of the problems detracting from the quality of currency transaction data. The financial institution regulatory agencies changed their examination procedures to strengthen report compliance monitoring. Treasury, in coordination with the Department of Justice and several other agencies, initiated special investigative projects in an effort to better use the Bank Secrecy Act reports. These efforts are a major step toward effectively implementing the Bank Secrecy Act reporting requirements. They should help strengthen compliance with the requirements, provide more complete and timely report data to law enforcement and regulatory investigations, and encourage greater use of the act's reports. Although these recent efforts are commendable, we believe additional actions are needed for the act's reporting requirements to achieve their intended purpose. Accordingly, on pages 57 and 58 of our final report, we have made several specific recommendations to help assure that the reporting requirements are properly implemented and the resulting data used. These relate to: allocating the staff necessary to carry out the act; revising Bank Secrecy Act data dissemination practices to make the data more readily available; strengthening compliance enforcement and monitoring efforts; and developing the information necessary to make a comprehensive assessment of the costs and benefits of the act's reporting requirements. Although our administrative recommendations are made to the Secretary of the Treasury, Treasury alone cannot effectively implement the act's reporting requirements so that they achieve expectations. For example, the Federal financial regulatory agencies need to be more responsive to Treasury directives. Additionally, law enforcement agencies must use the report data in investigations and prosecutions for the reporting requirements to demonstrate their value. In this regard, the Assistant Attorney General for Administration, in commenting on a draft of our final report, stated the following: Now that the Federal investigative and prosecutive agencies have begun to turn the corner toward successful pursuit of national criminal enterprises, it is crucial that we insure that the tools available under the Bank Secrecy Act can be utilized as fully as possible. Even with a smoothly administered act, it is uncertain that the reporting requirements can or will ever achieve the degree of usefulness that the Congress intended. Given the recent efforts to improve implementation, we believe that the next 2 to 3 years are crucial to demonstrating the contributions that the reporting requirements can make. As law enforcement agencies focus more on detecting the financial resources of organized criminals, and as more attention is given to the effects of Federal regulatory activities on the national economy, Treasury will have to better demonstrate that the usefulness of the Bank Secrecy Act reports justifies the cost. If this cannot be demonstrated, the act's reporting requirements, in part or in total, should be repealed. Accordingly, we have recommended in our report that the Congress amend the Bank Secrecy Act to require reauthorization of the reporting requirements by the end of 1984. We have attached to my statement, one, an explanation of the rationale for our recommendation; and two, suggested statutory language for the amendment. On the basis of current progress, we believe that, before 1984, Treasury should be able to provide the Congress with sufficient data on the costs associated with the various reporting requirements and on the value of the reports. This data, together with Treasury's recommendations for legislative and program changes, should help the Congress in deliberating and deciding whether to continue, modify, or eliminate the Bank Secrecy Act's reporting requirements. This concludes my statement. We would be pleased to respond to any questions. [The attachment referred to by Mr. Anderson follows:] ATTACHMENT ATTACHMENT GAO PROPOSED AMENDMENT OF PUBLIC LAW 91-508 THE REPORTING, REQUIREMENTS The Congress granted the Secretary of the Treasury great discretionary authority under the Currency and Foreign Transactions Reporting Act, commonly referred to as the Bank Secrecy Act. It envisioned that the data required to be kept and reported would be very useful to law enforcement agencies in investigating the financial resources connected with illegal activities. At the same time, however, the Congress made it clear that (1) the reporting requirements imposed by Treasury should not unduly burden legitimate commercial transactions, and (2) the cost of implementing and administering the requirements should not outweigh benefits to law enforcement. After 10 years, the questions of whether the Bank Secrecy Act has achieved its expectations and whether its associated costs are justified are still unanswered. In our April 6, 1979 report on currency and foreign account reports (GGD-79-24), we recognized the need for evaluation of the Bank Secrecy Act reports' usefulness. We recommended that Treasury conduct such an evaluation and request that the Congress reconsider the need for reporting requirements if they are found not to be useful. Since that time, however, no meaningful assessment of the reports' usefulness or cost has been performed. For this reason, we recommend on page 57 of our July 23, 1981 report (GGD-81-80) that the Secretary of the Treasury initiate, and submit to the Congress within 2 years, a comprehensive assessment of the act's reporting requirements. Such an assessment should demonstrate whether the act is cost-beneficial and should highlight changes needed to make the act's requirements more effective. Also, while our report focuses on the usefulness of Bank Secrecy Act reports for law enforcement purposes, we recognize that there may be collateral uses to the Government for these reports. Treasury's assessment, therefore, should include an evaluation of the usefulness of these reports for such collateral purposes. Concurrently, we recommend (on the same page) that the Congress amend the Bank Secrecy Act to require a reauthorization of the act's reporting requirements in 1984. On the basis of current progress, we believe that Treasury should be able to provide sufficient data, before then, for the Congress to make a decision on the act's continuation, modification, or elimination. GAO Suggested Statutory Language To amend the Financial Recordkeeping and Currency and Foreign Transactions Reporting Act, Public Law 91-508, add a paragraph (d) to section 401, Title IV: "The reporting requirements prescribed or authorized by Chairman MINISH. Thank you, Mr. Anderson. Mr. Zeferetti, you have a statement, I understand, and you may proceed. Mr. ZEFERETTI. Thank you very much, Mr. Chairman. I want to compliment you and your subcommittee for the leadership and constructive work on this issue. I know you have been very active in looking critically at the Bank Secrecy Act and its enforcement. I believe it is well recognized that because of your work over the past several months, the Treasury Department and the other agencies responsible for auditing and examining the operations of federally chartered financial institutions are now more innovative and effective in enforcing the reporting requirements of the act. As you know, illegal drug traffic in the United States, it is a vast, multibillion dollar industry valued at somewhere between $70 and $90 billion a year, according to the DEA. The heart of this underground, flourishing industry is not the small, $100 or $1,000 drug dealer, but the huge transactions amounting to tens and hundreds of thousands of dollars, and oftentimes even into millions of dollars. As chairman of the House Select Committee on Narcotics, I am greatly concerned about this overwhelming problem. I am convinced, as I know you are, Mr. Chairman, that the way to cut the heart out of this incredibly large underground economy is to effectively enforce the Bank Secrecy Act so that an audit trail exists on the movement of large amounts of cash. I am informed that the Operation Greenback, a multiagency task force operating in the Miami area, has been effectively using the reports required by the act to investigate and prosecute members of criminal organizations involved in multimillion dollar drug trafficking in south Florida. The men and women who are participating in this task force are to be commended for their hard work and ingenuity. It is my understanding that while the Government was slow to enforce the Bank Secrecy Act and to use it to go after the large criminal organizations, the agencies participating in Greenback have recently developed entirely new techniques for pursuing drug traffickers by following the audit trail created by the Bank Secrecy Act. While the act has provided us with certain weapons useful in the war on drugs, the act also currently has some shortcomings which may require legislative amendments, shortcomings such as the apparent need for a provision which requires a report on the transportation of more than $5,000 in or out of the country. This is why I commend you, Mr. Chairman, for staying on top of this issue for so many months and why I appreciate your allowing me to participate in these hearings. Our narcotics committee intends to hold similar hearings in the Miami area sometime during the next 2 or 3 months. I hope to take an intense, firsthand look at Operation Greenback and the impact of the Bank Secrecy Act in the field. I would hope that our respective hearings would complement each other, and I would invite you, Mr. Chairman, along with the other committee members and staff to participate in our hearings. I will keep you and your committee informed as to the details on our hearings in the upcoming weeks, and I look forward to your joining our committee, just as you have so courteously extended an invitation to me to join with you today. Again I want to say thank you. Chairman MINISH. Thank you, Mr. Zeferetti. Mr. Green, do you have any questions? Mr. GREEN. Yes. I think both in your testimony and in the previous testimony at earlier hearings that this subcommittee held it has become clear that at the heart of the enforcement problem is the fact that Treasury, the financial institutions regulatory agencies, and Justice each have a part to play in this; but each have their own institutional interest. The question is whether some mechanism is needed that does not now exist that insures they are all pulling together. Is there some way that can be done? Mr. ANDERSON. The opportunity was probably missed several years ago for all of the agencies to get together, decide on how this new information could be fruitfully put to use and gear up to use it. I would say that there have been a number of ad hoc steps taken over time by each of the individual agencies as they slowly come to recognize that the information is there and that it has value. I would come down and say yes, there probably still is a need for the agencies to get together. It is unfortunate that it was not done back in 1974 or 1975. Mr. GREEN. Do you have any views as to what form the getting together should take and how they could do it? Mr. ANDERSON. It could probably start off with Treasury and representatives of each of the law enforcement agencies convening and assuring that the law enforcement agencies really understand what this information represents, what the Reports Analysis Branch actually has in its files, and how that information might be useful to the law enforcement agencies. I think you would have to depend on the law enforcement agencies to perceive how they might use it. I think there might be beneficial exchange of views among the law enforcement agencies on how the data might be used. I would say that the initial step would be let's get together, let us, Treasury, the Reports Analysis Branch, really enlighten these people on what this information that we have represents, and let them try and perhaps reason through collectively on how we can put it to some use. Mr. GREEN. Would you include the financial institutions regulatory agencies in this process? Mr. ANDERSON. I don't think that would really be required, sir. In other words, I see a separate function there. I think the regulatory agencies have to be concerned with compliance. I think that they have made substantial progress in the last couple of years. I think that this is evidenced by the number of reports that are being submitted in the last 5 years, about a sixfold or sevenfold increase in the number of reports which indicates that the word is getting out to the institutions. I do not see them as really being a necessary part of what do we do with this information, how can we better utilize it. Mr. GREEN. You are comfortable that the financial institutions regulatory agencies are now taking this part of their regulatory responsibility seriously? |