports in a timely manner, as well as failing to submit SARs that were "complete or accurate."

In the report, the GAO reported that Fincen’s leadership concurred generally with the government watchdog’s finding that more law enforcement agencies should use their BSA database but disputed not having procedures in place to make that happen.

In a letter responding to the GAO’s findings, Fincen Director Kenneth Blanco wrote that his agency “provides extensive support to federal, state, and local law enforcement agencies both bilaterally to individual agencies and through numerous task forces, fusion centers, and SARs review teams, whose reach often extends to agencies that do not otherwise have direct access to BSA data.”

The U.S. anti-money-laundering regulatory framework has come under increased scrutiny in recent days after publication of “The Fincen Files” by the journalist consortium and BuzzFeed News. Citing information from leaked suspicious activity reports, the report delves into specific transactions involving large banks and clients with criminal records.

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