prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: The Federal Communications Commission (FCC) is an independent federal agency, with its five members appointed by the President, subject to confirmation by the Senate  It was established by the Communications Act of 1934 (1934 Act, or "Communications Act") and is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable  The mission of the FCC is to ensure that the American people have available, "without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges " The 1934 Act is divided into titles and sections that describe various powers and concerns of the commission  Title I—FCC Administration and Powers  The 1934 Act originally called for a commission consisting of seven members, but that number was reduced to five in 1983  Commissioners are appointed by the President and approved by the Senate to serve five-year terms; the President designates one member to serve as chairman  Title II—Common carrier regulation, primarily telephone regulation, including circuit-switched telephone services offered by cable companies  Common carriers are communication companies that provide facilities for transmission but do not originate messages, such as telephone and microwave providers  The 1934 Act limits FCC regulation to interstate and international common carriers, although a joint federal-state board coordinates regulation between the FCC and state regulatory commissions  Title III—Broadcast station requirements  Much existing broadcast regulation was established prior to 1934 by the Federal Radio Commission, and most provisions of the Radio Act of 1927 were subsumed into Title III of the 1934 Act  Title IV—Procedural and administrative provisions, such as hearings, joint boards, judicial review of the FCC's orders, petitions, and inquiries  Title V—Penal provisions and forfeitures, such as violations of rules and regulations  Title VI—Cable communications, such as the use of cable channels and cable ownership restrictions, franchising, and video programming services provided by telephone companies  Title VII—Miscellaneous provisions and powers, such as war powers of the President, closed captioning of public service announcements, and telecommunications development fund  The FCC is directed by five commissioners appointed by the President and confirmed by the Senate for five-year terms (except when filling an unexpired term)  The President designates one of the commissioners to serve as chairperson  Three commissioners may be members of the same political party as the President and none can have a financial interest in any commission-related business  Ajit Pai, Chair (originally sworn in on May 14, 2012; designated chairman by President Trump in January 2017 and confirmed by the Senate for a second term on October 2, 2017); Michael O'Rielly (sworn in for a second term on January 29, 2015); Brendan Carr (sworn in on August 11, 2017); Jessica Rosenworcel (sworn in on August 11, 2017); and Geoffrey Starks (sworn in on January 30, 2019)  The day-to-day functions of the FCC are carried out by 7 bureaus and 10 offices  The current basic structure of the FCC was established in 2002 as part of the agency's effort to better reflect the industries it regulates  The seventh bureau, the Public Safety and Homeland Security Bureau, was established in 2006, largely in response to Hurricane Katrina  The bureaus process applications for licenses and other filings, analyze complaints, conduct investigations, develop and implement regulatory programs, and participate in hearings, among other things  The offices provide support services  Bureaus and offices often collaborate when addressing FCC issues  The bureaus hold the following responsibilities: Consumer and Governmental Affairs Bureau—Develops and implements consumer policies, including disability access and policies affecting Tribal nations  The Bureau serves as the public face of the Commission through outreach and education, as well as responding to consumer inquiries and informal complaints  The Bureau also maintains collaborative partnerships with state, local, and tribal governments in such critical areas as emergency preparedness and implementation of new technologies  In addition, the Bureau's Disability Rights Office provides expert policy and compliance advice on accessibility with respect to various forms of communications for persons with disabilities  Enforcement Bureau—Enforces the Communications Act and the FCC's rules  It protects consumers, ensures efficient use of spectrum, furthers public safety, promotes competition, resolves intercarrier disputes, and protects the integrity of FCC programs and activities from fraud, waste, and abuse  International Bureau—Administers the FCC's international telecommunications and satellite programs and policies, including licensing and regulatory functions  The Bureau promotes pro-competitive policies abroad, coordinating the FCC's global spectrum activities and advocating U S  interests in international communications and competition  The Bureau works to promote high-quality, reliable, interconnected, and interoperable communications infrastructure on a global scale  Media Bureau—Recommends, develops, and administers the policy and licensing programs relating to electronic media, including broadcast, cable, and satellite television in the United States and its territories  Public Safety and Homeland Security Bureau—Develops and implements policies and programs to strengthen public safety communications, homeland security, national security, emergency management and preparedness, disaster management, and network reliability  These efforts include rulemaking proceedings that promote more efficient use of public safety spectrum, improve public alerting mechanisms, enhance the nation's 911 emergency calling system, and establish frameworks for communications prioritization during crisis  The Bureau also maintains 24/7 operations capability and promotes Commission preparedness to assist the public, first responders, the communications industry, and all levels of government in responding to emergencies and major disasters where reliable public safety communications are essential  Wireless Telecommunications Bureau—Responsible for wireless telecommunications programs and policies in the United States and its territories, including licensing and regulatory functions  Wireless communications services include cellular, paging, personal communications, mobile broadband, and other radio services used by businesses and private citizens  Wireline Competition Bureau—Develops, recommends, and implements policies and programs for wireline telecommunications, including fixed (as opposed to mobile) broadband and telephone landlines, striving to promote the widespread development and availability of these services  The Bureau has primary responsibility for the Universal Service Fund which helps connect all Americans to communications networks  The offices hold the following responsibilities: Administrative Law Judges—Composed of one judge (and associated staff) who presides over hearings and issues decisions on matters referred by the FCC  Communications Business Opportunities—Promotes competition and innovation in the provision and ownership of telecommunications services by supporting opportunities for small businesses as well as women and minority-owned communications businesses  Economics and Analytics—Responsible for expanding and deepening the use of economic analysis into Commission policymaking, for enhancing the development and use of auctions, and for implementing consistent and effective agency-wide data practices and policies  The Office also manages the FCC's auctions in support of and in coordination with the FCC's Bureaus and Offices  In January 2019, the FCC voted along party lines to eliminate the Office of Strategic Planning and Policy Analysis and replace it with the Office of Economics and Analytics  Engineering and Technology—Advises the FCC on technical and engineering matters  This Office develops and administers FCC decisions regarding spectrum allocations and grants equipment authorizations and experimental licenses  General Counsel—Serves as the FCC's chief legal advisor and representative  Inspector General—Conducts and supervises audits and investigations relating to FCC programs and operations  Legislative Affairs—Serves as the liaison between the FCC and Congress, as well as other federal agencies  Managing Director—Administers and manages the FCC  Media Relations—Informs the media of FCC decisions and serves as the FCC's main point of contact with the media  Workplace Diversity—Ensures that FCC provides employment opportunities for all persons regardless of race, color, sex, national origin, religion, age, disability, or sexual orientation  Additionally, an FCC Secretary serves to preserve the integrity of the FCC's records, oversee the receipt and distribution of documents filed by the public through electronic and paper filing systems, and give effective legal notice of FCC decisions by publishing them in the Federal Register and the FCC Record   The current FCC Strategic Plan covers the five-year period FY2018-FY2022  The plan outlines four goals: Closing the Digital Divide—Broadband is acknowledged as being critical to economic opportunity, but broadband is unavailable or unaffordable in many parts of the country  The FCC is to seek to help close the digital divide, bring down the cost of broadband deployment, and create incentives for providers to connect consumers in hard-to-serve areas  Promoting Innovation—Fostering a competitive, dynamic, and innovative market for communications services is a key priority for the FCC  The FCC plans to promote entrepreneurship, expand economic opportunity, and remove barriers to entry and investment  Protecting Consumers and Public Safety—Serving the broader public interest is the FCC's core mission  The FCC plans to work to combat unwanted and unlawful robocalls, make communications accessible for people with disabilities, and protect public safety (e g , ensuring delivery of 9-1-1 calls, restoring communications after disasters)  Reforming the FCC's Processes—One of the chairman's top priorities has been to implement process reforms to make the work of the FCC more transparent, open, and accountable to the public  The FCC plans to modernize and streamline its operations and programs to improve decisionmaking, build consensus, and reduce regulatory burdens  The FCC has identified performance objectives associated with each strategic goal  Commission management annually develops targets and measures related to each performance goal to provide direction toward accomplishing those goals  Targets and measures are published in the FCC's Performance Plan, and submitted with the commission's annual budget request to Congress  Results of the commission's efforts to meet its goals, targets, and measures are found in the FCC's Annual Performance Report published each February  The FCC also issues a Summary of Performance and Financial Results every February, providing a concise, citizen-focused review of the agency's accomplishments  Since the 110 th Congress, the FCC has been funded through the House and Senate Financial Services and General Government (FSGG) appropriations bill as a single line item  Previously, it was funded through what is now the Commerce, Justice, Science appropriations bill, also as a single line item  The FCC annually collects and retains regulatory fees to offset costs incurred by the agency and to carry out its functions  Since 2009 the FCC's budget has been derived from regulatory fees collected by the agency rather than through a direct appropriation  The fees, often referred to as "Section (9) fees," are collected from license holders and certain other entities (e g , cable television systems)  The regulatory fees do not apply to governmental entities, amateur radio operator licensees, nonprofit entities, and certain other non-commercial entities  The FCC is authorized to review the regulatory fees each year and adjust them to reflect changes in its appropriation from year to year  The Commission originally implemented the Regulatory Fee Collection Program by rulemaking on July 18, 1994  The most recent regulatory fee order was released by the Commission on August 29, 2018  The FCC's budgets from FY2010 to FY2020 are in Figure 1   On March 23, 2018, the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (the "RAY BAUM'S Act" or "2018 Act") became law as part of the Consolidated Appropriations Act, 2018 ( P L  115-141 )  The 2018 Act requires the FCC to transfer all excess collections for FY2018 and prior years to the General Fund of the U S  Treasury for the sole purpose of deficit reduction  The 2018 Act also requires the Commission to transfer any excess collections in FY2019 and in subsequent years to the General Fund of the U S  Treasury for the sole purpose of deficit reduction  On October 1, 2018, the Commission transferred over $9 million in excess collections from FY2018 as well as approximately $112 million in excess collections from FY2017 and prior years to the General Fund of the U S  Treasury  For FY2020, the FCC has requested $335,660,000 in budget authority from regulatory fee offsetting collections  This is $3,950,000 less than the authorization level of $339,610,000 included in the 2018 FCC Reauthorization in the Consolidated Appropriations Act, 2018  The FY2020 FCC request also represents a decrease of $3,340,000, or about 1 0%, from the FY2019 appropriated level of $339,000,000  The FCC requested $132,538,680 in budget authority for the spectrum auctions program  For FY2019, Congress appropriated a cap of $130,284,000 for the spectrum auctions program, which included additional funds to implement the requirements of the 2018 Act that mandated significant additional work for the FCC related to the TV Broadcaster Relocation Fund  The Commission's FY2020 budget request of $132,538,680 for this program would be an increase of $2,254,680, or 1 7%, over the FY2019 appropriation  This level of funding is intended to enable the Commission to continue its efforts to: reimburse full power and Class A stations, multichannel video programming distributors, Low Power TV, TV translator, and FM stations for reasonable costs incurred as a result of the Commission's incentive auction; make more spectrum available for 5G; and educate consumers affected by the reorganization of broadcast television spectrum  To date, the Commission's spectrum auctions program has generated over $114 6 billion for government use; at the same time, the total cost of the auctions program has been less than $2 0 billion, or less than 1 7% of the total auctions' revenue  Through the Consolidated Appropriations Act, 2018 ( P L  115-141 ), the FCC was reauthorized for the first time since 1990 (FCC Authorization Act of 1990, P L  101-396 )  The FCC publishes four periodic reports for Congress  Strategic Plan  The Strategic Plan is the framework around which the FCC develops its yearly Performance Plan and Performance Budget  The FCC submitted its current four-year Strategic Plan for 2018-2022 in February 2018, in accordance with the Government Performance and Results Modernization Act of 2010, P L  111-352   Performance Budget  The annual Performance Budget includes performance targets based on the FCC's strategic goals and objectives, and serves as the guide for implementing the Strategic Plan  The Performance Budget becomes part of the President's annual budget request  Agency Financial Report  The annual Agency Financial Report contains financial and other information, such as a financial discussion and analysis of the agency's status, financial statements, and audit reports  Annual Performance Report  At the end of the fiscal year, the FCC publishes an Annual Performance Report that compares the agency's actual performance with its targets  All of these reports are available on the FCC website, https://www fcc gov/about/strategic-plans-budget   One FCC-related hearing has been held in the 116 th Congress  On April 3, 2019, the House Committee on Appropriations Subcommittee on Financial Services and General Government held a hearing on the FY2020 FCC budget  The hearing addressed issues including 5G deployment, federal preemption of state and local tower siting requirements, merger reviews, robocalls, and net neutrality  No bills that would affect the operation of the FCC have been introduced in the 116 th Congress  The FCC operates under a public interest mandate first laid out in the 1927 Radio Act (P L  632, 69 th Congress), but how this mandate is applied depends on which of two regulatory philosophies is relied upon to interpret it  The first seeks to protect and benefit the public at large through regulation, while the second seeks to achieve the same goals through the promotion of market efficiency  Additionally, Congress granted the FCC wide latitude and flexibility to revise its interpretation of the public interest standard to reflect changing circumstances, and the agency has not defined it in more concrete terms  These circumstances, paired with changes in FCC leadership, have led to significant changes over time in how the FCC regulates the broadcast and telecommunications industries  This evolution can be illustrated in changes to the agency's strategic goals under former Chairman Tom Wheeler to current Chairman Ajit Pai, which, in turn, led to the repeal in 2017 of the FCC's 2015 net neutrality rules and to changes in the agency's structure in 2019  The FCC's strategic goals are set forth in its quadrennial Strategic Plan  How these goals change from one plan to the next can illustrate how the priorities of the commission change over time, especially when there is a change in the political majority of the commission and therefore, the political party of the chairman  Table 1 outlines the strategic goals of Chairman Wheeler in the FY2015-FY2018 Strategic Plan compared to those of Chairman Pai in the FY2018-FY2022 Strategic Plan  Chairman Wheeler was a proponent of protecting and benefitting the public through regulation  His support of this regulatory philosophy can be seen in the language used in the strategic goals, such as the "rights of users" and the "responsibilities of network providers " Another example can be seen in the following language: "The FCC has a responsibility to promote the expansion of these networks and to ensure they have the incentive and the ability to compete fairly with one another in providing broadband services " On the other hand, Chairman Pai speaks about protecting and benefitting the public through the promotion of market incentives and efficiency  His support of this regulatory philosophy can be seen in the language used in the strategic goals, such as "reducing regulatory burdens" and ensuring that "regulations reflect the realities of the current marketplace, promote entrepreneurship, expand economic opportunity, and remove barriers to entry and investment " The use of this particular language may seem somewhat vague, but within the context of the net neutrality debate, discussed below, and the replacement of the Office of Strategic Planning and Policy Analysis with the Office of Economics and Analytics, those words take on more specific meaning, each intending to support the policy agenda of the Chairman  Net neutrality is arguably the highest profile issue illustrating the two regulatory philosophies described above  Chairman Pai had long maintained that the FCC under Chairman Wheeler had overstepped its bounds, expressing confidence that the 2015 Wheeler-era net neutrality rules would be undone, calling them "unnecessary regulations that hold back investment and innovation " Although the net neutrality debate originated in 2005, the 2015 Open Internet Order, implemented under the leadership of Chairman Wheeler, and the 2017 Order overturning those rules, promulgated under Chairman Pai, are the most recent  These two orders can be used to illustrate the contrast between the regulatory philosophies of the two chairmen: Some policymakers contend that more proscriptive regulations, such as those contained in the FCC's 2015 Open Internet Order (2015 Order), are necessary to protect the marketplace from potential abuses which could threaten the net neutrality concept  Others contend that existing laws and the current, less restrictive approach, contained in the FCC's 2017 Restoring Internet Freedom Order (2017 Order), provide a more suitable framework  Net neutrality continues to be a highly politicized issue, with most FCC action being approved along party lines  In January 2019, the FCC voted along party lines to eliminate the Office of Strategic Planning and Policy Analysis and replace it with a new Office of Economics and Analytics  The Office of Strategic Planning and Policy Analysis (OSP) was created in 2005, replacing the Office of Plans and Policy  OSP had been charged with "providing advice to the chairman, commissioners, bureaus, and offices; developing strategic plans; identifying the agency's policy objectives; and providing research, advice, and analysis of advanced, novel, and nontraditional communications issues " It had also been the home of the Chief Economist and Chief Technologist  The new Office of Economics and Analytics is "responsible for expanding and deepening the use of economic analysis into FCC policy making, for enhancing the development and use of auctions, and for implementing consistent and effective agency-wide data practices and policies " This new office reflects the goals in the current strategic plan: We will modernize and streamline the FCC's operations and programs to … reduce regulatory burdens…  A key priority [is to] … ensure that the FCC's actions and regulations reflect the realities of the current marketplace … and remove barriers to entry and investment  As the FCC continues to conduct its business into the future, the changing regulatory philosophies of the FCC chairmen may continue to drive how the FCC defines its long-term, strategic goals  This, in turn, may affect how the agency structures (and restructures) itself and how it decides regulatory questions, including a continued review of net neutrality  Congress may determine that the public interest standard should remain more static, rather than fluctuating dramatically depending on the regulatory philosophy of the chairman  No legislation on this topic has been introduced in Congress, signaling to some observers that it intends to continue allowing the FCC to define it  Table A-1   Senate and House hearings in the 115 th Congress regarding the operation of the FCC are detailed in Table A-2 and Table A-3 , respectively  Links to individual hearing pages are included in these tables 


Report 2: International financial transactions, including the transfer of U S  humanitarian assistance funds, rely on a system of correspondent banking relationships  State and USAID provide humanitarian assistance through funding awards to partners  Funds to U S  partners are deposited into the partners’ bank accounts located in the United States  The partners are then responsible for transferring the funds to recipient countries for project implementation  These transfers typically involve the use of a correspondent, or intermediary, bank to transfer the funds from a U S -based account to an account held at the recipient country, where the funds are then used by in-country staff to implement the project  See appendix IV for more information on the State and USAID offices providing humanitarian assistance  According to research by the Bank for International Settlements, the number of correspondent banking relationships has declined over the past several years, especially for banks that are located in higher-risk jurisdictions (such as those subject to sanctions), have customers perceived as higher-risk, and who generate revenues insufficient to recover compliance costs  Further, the Financial Stability Board noted that a decline in the number of correspondent banking relationships could affect the ability to send and receive international payments and may drive some payment flows underground, with potential consequences on growth, financial inclusion, and the stability and integrity of the financial system  When performing overseas money transfers, U S  banks and financial institutions must comply with the Bank Secrecy Act’s (BSA) anti-money laundering (AML) regulations and relevant regulations that implement U S  sanctions  The BSA has established reporting, recordkeeping, and other AML requirements for financial institutions  BSA/AML regulations require that each bank tailor a compliance program that is specific to its own risks based on factors such as products and services offered, and customers and locations served  By complying with BSA/AML requirements, U S  financial institutions assist government agencies in the detection and prevention of money laundering and terrorist financing by, among other things, maintaining compliance policies, conducting ongoing monitoring of customers and transactions, and reporting suspicious financial activity  In addition to BSA regulations established by Treasury, federal banking regulators have issued their own BSA regulations  These regulations require banks to establish and maintain a BSA compliance program that, among other things, identifies and reports suspicious activity  The banking regulators are also required to review banks’ compliance with BSA/AML requirements and regulations, and they generally do so every 12 to 18 months as a part of their routine safety and soundness examinations  Among other things, examiners review whether banks have an adequate system of internal controls to ensure ongoing compliance with BSA/AML regulations  The federal banking regulators may take enforcement actions using their prudential authorities for violations of BSA/AML requirements  They may also assess civil money penalties against financial institutions and individuals  Banks must also comply with relevant regulations that implement U S  sanctions in certain countries  When the United States imposes sanctions on an entity or individual, it freezes assets subject to U S  jurisdiction  All U S  transactions with the entity or individual are prohibited, including transactions by banks and NPOs  When appropriate, Treasury’s Office of Foreign Assets Control (OFAC) may issue a general license authorizing the performance of certain categories of transactions, including funds transfers for the provision of humanitarian assistance  OFAC also issues specific licenses on a case-by-case basis under certain limited situations and conditions  Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, takes actions to help prevent financial crimes, and considers NPOs operating in conflict areas and other high risk zones as potentially vulnerable to such crimes  Treasury leads U S  efforts to fight various financial crimes primarily through its Office of Terrorism and Financial Intelligence (TFI)  TFI develops and implements U S  government strategies to combat terrorist financing domestically and internationally, and develops and implements the National Money Laundering Strategy as well as other policies and programs to fight financial crimes  Relevant offices under TFI include: The Office of Terrorist Financing and Financial Crimes (TFFC)  TFFC, the policy development and outreach office for TFI, works across all elements of the national security community – including the law enforcement, regulatory, policy, diplomatic, and intelligence communities – and with the private sector and foreign governments to identify and address the threats presented by all forms of illicit finance to the international financial system  The Office of Foreign Assets Control (OFAC)  OFAC administers and enforces economic and financial sanctions based on U S  foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, transnational criminal organizations, human rights abusers and corrupt actors, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States  The Financial Crimes Enforcement Network (FinCEN)  FinCEN, among other duties, is responsible for administering the BSA, has authority for enforcing compliance with its requirements and implementing regulations, and also has the authority to enforce the BSA, including through civil money penalties  FinCEN issues regulations under the BSA and relies on the examination functions performed by other federal regulators, including federal banking regulators  FinCEN also collects, analyzes, and maintains the reports and information filed by financial institutions under BSA and makes those reports available to law enforcement and regulators  According to Treasury, organizations, including NPOs, implementing humanitarian assistance in high-risk areas may be vulnerable to exploitation by terrorist groups and their support networks  These terrorist groups and support networks may establish or abuse charities to raise and move funds, or provide other forms of support, that benefit the terrorist groups  As of May 2017, Treasury, through OFAC, had designated 67 charities, branches, and foreign terrorist organizations’ potential fundraising front organizations for violations of U S  sanctions  For 7 of our 18 selected projects, State and USAID partners told us that they had experienced banking access challenges  Additionally, 15 of the 18 partners we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects over the previous 5 years  Most of the 18 partners we interviewed told us that they were able to mitigate these challenges through various actions or the challenges were not significant enough to affect project implementation  Nevertheless, a few partners noted that projects they were implementing were adversely affected by such challenges  For example, 1 of our 18 selected projects faced repeated delays as a result of banking access challenges  Additionally, 2 partners noted that they had to reduce the scope of implementation or suspend projects in their global humanitarian assistance portfolio because of banking access challenges  Furthermore, several partners and other NPOs told us that such challenges posed potential risks to project implementation  Lastly, a recent study found that more than two-thirds of all U S -based NPOs that work internationally experienced banking access challenges, but that few NPOs canceled programs as a result of those challenges  For our 18 selected U S -funded projects, 7 of the partners told us that they had experienced banking access challenges in implementing their projects, with the majority citing delays or denials of funds transfers  Specifically, 3 (of 5) partners in Somalia and 4 (of 7) partners in Syria told us that they had experienced banking access challenges related to the selected project  None of the partners implementing selected sample projects in Haiti or Kenya noted that they had experienced any banking access challenges  Denials of funds transfers to the destination country was the most frequently cited banking access challenge (experienced by 5 of the 7 projects), followed by delays of funds transfers (experienced by 3 of the 7 projects) (see fig  2)  Fifteen of the 18 partners that we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects implemented over the previous 5 years (see fig  3)  The most frequently cited challenges were funds transfer delays and denials  Twelve partners noted that they had experienced transfer delays, with 8 noting that the delays occurred occasionally and 6 noting that the delays lasted weeks or months  Most partners that noted experiencing delays told us that the delays were caused exclusively by intermediary banks  Eleven partners noted that they had experienced transfer denials, including 5 that told us the denials occurred occasionally  Five partners also noted that transfers were denied by intermediary banks  In addition, 2 partners noted that they had experienced challenges opening new bank accounts; 3, increased costs to transfer funds; 1, a bank-initiated account closure; and 2, other challenges  For more information on the types of banking access challenges that partners identified, including details on the duration of delays and the frequency of denials, see appendix V  Some partners that experienced banking access challenges told us that those challenges had adversely affected or posed a potential risk to implementation of projects  Of those partners experiencing challenges, 3 partners noted that banking access challenges had adversely affected a project’s implementation  Specifically, 1 partner that experienced challenges on one of our selected projects and 2 partners that experienced challenges on projects outside of our sample noted that the challenges they had experienced resulted in a project being adversely affected in some form, such as: Reduced scope of implementation  One partner told us that its project in the Democratic People’s Republic of Korea was scaled back significantly because of difficulty transferring funds to the country  Delays implementing a project  One partner told us that for one of our selected projects, in part because of banking access challenges, implementation of the project was delayed and required approval for two no-cost extensions from USAID  The partner noted that it had experienced recurring issues with funds transfers to Syria, including 3- to 6-week delays and frequent denials of transfers  Suspension of an in-progress project  One partner told us that an ongoing project it implemented in Syria (outside of our sample of projects) to deliver food assistance had been suspended for about a week because its funds transfers to the country were denied  While some projects were adversely affected, 6 of the 7 partners of our selected projects that noted experiencing banking access challenges told us that the challenges they had experienced did not adversely affect project implementation  Similarly, 12 of the 15 partners that noted experiencing banking access challenges on their global portfolio of humanitarian assistance told us that the challenges did not affect project implementation  Additionally, for both our selected projects and their global portfolio of humanitarian assistance projects, the challenges experienced were either not significant enough to affect project implementation, or were mitigated through various actions  For example, partners told us that they had mitigated challenges by: Maintaining a funding buffer  Partners may keep enough funding to operate a project for several weeks in order to mitigate delays and denials of funds transfers  For example, one partner noted that projects maintain approximately 4 weeks of operating funds on hand, which is enough to mitigate transfer delays that last up to 3 weeks  Using alternate methods to move funds  Partners may use alternate methods to move funds, such as using different intermediary banks or money transmitters, or by carrying cash  For example, one partner told us that when its U S  bank stopped allowing funds transfers to Syria, the partner opened an account with a different bank  That partner also told us that because it was unable to reliably transfer funds to Syria, it regularly transfers funds to Lebanon—either to intermediaries or to the personal accounts of individuals involved in the projects—and manually moves the physical currency to Syria  Maintaining multiple bank accounts  Partners may maintain accounts with multiple banks in order to mitigate the risk of a bank-initiated account closure  For example, one partner told us that after a bank closed all of its accounts without warning or explanation, the partner opened accounts across three different banks in order to mitigate the effects of any individual bank closing its account  While most partners’ projects did not experience adverse effects as a result of banking access challenges, three USAID partners—as well as another NPO that we spoke with—told us that banking access challenges posed a potential risk to project implementation, such as: Potential for physical violence  One partner told us that, for one of our selected projects, there were concerns of violence if payments were halted because of funds transfer delays, while another partner told us that violence was a concern if it was unable to pay vendors on time  An NPO also told us that there was a potential for physical violence if local staff were not paid on time  Potential for insolvency of vendors  One partner told us that, for one of our selected projects, transfer delays prevented it from reimbursing a money transmitter it used to move funds to Somalia, which in turn caused that money transmitter to experience financial difficulties  The partner stated that the delays were almost significant enough to affect operations, though it was able to resolve the situation in time to prevent its vendor from becoming insolvent  Potential for project suspension  One partner told us that it provides advance funding for projects to account for delays, but at times transfer delays have come close to exhausting the advance funding  For example, the partner told us that it provided funding for projects 4 weeks in advance and experienced transfer delays averaging 3 weeks  In addition, an NPO told us that staff are sometimes not paid for several months because of such delays; thus, if transfer delays worsened or staff were unwilling to work without being paid, project implementation may be adversely affected  A recent study by Charity and Security Network on banking access for U S  NPOs, which included NPOs that received U S  government funds, found widespread banking challenges for U S -based NPOs  Data for a survey conducted as part of this study indicated that about two-thirds of the responding U S -based NPOs that work internationally experienced banking access challenges  The challenges included delays of wire transfers, unusual requests for documentation, and increased fees  Some NPOs also cited experiencing account closures and refusals to open accounts  About 15 percent of the NPOs that responded to the survey noted that they experienced these banking access challenges constantly or regularly, and about 3 percent of NPOs reported cancelling a project because of banking access challenges  Furthermore, transfers to all parts of the globe were affected, and the challenges were not limited to conflict zones  According to the report, NPOs with 500 or fewer staff were more likely to experience delayed wire transfers, fee increases, and account closures  Smaller organizations were more likely to receive unusual requests for documentation, according to the report  The smallest NPOs, those with 10 or fewer employees, reported experiencing more trouble opening accounts than larger organizations  According to the report, as a result of the challenges they experienced, NPOs were sometimes forced to move money through less transparent, less traceable, and less safe channels, such as carrying cash  As shown in table 1, survey data from the Charity and Security Network study indicated that there were only minor differences between NPOs receiving and not receiving U S  government funding in terms of experiencing banking access challenges  For example, about 15 percent of responding NPOs, regardless of whether or not they received U S  funds, noted experiencing banking access challenges regularly or constantly, with transfer delays the challenge most frequently cited by both groups  Additionally, about the same proportion of NPOs that received or did not receive U S  funds reported that they rarely or never experienced banking access challenges  Both groups of NPOs also noted taking similar measures to deal with banking access challenges  USAID’s partners’ written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation  Six of the 7 projects that noted experiencing banking access challenges were USAID projects  None of those 6 USAID partners reported on the banking access challenges they had experienced to USAID in their regular project reporting  USAID requires partners to report adverse effects to their projects, but 1 partner that faced delays on its project as a result of banking access challenges did not identify these challenges as the reason for delays in its reporting to USAID  We also reviewed over 1,300 USAID partner reports for fiscal years 2016 and 2017 from high-risk countries and found no explicit discussion of banking access challenges  USAID generally requires partners implementing humanitarian assistance projects to report challenges that affect project implementation  USAID, through the Office of U S  Foreign Disaster Assistance (OFDA) and the Office of Food For Peace (FFP), provides humanitarian assistance and monitors the implementation of projects through various methods, including periodic performance reports  USAID’s reporting requirements, as well as the number of partners of selected projects that told us they had experienced banking access challenges, are as follows: USAID/OFDA  USAID/OFDA agreements for the selected projects we reviewed require the awardee to report via email (1) developments that have a significant effect on the activities supported by the agreement, and (2) problems, delays, or adverse conditions that materially impair the ability to meet the objectives of this agreement  The agreements also require Program Performance Reports that must address reasons why established goals were not met, the impact on the program objectives, and how the impact has been or will be addressed  Four of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/OFDA projects  USAID/FFP  USAID/FFP’s Fiscal Year 2017 Annual Program Statement for International Emergency Food Assistance requires partners to report, as part of their quarterly reporting, any challenges that the project has faced during the quarter and how they were resolved and discuss any potential challenges or delays that may affect the program’s ability to achieve its objectives  Each of the agreements—both for NPOs and for public international organizations—that we reviewed require the partner to notify USAID of any developments, problems, or delays that may have an adverse effect on the project  Two of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/FFP projects  Five of the 6 USAID partners of selected sample projects that noted experiencing banking access challenges told us those challenges did not adversely affect project implementation and therefore did not need to be reported  The sixth—a partner that noted its project was adversely affected by banking access challenges—did not include these challenges in its reporting to USAID, although the challenges met the reporting threshold of adversely affecting project implementation  While both USAID and the partner told us that the delays were communicated to USAID through emails and conversations with a designated USAID contact and in the justification for the no-cost extensions submitted to USAID, our review of the partner’s program performance reports to USAID and the no-cost extensions found no explicit discussion of banking access challenges  Our review of the over 1,300 publicly available USAID partner reports for fiscal years 2016 and 2017 from high-risk countries found no explicit discussion of banking access challenges  Overall, we identified 5 reports out of the over 1,300 that included some mention of challenges related to banking access  However, those reports lacked sufficient detail for us to determine the type, severity, or origin of the challenges  For example, one report stated that there are sometimes delays in the payment of salaries through foreign accounts, with no further details about the delays, while another report stated that subgrantees experienced delays in payments without identifying the reasons for these delays, which could include late reports, late verification, late processing, or banking issues  While most of the partners we interviewed noted that they did not report banking access challenges because the challenges did not adversely affect their projects, an NPO advocacy group and a large international NPO told us that NPOs may be reluctant to discuss or report banking access challenges publicly because of concern about being perceived as high-risk or unable to carry out their mission, and that any public mention of banking access challenges could adversely affect their ability to raise funds  Standards for Internal Control in the Federal Government require agencies to identify and respond to risks related to achieving their goals, and USAID currently has no other process for collecting information on banking access challenges affecting its partners  Without this information, USAID does not have a record of the frequency and prevalence of the challenges and may not be aware of the full extent of risks to achieving its humanitarian assistance objectives  Further, as mentioned previously, two USAID partners stated that their projects faced potential adverse effects from banking access challenges  Documenting the prevalence and frequency of banking access challenges experienced by USAID partners is important given the potential adverse effects that these challenges can have on project implementation  Both Treasury and State have taken actions to help address banking access challenges encountered by NPOs; however, USAID’s efforts to address these challenges have been limited by a lack of communication about them—both within the agency and with external entities  Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, has conducted meetings between charities, banks, and government officials to discuss banking access challenges and released guidance on sanctions and other related issues  State, as a provider of funding for humanitarian assistance, has issued guidance to its overseas posts on banking access challenges  In addition, both State and Treasury are involved in international efforts led by the World Bank and the Financial Action Task Force (FATF) to help address banking access challenges  Although USAID’s partners have experienced banking access challenges, USAID has had more limited engagement than State and Treasury with other agencies, international organizations, and NPOs on addressing such challenges—in part because of a lack of communication about them, both within the agency and with external entities  Treasury’s efforts to help address banking access challenges encountered by NPOs include holding roundtable meetings and issuing guidance and resources for charitable organizations  Treasury, in its role as a regulator of the banking system, serves as a nexus between the banks and the U S  agencies providing humanitarian assistance  Treasury has organized several roundtable meetings with the charitable sector to facilitate a dialogue on banks’ expectations  These sessions brought together representatives from charities, banks, financial supervisors, and the U S  government to discuss the factors that banks consider related to charity accounts and that examiners use in their review of banks’ procedures  Since 2013, Treasury’s Office of Terrorist Financing and Financial Crimes (TFFC) has dedicated three of these roundtable meetings specifically to banking access challenges affecting charities, as follows: December 17, 2013: This initial Treasury / TFFC working group meeting with charities included a discussion of terrorist financing risk mitigation guidance  There was also a discussion of banking access challenges, during which TFFC provided an overview of the NPO section of the manual used by bank examiners to conduct bank examinations and explained the bank examination process to the charities  March 21, 2014: This meeting focused on a discussion of access to financial services for charities  A Muslim-American charity delivered a presentation on how it has managed its banking relationships over the past several years  Several banks also delivered presentations to help charities better understand the factors that banks consider and the complex processes related to banking transactions and opening or maintaining bank accounts  November 12, 2015: This meeting included a stakeholder discussion of banking access challenges for charities, with charities, bankers, and regulators presenting each of their perspectives and discussing the challenges faced on all sides  In addition, in May 2015, Treasury, with the Department of Homeland Security, conducted a roundtable on banking access challenges with Syrian-American charities, U S  regulators, and bankers  This event was focused on challenges affecting the Syrian-American charitable community and delivering humanitarian assistance to Syria during the worsening conflict  Treasury provided guidance related to OFAC’s general license 11a for U S  charities to provide humanitarian assistance for Syria  Further, officials reported that Treasury also maintains contact with the charitable sector through various domestic and international events, and holds frequent meetings with members of the charitable sector in Washington, D C  and around the United States  Treasury has also issued guidance and resources on its website for charities, including frequently asked questions and best practices  Treasury’s website provides information and resources for all stakeholders in four strategic areas—private sector outreach, coordinated oversight, targeted investigations, and international engagement  The guidance includes: voluntary best practices regarding anti-terrorist financing for charities, lists of frequently asked questions regarding sanctions and charities, list of charities that have been designated by OFAC for assisting or having ties to terrorist organizations, several international multilateral organization reports on banking access challenges and terrorist exploitation of charities, and OFAC guidance specifically related to the provision of humanitarian assistance  Lastly, Treasury has taken actions on derisking challenges more generally  According to Treasury officials, these more general actions focused on encouraging dialogue and making clear to financial institutions that they are expected to make individual risk-based decisions rather than wholesale, indiscriminate policies for entire sectors or classes of customers  Treasury officials noted that banks retain the flexibility to make business decisions such as which clients to accept, since banks are in the best position to know whether they are able to implement controls to manage the risk associated with any given client  These officials indicated that Treasury pursues market-driven solutions and cannot order banks to open or maintain accounts  The officials have stated that Treasury does not view the charitable sector as presenting a uniform or unacceptably high risk of money laundering, terrorist financing, or sanctions violations  However, charities delivering critical assistance in high-risk conflict zones have, in some cases, had terrorist organizations and their support networks exploit donations and operations to support terrorist activities  State has issued guidance to its staff overseas to help address banking access challenges encountered by NPOs and others and identified a focal point for banking access challenges within the agency  In July 2017, State issued internal guidance, through a document issued to all of its overseas embassies, regarding derisking  State, based on guidance from Treasury, developed guidance for all personnel that provides background on “de-risking” and related talking points, additional web-based resources, and an assessment framework tool to evaluate the current state of banking relationships in a given market  The guidance includes links to resources from Treasury, U S  banking regulators, and various international organizations, such as the World Bank, International Monetary Fund, and FATF  The guidance is designed to give embassy staff some tools to work with host governments on these issues and to help identify countries and markets where further U S  government engagement is necessary  In addition, State’s Office of Threat Finance Countermeasures serves as the main focal point for all banking access challenges brought to the attention of State  This office provides assistance to State’s embassies when banking-access-related issues are raised through the embassy to State headquarters  All embassy staff, as part of the guidance issued on derisking, have been instructed to direct all questions received on banking access issues to the Office of Threat Finance Countermeasures  In addition, this office is responsible for interfacing with Treasury on banking access issues and staff from this office have attended all of the relevant Treasury-hosted roundtable meetings focused on banking access challenges encountered by charities  The World Bank and FATF have several efforts underway—with participation from Treasury and State—to address banking access challenges for NPOs  The World Bank, in collaboration with the Association of Certified Anti-Money Laundering Specialists (ACAMS), is working with humanitarian organizations, banks, and U S  regulators on the question of how humanitarian organizations can maintain access to the financial system  More specifically, the World Bank and ACAMS have launched three primary work streams focused on different aspects of banking access to improve NPOs’ understanding of what the financial institutions require and to improve the banks’ understanding of how NPOs operate  According to a World Bank official, the three workstreams are as follows: Work Stream 1: This work stream aims to ensure a better understanding of bank examiners of the NPO sector and to enable more risk differentiation on the part of those examiners when they conduct on-site supervision and examine bank client accounts  Work Stream 2: This work stream aims to help banks conduct due diligence on charities more easily through the use of technological tools, such as databases that contain key information on charities  Work Stream 3: This work stream aims to work with the regulatory bodies to help bank examiners change their perceptions of the risk potential of charities  In addition, the World Bank and ACAMS have organized roundtable meetings as part of the ongoing Stakeholder Dialogue on De-Risking  The objectives of a January 2017 meeting were to promote access of humanitarian organizations to financial services and to discuss practical measures to foster the relationship between NPOs and financial institutions, improve the regulatory and policy climate for financial access for NPOs, and build coalitions and create opportunities for sharing information and good due diligence practices  Officials from Treasury and State have been involved with the dialogues and various work streams  FATF, with participation from both Treasury and State, also has several efforts underway to help address banking access challenges, including revising its recommendations and issuing guidance  Derisking has been a stated FATF priority since October 2014  In June 2016, FATF revised its recommendation that pertains to how countries should review NPOs and its interpretive note to better reflect how to implement measures to protect NPOs from terrorist abuse, in line with the proper implementation of the risk-based approach  According to Treasury, this approach emphasizes that not all charities are considered high-risk  Specific changes included defining NPOs, removal of the words “particularly vulnerable” from previous language, and emphasis on a risk-based approach for evaluating NPOs  The FATF has also issued guidance and best practices to guide both financial institutions and regulators on how to properly implement the risk-based approach, in line with the revised FATF recommendations  Additionally, according to Treasury, the FATF updated a report analyzing the global terrorist threat to the charitable sector, gathering over 100 examples of terrorist abuse of charities to pinpoint which types of charities are considered higher-risk  This report and its findings were published in June 2014  USAID efforts to address banking access challenges have been limited, in part because of a lack of communication within the agency and with external entities about challenges faced by USAID’s partners  Within USAID, we found that information on banking access challenges faced by partners was not always communicated beyond staff directly overseeing the project

ground_truth: The Federal Communications Commission (FCC) is an independent federal agency established by the Communications Act of 1934 (1934 Act, or "Communications Act"). The agency is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. The mission of the FCC is to make available for all people of the United States, "without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges." The FCC operates under a public interest mandate first laid out in the 1927 Radio Act (P.L. 632, 69th Congress), but how this mandate is applied depends on how "the public interest" is interpreted. Some regulators seek to protect and benefit the public at large through regulation, while others seek to achieve the same goals through the promotion of market efficiency. Additionally, Congress granted the FCC wide latitude and flexibility to revise its interpretation of the public interest standard to reflect changing circumstances and the agency has not defined it in more concrete terms. These circumstances, paired with changes in FCC leadership, have led to significant changes over time in how the FCC regulates the broadcast and telecommunications industries. The FCC is directed by five commissioners appointed by the President and confirmed by the Senate for five-year terms. The President designates one of the commissioners as chairperson. Three commissioners may be members of the same political party of the President and none can have a financial interest in any commission-related business. The current commissioners are Ajit Pai (Chair), Michael O'Rielly, Brendan Carr, Jessica Rosenworcel, and Geoffrey Starks. The day-to-day functions of the FCC are carried out by 7 bureaus and 10 offices. The current basic structure of the FCC was established in 2002 as part of the agency's effort to better reflect the industries it regulates. The seventh bureau, the Public Safety and Homeland Security Bureau, was established in 2006. The bureaus process applications for licenses and other filings, manage non-federal spectrum, analyze complaints, conduct investigations, develop and implement regulatory programs, and participate in hearings, among other things. The offices provide support services. Bureaus and offices often collaborate when addressing FCC issues. Beginning in the 110th Congress, the FCC has been funded through the House and Senate Financial Services and General Government (FSGG) appropriations bill as a single line item. Previously, it was funded through what is now the Commerce, Justice, Science appropriations bill, also as a single line item. Since 2009 the FCC's budget has been derived from regulatory fees collected by the agency rather than through a direct appropriation. The fees, often referred to as "Section (9) fees," are collected from license holders and certain other entities. The FCC is authorized to review the regulatory fees each year and adjust them to reflect changes in its appropriation from year to year. Most years, appropriations language prohibits the use by the commission of any excess collections received in the current fiscal year or any prior years. For FY2020, the FCC has requested $335,660,000 in budget authority from regulatory fee offsetting collections. The FCC also requested $132,538,680 in budget authority for the spectrum auctions program.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2:  We found that the USAID staff who had direct responsibility for managing the project were generally aware of banking access challenges that affected project implementation, and had taken steps to help mitigate these challenges on a project-level basis  However, other relevant staff, such as USAID management and country-level headquarters staff, were not aware of these challenges  For example, partners in Syria and Somalia that we interviewed noted experiencing banking access challenges, but the USAID officials representing these countries in headquarters told us they were not aware of such challenges occurring recently  This situation may be, in part, because USAID has no designated office or process that focuses on communicating these issues throughout the agency to other relevant officials, including USAID management  Federal standards for internal control note that management should use quality information to achieve the entity’s objectives, and that entity management needs access to relevant and reliable communication related to internal as well as external events  If information on banking access challenges experienced by USAID partners is only reported to program-level staff and not communicated to a wider audience within the agency, then the agency as a whole may not fully recognize the overall risks posed by banking access challenges to USAID’s ability to achieve its objectives  Further, the agency may miss opportunities to assist other partners that might be experiencing similar issues based on lessons learned from previous experiences, if staff are not aware of the banking access challenges that have been experienced by its partners implementing other projects or working in other countries  USAID participation in interagency and partner efforts to address banking access challenges has been limited, in part because of a lack of communication with these external entities  According to Treasury officials, because there is no main focal point at USAID for banking access challenges, there is no consistency on who attends, or whether anyone attends, the Treasury-hosted roundtable meetings on banking access challenges from USAID  Further, an NPO trade association and other NPOs told us that it is difficult to find a person at USAID to engage with on banking access challenges  Lastly, a USAID/OFDA official stated that USAID has had limited engagement on issues related to banking access challenges  The OFDA official stated that once OFDA fully staffs its new Award, Audit, and Risk Management Team, it will be able to more fully engage on these issues  Federal standards for internal control state that management should communicate the necessary quality information both internally and externally to achieve the organization’s objectives  Without effective communication with partners and other government agencies about banking access challenges its partners face, USAID’s ability to effectively and consistently engage with these entities or contribute to efforts to help address these challenges is limited  The United States provides humanitarian assistance in countries that are often plagued by conflict, instability, or other issues that increase the risk of financial crimes  Some of these countries also face U S  sanctions that are aimed at their governments or other actors that engage in terrorism or illicit activities  Additionally, to ensure that the U S  financial system is not used for money laundering or financing terrorism, financial institutions such as banks are subject to various U S  laws and regulations that require banks to conduct proper due diligence on entities, such as those transferring funds to high-risk countries  However, there is concern among some organizations that banks’ higher level of due diligence, especially for clients such as charitable organizations that provide humanitarian assistance in high-risk countries, may create undue difficulties, including delays, for these organizations  Charitable organizations and others believe that because the United States and a key multilateral organization previously labeled charitable organizations as high-risk, banks remain reluctant to serve these organizations even though a case-by-case assessment of risk is now recommended  As such, we found that the majority of implementing partners—many of which are charitable organizations—of U S  government assistance that we interviewed had experienced some banking access challenges  Despite our findings and others’ findings on the prevalence of banking access challenges facing humanitarian assistance organizations, USAID’s current partner reporting does not capture information related to the potential risks of banking access challenges faced by its partners  Without collecting this information, USAID cannot help the partners mitigate banking access challenges  Additionally, if these challenges are not documented and shared throughout the agency, the prevalence of the challenges and potential risks cannot be fully assessed  Further, without communicating about banking access challenges faced by its partners throughout the agency and to others, the potential risk to agency objectives will not be known and USAID’s ability to engage with other agencies and organizations in helping to address these challenges is limited  We are making the following two recommendations to USAID: The Administrator of USAID should take steps to collect information on banking access challenges experienced by USAID’s implementing partners  (Recommendation 1) The Administrator of USAID should take steps to communicate information on banking access challenges faced by partners both within USAID and with external entities, such as other U S  agencies and U S  implementing partners  (Recommendation 2) We provided a draft of this report to State, USAID, and Treasury for comment  We received written comments from USAID that are reprinted in appendix VI  USAID concurred with our recommendations  Treasury provided technical comments, which we incorporated as appropriate  State told us that it had no comments on the draft report  We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of the U S  Agency for International Development, the Secretary of the Treasury, and other interested parties  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-9601 or melitot@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix VII  While the Department of State (State) and the U S  Agency for International Development (USAID) have encountered some banking access challenges, such as closed accounts and delays in transferring funds, these challenges did not affect their operations for providing assistance to high-risk countries  To send funds overseas, State, through two U S  disbursement offices managed by State’s Bureau of the Comptroller and Global Financial Services (CGFS), maintains foreign currency bank accounts in 172 countries  Funds are transferred from a Federal Reserve Bank to a U S  dollar bank account maintained by State, after which the funds are directed through a correspondent bank or a foreign exchange broker to a foreign bank account maintained by State  A correspondent bank serves as the intermediary between the bank sending a transfer, in this case a U S  dollar denominated bank account, and the bank issuing payment to the recipient, in this case the State-held account in the recipient country  Both the bank sending the transfer and the bank receiving the transfer hold an account at the correspondent bank, which is used for fund transfers, cash management, and other purposes  According to State, all State transfers overseas, as well as the majority of USAID payments overseas, are managed by CGFS, and in fiscal year 2017 CGFS’s two disbursement offices processed approximately 3 million payments through accounts managed by State in 172 countries  State officials told us that State encounters occasional banking access challenges, including short delays in funds transfers, denials of funds transfers to certain countries, and one bank-initiated account closure  State officials told us that they are able to mitigate the occasional banking access challenges that they encounter to ensure operations are not affected  For example: State’s transfers to countries sanctioned by the Office of Foreign Asset Control (OFAC) are occasionally flagged by intermediary banks  According to State, in fiscal year 2017 approximately one- tenth of one percent (0 1%) of payments were delayed because of OFAC sanctions  When this occurs, State receives questions on the details of those transfers  According to officials, this is an ongoing challenge, but State resolves such delays within 2 weeks—and typically within days—and there are no operational effects as a result of the delays  In some instances—including once in 2012, and once in 2018—an intermediary bank used by CGFS’s U S  bank stopped processing transfers to a recipient bank in a specific country  According to State officials, in both cases State identified an alternative intermediary bank to transfer funds to the destination country  In both cases, there were no operational effects  In 2014, an intermediary bank used by CGFS’s U S  bank ended its banking relationship with an OFAC-sanctioned country (Syria), and State was unable to move funds from its U S -dollar denominated accounts to that country  State, with the advice of the recipient bank in the OFAC-sanctioned country, identified an alternative intermediary bank that was able to move funds to that country using euro-denominated accounts  In 2014, a U S  bank—at which State maintained an account and that State used to fund its operations in Brunei—notified State that it would be closing State’s account with 29 days’ notice  State worked with Treasury to identify an alternative bank that would be willing to maintain a State bank account  The operation was not affected  For this review, we selected four countries—Syria, Somalia, Haiti, and Kenya—that may have a higher risk of financial crimes because of conflict, instability, or other issues  We selected them based on factors including the level of humanitarian assistance they received from U S  agencies, their inclusion on multiple financial-risk-related indices, and geographical diversity  Syria  Since 2011, Syria has been plagued by an ongoing multisided armed conflict fought primarily between the government of President Bashar al-Assad, along with its allies, and various forces opposing both the government and each other  Syria’s economy has deeply deteriorated amid the ongoing conflict, declining by more than 70 percent from 2010 to 2017  During 2017, the ongoing conflict and continued unrest and economic decline worsened the humanitarian crisis, necessitating high levels of international assistance, as more than 13 million people remained in need inside Syria and the number of registered Syrian refugees increased from 4 8 million to more than 5 4 million  Multiple terrorist groups operate inside Syria, raising the potential risk of terrorist financing  Additionally, according to a Central Intelligence Agency report, Syria is a transit point for opiates, hashish, and cocaine bound for regional and Western markets, and weak anti-money-laundering controls and bank privatization may leave it vulnerable to money laundering  The U S  maintains a comprehensive Syria sanctions program  A general license in the Syria regulations authorizes nonprofit organizations to provide services, including financial services, to Syria in support of certain not-for-profit activities, such as activities to support humanitarian projects to meet basic human needs and support education in Syria  Organizations providing humanitarian assistance that is not authorized by the general license may apply for a specific license to engage in those transactions  The United States has provided approximately $3 3 billion in humanitarian assistance for Syria since 2012  Somalia  Since 1969, Somalia has endured political instability and civil conflict, and is the third-largest source of refugees, after Syria and Afghanistan  Somalia lacks effective national governance and maintains an informal economy largely based on livestock, money transfer companies, and telecommunications  In the absence of a formal banking sector, money transfer companies have sprung up throughout the country, handling up to $1 6 billion in remittances annually  According to a 2016 State report, Somalia remained a safe haven for terrorists who used their relative freedom of movement to obtain resources and funds, recruit fighters, and plan and mount operations within Somalia and neighboring countries  The United States maintains a targeted list-based Somalia sanctions program  Organizations providing humanitarian assistance may apply for a specific license to engage in transactions that otherwise would be prohibited by the Somalia sanctions regulations  The United States has provided approximately $1 2 billion in humanitarian assistance for Somalia since 2012  Haiti  Currently the poorest country in the western hemisphere, Haiti has experienced political instability for most of its history  Remittances are the primary source of foreign exchange, equivalent to more than a quarter of GDP, and nearly double the combined value of Haitian exports and foreign direct investment  In January 2010, a catastrophic earthquake killed an estimated 300,000 people and left close to 1 5 million people homeless  Hurricane Matthew, the fiercest Caribbean storm in nearly a decade, made landfall in Haiti on October 4, 2016, creating a new humanitarian emergency  An estimated 2 1 million people were affected by the category 4 storm, which caused extensive damage to crops, houses, livestock, and infrastructure across Haiti’s southern peninsula  Haiti is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report  According to USAID, the agency has provided $187 8 million in humanitarian assistance for Haiti since 2012  Kenya  Kenya is the economic, financial, and transport hub of East Africa  Since 2014, Kenya has been ranked as a lower middle income country because its per capita GDP crossed a World Bank threshold  Al-Shabaab aims to establish Islamic rule in Kenya’s northeastern border region and coast and carried out a spate of terrorist attacks in Kenya  Kenya is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report  The United States has provided approximately $807 million in humanitarian assistance for Kenya since 2012  This report examines (1) the extent to which implementing partners of the Department of State (State) and the U S  Agency for International Development (USAID) experience banking access challenges that affect their implementation of humanitarian assistance projects, (2) USAID implementing partners’ reporting on banking access challenges, and (3) actions relevant U S  agencies have taken to help address banking access challenges encountered by nonprofit organizations (NPO)  In addition, we provide information on the extent to which State and USAID experience banking access challenges in providing assistance in high-risk countries in appendix I  To address these objectives, we examined U S -funded projects and their implementers in four high-risk countries—Syria, Somalia, Haiti, and Kenya  We selected these countries based on factors including the high level of humanitarian assistance they received from U S  agencies, their higher propensity for the occurrence of financial crimes based on their inclusion on multiple financial-risk-related indices, and to obtain geographical diversity  More specifically, to identify our list of high-risk countries in terms of banking or financial risk, we used several indices including ones based on financial risk, money laundering risk, and counterterrorism-related risk  The indices we chose to use were State’s International Narcotics Control Strategy Report (2014- 2016) (Money Laundering Risks), the Department of the Treasury’s (Treasury) Office of Foreign Assets Control (OFAC) sanctions, the Organisation for Economic Co-operation and Development’s (OECD) Fragile State Index (2014-2016), the 2017 Financial Action Task Force (FATF) High Risk and Non- Cooperative Jurisdictions list, and the BASEL AML Index, 2017  We then identified 19 countries that appeared on at least two of the five lists and received at least $100 million in U S  based humanitarian assistance from 2012 through 2017, based on data from the United Nations Office for the Coordination of Humanitarian Affair’s financial tracking system  We then applied the following primary selection criteria to select our four countries: whether they (1) appeared on at least three of the five identified lists and (2) have received at least $100 million in U S  humanitarian assistance since 2012  Secondary considerations that informed our selection included whether a country had been identified as having banking access challenges by USAID, geographical diversity, and ensuring we had at least one country from each of the five indices we chose  The data we obtained for these four countries cannot be generalized beyond our selected projects and partners  For our first objective, to examine the extent to which implementing partners of State and USAID experienced banking access challenges that affected their implementation of humanitarian assistance projects, we conducted semi-structured interviews with 18 partners about (1) one of 18 specific projects we had selected in one of our high-risk countries and (2) their experiences implementing their global portfolio of humanitarian assistance projects over the previous 5 years  In order to determine our sample of partners, we selected a weighted, non-generalizable sample of 18 projects located in our four selected high-risk countries  We selected our projects from a list, provided by State and USAID, of 195 projects that were active as of the end of fiscal year 2017 in these countries  In making our selection of projects we made sure that our sample included a mix of projects from each country (7 projects for Syria, 5 for Somalia, 3 for Haiti, and 3 for Kenya), and a mix of State and USAID projects (3 State and 15 USAID)  We selected those numbers for each country and each agency based on the number of projects in each country and the proportion of assistance provided  We selected one State project in each of the three countries where they were active  Once we had determined these parameters for our non-generalizable sample, we made the final selections of the projects at random, making sure that we did not select more than one project for any one partner  Several of the implementing partners in our sample operate in over 100 countries in every part of the world, while a few operate in 20 or fewer countries  Three of the partners are United Nations organizations  The implementing partners in our sample had fiscal year 2016 annual revenues ranging from $5 9 billion to just over $10 million  We conducted semi-structured interviews with each of the 18 implementing partners on potential banking access challenges, such as the ability to open and maintain new accounts and make transfers in a timely fashion, and the effect of those challenges on project implementation  Our interviews were separated into two distinct sets of questions—one on banking access challenges the implementing partner encountered on the selected project, and the other on any banking access challenges the implementing partner encountered in its global portfolio of humanitarian assistance projects over the previous 5 years (2013-2017)  When discussing their global humanitarian assistance portfolios, the partners did not limit their responses to projects funded by U S  government agencies, but instead considered projects funded by all of their donors  We did not ask the partners to quantify the number of projects they had implemented over the previous 5 years, nor did we ask them to quantify the number of projects in their global portfolio of humanitarian assistance for which they had experienced banking access challenges  Our interview followed a protocol that asked both closed and open-ended questions  For most banking access challenges, when interview respondents indicated that their project or organization had experienced a banking access challenge, we probed for details of the challenge, including whether the challenge had caused an adverse effect on the project, such as project delays or cancellations  After the interviews had been conducted, we content-coded some of the open- ended answers we received  Specifically, we developed codes on whether any challenges reported had adversely affected the projects, the extent and duration of delays in transferring funds, and the extent and frequency of denials of international fund transfers  Two analysts independently coded each interview  The analysts then compared their coding and reconciled any initial disagreements  We also reviewed relevant studies on banking access challenges for NPOs conducted by the World Bank and the Charity and Security Network (CSN)  The study conducted by CSN included a survey that was designed to be generalizable to the population of all U S  NPOs with activities outside the U S , including providing humanitarian assistance  This survey received more than 300 responses, which constituted a reported response rate of about 38 percent  The researchers conducting the survey indicated that this response rate could be considered high for a public opinion telephone survey but low for a survey like the Census  The study determined the survey findings to be representative of the population with some qualifications, such as the fact that smaller organizations were more likely to complete the survey than larger organizations  The maximum margin of error was estimated to be 5 4 percent  More than 70 of the NPOs reported that they had received U S  government funding  We requested and received some additional data analysis from the researchers who had conducted this survey  We examined the aggregate survey responses in detail and compared them to the responses we received to our semi-structured interview questions, which probed into similar aspects of financial access  We reviewed documentation and interviewed the officials responsible for the survey and determined that they had used a reasonable methodology to conduct the survey  We also interviewed several NPOs and NPO groups that were not part of our sample to obtain their views on banking access challenges affecting those delivering humanitarian assistance  For our second objective, to examine USAID implementing partners’ reporting on banking access challenges, we reviewed the fiscal year 2017 progress reports, including quarterly, semi-annual, and annual reports, that USAID provided for our selected projects to determine if banking access challenges the implementing partners told us about in the interviews had been reported in accordance with requirements in the individual award agreements  In total, we reviewed 26 reports from these partners  We also interviewed USAID agreement officers for the projects that stated they had experienced banking access challenges about implementing partners’ reporting of those banking access challenges  To obtain a broader context, we also reviewed over 1300 USAID implementing partner reports for fiscal years 2016 and 2017 from a wider selection of high-risk countries to determine the extent to which banking access challenges are being reported to USAID  To identify the relevant USAID progress reports, we searched USAID’s Development Experience Clearinghouse (DEC) for all periodic progress reports filed for fiscal years 2016 and 2017 by implementing partners working in selected 19 high-risk countries for instances of reporting on financial access challenges  Using these criteria, we identified 1,369 reports from fiscal years 2016-2017 from our selected 19 high-risk countries  The reports included annual reports, final contractor / grantee reports, final evaluation reports, and periodical and periodic reports (such as quarterly or semi-annual reports)  The 1,369 reports constituted our universe of reports for which we used a textual analysis program to automatically scan and search for words and phrases that we identified in a lexicon of financial access terms  We developed this lexicon of financial access terms based on a review of relevant research, interviews with industry organizations, and a manual review of USAID progress reports  Using the lexicon, our textual analysis program identified all mentions of identified terms in the universe of reports  Next, two analysts independently reviewed the mentions identified through our textual analysis software program to determine whether the mentions actually constituted a reporting of a financial access challenge  The analysts then reconciled any differences in their reviews  For the purposes of this review, we considered a relevant financial access challenge to be any challenge encountered by the implementing partner in obtaining U S  banking services, or in transferring funds from the United States to the destination country  We did not conduct a similar review of State partner reporting because we only had a sample of three State projects and one of the projects did not require direct written reporting to State  In addition, State does not have a central depository for partner reports that we could search, such as USAID’s DEC  For our third objective, to examine actions relevant U S  agencies have taken to help address banking access challenges encountered by NPOs, we conducted interviews with and reviewed documentation from State, USAID, and Treasury on actions they have taken to help address these challenges  We also discussed U S  agency involvement in efforts to help address these challenges with relevant organizations that represent NPOs  In addition, we reviewed relevant documentation published by the World Bank and the Financial Action Task Force on actions they have taken to help address banking access challenges encountered by NPOs, and interviewed relevant staff at the World Bank on efforts undertaken to address banking access challenges  To examine the extent to which State and USAID encountered banking access challenges in providing assistance in high-risk countries, we interviewed State officials responsible for conducting overseas transfers of funds for both State and USAID to determine if any banking access challenges exist that are specific to our case study countries as well as for U S  assistance worldwide  We also interviewed State and USAID officials with responsibility for overseeing programs in our four selected countries to determine if they had seen any effects of banking access challenges  We focused primarily on these agencies’ ability to access banking services in the United States and on the transfer of funds to the ultimate destination  We conducted this performance audit from July 2017 to September 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  The United States provides humanitarian assistance primarily through offices and bureaus within the Department of State (State) and the U S  Agency for International Development (USAID)  The primary humanitarian offices and bureau are: State’s Bureau of Population, Refugees, and Migration (PRM)  PRM’s stated mission is to provide protection, ease suffering, and resolve the plight of persecuted and uprooted people around the world by providing life-sustaining assistance, working through multilateral systems to build global partnerships, promoting best practices in humanitarian response, and ensuring that humanitarian principles are integrated into U S  foreign and national security policy  PRM does not operate refugee camps or give aid directly to refugees, but rather works with entities that operate these programs, including the United Nations, other international organizations, and nonprofit organizations  USAID’s Office of U S  Foreign Disaster Assistance (OFDA)  OFDA states that it helps countries prepare for, respond to, and recover from humanitarian crises  According to USAID, OFDA works with the international humanitarian community to give vulnerable populations resources to build resilience and strengthen their ability to respond to emergencies  Assistance includes provision of emergency relief supplies, establishing early warning systems, and training on search and rescue efforts, as well as programs to help victims of disasters recover  USAID’s Office of Food For Peace (FFP)  FFP’s stated mission is to partner with others to reduce hunger and malnutrition, and help ensure that all individuals have adequate, safe, and nutritious food to support a healthy and productive life  According to FFP, it works to mobilize resources to predict, prevent, and respond to hunger overseas  FFP’s emergency activities include food assistance to help reduce suffering and support the early recovery of people affected by conflict and natural disaster emergencies  In addition to the individual named above, Mona Sehgal (Assistant Director), Michael Maslowski (Analyst in Charge), Ming Chen, Debbie Chung, Martin de Alteriis, Leia Dickerson, Mark Dowling, Erin Guinn- Villareal, Chris Keblitis, and Benjamin L  Sponholtz made key contributions to this report 
Report 2:  In general, private electronic payment systems using distributed ledgers allow individuals to establish an account identified by a string of numbers and characters (often called an address or public key ) that is paired with a password or private key known only to the account holder  A transaction occurs when two parties agree to transfer digital currency (perhaps in payment for a good or service) from one account to another  The buying party will "unlock" the currency used as payment with her private key, allowing some amount to be transferred from her account to the seller's  The seller then "locks" the currency in her account using her own private key  From the perspective of the individuals using the system, the mechanics are similar to authorizing payment on any website that requires an individual to enter a username and password  In addition, companies offer applications or interfaces that users can download onto a device to make transacting in cryptocurrencies more user-friendly  Many digital currency platforms use blockchain technology to validate changes to the ledgers  In a blockchain-enabled system, payments are validated on a public or "distributed" ledger by a decentralized network of system users and cryptographic protocols  In these systems, parties that otherwise do not know each other can exchange something of value (i e , a digital currency) not because they trust each other but because they trust the platform and its protocols to prevent invalid changes to the ledger  A notable feature of transfers using blockchain is that they require no centralized, trusted intermediary such as a bank, government central bank, or other financial or government institution  Proponents envision these systems could achieve instantaneous transfers, although they currently require minutes or hours to finalize transfers  The decentralized nature of digital currencies and their recent proliferation poses challenges to performing industry-wide analysis of their use in payments  For example, as of August 27, 2018, one industry group purported to track trading prices of 1,890 cryptocurrencies alone  For brevity and clarity, this report uses statistics on Bitcoin—the first and most well-known cryptocurrency, the total value of which accounts for more than half of the industry as a whole —as an illustrative example of a digital currency's use in payments  In January 2017, the price of a Bitcoin on an exchange was about $993  The price surged during the year, peaking at about $19,650 in December 2017, an almost 1,880% increase  However, the price then dramatically declined  Overall, the price of Bitcoin has experienced a high degree of volatility  On March 12, 2018, the price of Bitcoin was $3,860, down 80% from its peak  More recently, the price rebounded and was $5,948 on May 8, 2019  Although price data on Bitcoin illustrates the public interest in and overall demand for this cryptocurrency, it is a poor indicator of how often it is being exchanged for goods and services (i e , how often it is being used as money)  Certain analyses appear to show that digital currencies are not being widely used and accepted as payment for goods and services, but rather as investment vehicles  The number of Bitcoin transactions may serve as a better indicator—though a flawed one—of the use of Bitcoin as a payment system  This number reveals how many times Bitcoins are transferred between accounts each day, and data indicates the number of transactions is miniscule compared with those of traditional systems  For example, in 2019 through March 12, the Bitcoin system averaged about 310,000 transactions per day globally, a pace that would result in about 113 million transactions per year  Recall that in the United States alone, more than 144 billion traditional (nearly 1,275 times as many) noncash payments were made in 2015  Moreover, one problem with this measure it that it is a count of how many times two parties have exchanged Bitcoin, not a count of how many times Bitcoin has been used to buy something  Some portion of those exchanges, possibly a significantly large portion, is driven by investors giving fiat currency to an exchange to buy and hold the Bitcoin as an investment  In those transfers, Bitcoin is not acting as money (i e , not being exchanged for a good or service)  Advantages of Private Payment Systems Using Distributed Ledgers   As discussed in an earlier section, traditional electronic payment systems involve a number of intermediaries, such as government central banks and private financial institutions  To carry out transactions, these institutions operate and maintain extensive electronic networks and other infrastructure, employ workers, and require time to finalize transactions  To meet costs and earn profits, these institutions charge various user fees  Cryptocurrency advocates anticipate that a decentralized payment system operated through the internet could be less costly than traditional payment systems and existing infrastructures  However, whether such efficiencies can or will be achieved remains an open question  In addition, opening a bank account or otherwise using traditional electronic payment systems generally requires an individual to divulge to a financial institution certain basic personal information, such as name, Social Security number, and birthdate  Financial institutions store and may analyze or share this information  In some instances hackers have stolen personal information from financial institutions, causing concerns over how well these institutions can protect sensitive data  Individuals seeking a higher degree of privacy or control over their personal data than that afforded by traditional systems may choose to use an alternative digital currency system that provides a degree of pseudonymity or anonymity  Although inflation in the United States and other developed economies has been low in recent decades, some individuals may nevertheless believe that nontraditional digital money may maintain its value better than government-backed money in traditional systems  The dollar and most modern currencies are fiat money—that is, money that derives value based solely on government decree  Historically, incidents of hyperinflation in certain countries have seen government-backed currencies lose most or nearly all of their value  Thus, some individuals may judge the probability of their fiat money losing a significant portion of its value to be undesirably high  These individuals may place greater trust in the ability of a decentralized network using cryptographic protocols that limit the creation of new money to maintain stable value of money than in the ability of government institutions to do so  Obstacles to Widespread Adoption of Private Payment Systems Using Distributed Ledgers   Several characteristics of cryptocurrency undermine its ability to serve the functions of money in a payment system  Currently, a relatively small number of businesses and individuals use or accept cryptocurrency for payment  As discussed above, Bitcoin transactions have averaged about 310,000 per day globally  Cryptocurrency may be used as a medium of exchange less frequently than traditional money for several reasons  Unlike the dollar and most other government-backed currencies, cryptocurrencies are not legal tender, meaning creditors are not legally required to accept them to settle debts  Consumers and businesses also may be hesitant to place their trust in these systems because they have limited understanding of them  Relatedly, consumers and businesses may have sufficient trust in and be generally satisfied with traditional payment systems  The recent high volatility in the price of many cryptocurrencies undermines their ability to serve as a unit of account and a store of value  Cryptocurrencies can have significant value fluctuations within short periods of time; as a result, pricing goods and services in units of cryptocurrency would require frequent repricing and likely would cause confusion among buyers and sellers  Whether cryptocurrency systems are scalable —meaning their capacity can be increased in a cost-effective way without loss of functionality—is uncertain  At present, the systems underlying cryptocurrencies do not appear capable of processing the number of transactions that would be required of a widely adopted, global payment system  One concern involves the significant energy consumption required to run and cool the computers that validate the transactions on these platforms  Costs of Private Payment Systems Using Distributed Ledgers   As the energy consumption of a digital currency system demonstrates, these systems are not costless  In addition to energy, they require computer hardware and facilities  Often making payments on these platforms involves paying fees  Whether these direct economic costs of using the system are fixed or—as they develop and mature—become less than existing systems is an open question  Digital currency systems, at least as currently designed and regulated, also might impose other costs on society  Some critics of these systems fear their pseudonymous, decentralized nature may provide a new avenue for criminals to launder money, evade taxes, or sidestep financial sanctions  For example, Bitcoin was the currency used on the internet-based, illegal drug marketplace and Bitcoin escrow service called Silk Road  This marketplace facilitated more than 100,000 illegal drug sales from approximately January 2011 to October 2013, at which time the government shut down the website and arrested the individuals running the site  Consumer groups and other observers are also concerned that digital currency users are inadequately protected against unfair, deceptive, and abusive acts and practices  The way cryptocurrencies are sold, exchanged, or marketed can subject cryptocurrency exchanges or other cryptocurrency-related businesses to generally applicable consumer protection laws, and certain state laws and regulations are being applied to cryptocurrency-related businesses  However, other laws and regulations aimed at protecting consumers engaged in electronic financial transactions may not apply  For example, the Electronic Fund Transfer Act of 1978 (EFTA; P L  95-630 ) requires traditional financial institutions engaging in electronic fund transfers to make certain disclosures about fees, correct errors when identified by the consumer, and limit consumer liability in the event of unauthorized transfers  Because no bank or other centralized financial institution is involved in digital currency transactions, EFTA generally has not been applied to these transactions  In addition, the laws and regulations that do apply generally have not been implemented specifically to address digital currencies or related businesses  Whether the current regulatory regime applied to digital currency transactions, but originally implemented for different financial activities (e g , traditional money transmission), is effective and efficient is a debated issue  Finally, some central bankers and other experts and observers have speculated that the widespread adoption of cryptocurrencies could affect the ability of the Fed and other central banks to implement and transmit monetary policy  The Fed conducts monetary policy with the goals of achieving price stability and low unemployment  Like other central banks it achieves its goals by, putting it simply, controlling the amount of money in circulation in the economy  If one or more additional currencies that the government did not control the supply of were also prevalent and viable payment options, it could limit central banks' ability to transmit monetary policy to financial markets and the real economy  In this scenario, central banks likely would have to make larger adjustments to the fiat currency they do control to have the same effect as previous adjustments  Another possibility is that they would have to start buying and selling the digital currencies themselves in an effort to affect the availability of these currencies  These risks have led some central banks and other observers to suggest that perhaps central banks could issue their own digital currencies  The risks and challenges posed by private digital currencies have led some observers to suggest that perhaps central banks should offer their own central bank digital currencies (CBDCs) to realize certain hoped-for efficiencies in the payment system in a way that would be "safe, robust, and convenient " To date, no country has successfully created a CBDC for payment use by the general public  The extent to which a central bank could or would want to create a new, digital-only payment system likely would be weighed against the consideration that these government institutions already have trusted digital payment systems in place  Because of such considerations, the exact form that CBDCs would take could vary across a number of features and characteristics  Nevertheless, some central banks are examining the idea of CBDCs and the possible benefits and issues they may present  For the purposes of this discussion, this report examines a CBDC that would be available to consumers for retail payments  Some proposals would limit CBDCs to wholesale payments between banks and other financial institutions  Potential Advantages of CBDCs   Proponents of CBDCs generally argue they could provide efficiency gains over traditional legacy systems and contend that central banks could use the technologies underlying digital currencies to deploy a faster, less costly government-supported payment system  Observers have speculated that a CBDC could take the form of a central bank allowing individuals to hold accounts directly at the central bank  Advocates argue that a CBDC created in this way could increase systemic stability by imposing additional discipline on commercial banks  Because consumers would have the alternative of safe deposits made directly with the central bank, commercial banks likely would have to offer interest rates and limit risks at levels necessary to attract deposits above any deposit insurance limit  In addition, CBDCs could increase government revenue through a seignoriage-like mechanism  A more expansive definition of seignoriage is the income government obtains from having government liabilities act as money  Physical money—because it is liquid and low-risk—earns no interest rate and carries a cost to produce  Money—both physical and electronic in the traditional system—is also a balance sheet liability to the issuing authority, such as the Fed or other central banks  If the Fed allowed individuals to hold accounts directly with the Fed, the Fed would issue low- or no-interest liabilities to individuals (as electronic entries in a ledger produced at less cost than physical currency)  Then, as happens now, the Fed would use those liabilities to fund purchases of assets that earn a higher interest rate than what the Fed pays on liabilities  This would produce income, perhaps greater income than is earned through traditional seignoriage  Potential Obstacles to Creation of CBDCs   One of the main arguments critics—including various central bank officials—make against CBDCs is that there is no "compelling demonstrated need" for such a currency, because central banks and private banks already operate trusted electronic payment systems that generally offer fast, easy, and inexpensive transfers of value  Opponents also argue that a CBDC in the form of individual direct accounts at the central bank would reduce the role of private banks in financial intermediation and potentially expand the role of government central banks inappropriately  A portion of consumers likely would shift their deposits away from private banks toward central bank digital money, which would be a safe, government-backed liquid asset  Deprived of this funding, private banks likely would have to reduce their lending, leaving central banks to decide whether or how they should support lending markets to avoid a reduction in credit availability  In addition, skeptics of CBDCs object to the assertion that these currencies would increase systemic stability, arguing that CBDCs would create a less-stable system because they would facilitate runs on private banks  These critics argue that at the first signs of distress at an individual institution or the bank industry, depositors would transfer their funds to this alternative liquid, government-backed asset  Uncertaint y : CBDCs' Potential Effects on Monetary Policy   Observers also disagree over whether CBDCs would have a desirable effect on central banks' role and abilities in carrying out monetary policy  Proponents argue that, if individuals held a CBDC on which the central bank set interest rates, the central bank could directly transmit a policy rate to the macroeconomy, rather than achieving transmission through the rates the central bank charges banks and the indirect influence of rates in particular markets  In addition, if holding cash (which in effect has a 0% interest rate) were not an option for consumers, central banks potentially would be less constrained by the zero lower bound   The zero lower bound is the idea that the ability of individuals and businesses to hold cash and thus avoid negative interest rates limits central banks' ability to transmit negative interest rates to the economy  Critics argue that taking on such a direct and influential role in private financial markets is an inappropriately expansive role for a central bank  They assert that if CBDCs were to displace cash and private bank deposits, central banks would have to increase asset holdings, support lending markets, and otherwise provide a number of credit intermediation activities that private institutions currently perform in response to market conditions  As discussed above, although cash remains a frequently used payment system, other payment systems continue to develop that offer their own advantages and costs  Various trends suggest that due to market preference or government policy, the role of cash in the payment system has begun to decline and may continue to decline, perhaps significantly, in coming years  If the relative benefits and costs of cash and the various other payment methods evolve in such a way that cash is significantly displaced as a commonly accepted form of payment, that evolution could have a number of effects, both positive and negative, on the economy and society  This section of the report describes a number of potential benefits of a reduced role for cash in the U S  economy and the various risks and costs that may occur  Many of the factors discussed below may not occur wholly as a benefit, risk, or cost; rather, a potential benefit may bring with it a risk, and vice versa  Some observers argue that reducing or eliminating cash payments in the U S  economy will produce certain beneficial outcomes, including improved efficiency in payments, reduced criminality, and improved ability for the Fed to implement certain monetary policy  As discussed below, although these outcomes generally may be beneficial, that does not mean that there are not certain costs, or drawbacks, that may counterbalance these positive effects  Proponents of noncash payment systems assert that net economic benefits from the use and maintenance of a cash payment system are (or will become as technology advances) less than the net benefits of using and maintaining noncash systems  Put another way, they argue that the resources, labor, and capital that go into the cash system—for example, producing currency; stocking and maintaining ATMs; safely transporting cash; protecting businesses from theft and robbery—make it less efficient than noncash systems  If true—and absent policy interventions—market forces likely will result in the displacement of cash by other payment methods as businesses increasingly choose not to accept cash and consumers increasingly prefer not to use it  Under this scenario, although the payment system on net may be more efficient, it would not necessarily be true that all people would benefit, as is discussed in the " Potential Costs and Risks of a Reduced Role for Cash " section  Proponents of cashless societies assert that the elimination of cash would reduce crime by making operating an illegal enterprise more difficult and certain crimes, such as robbery and burglary, less remunerative  These proponents argue that criminals are more likely to conduct business in cash and to hold cash as an asset, in large part because cash is anonymous and allows them to avoid establishing relationships with and generating records at financial institutions that may be subject to anti-money laundering reporting and compliance requirements  Accordingly, they assert that the elimination of cash would be beneficial on net, because operating a criminal enterprise would become more difficult  Certain studies have shown that the prevalence of cash is correlated with the incidence of crime  In addition, the amount of "strong" currencies (i e , highly valuable and highly stable currencies) in circulation exceeds what many people would consider a reasonable amount needed for typical consumer transactions  For example, with the U S  population at approximately 329 million, the $1 6 trillion of currency in circulation equates to about $4,900 per person  Proponents of a cashless society assert that this number is inflated due in part to the cash demand of criminals (although part is also due to demand for the U S  dollar from abroad)  Although a robust analysis of this question is beyond the scope of this report, arguments that cash facilitates crime and even that reducing cash may reduce crime appear in certain cases to be well founded  However, when analyzing the net benefit to society of going cashless, reduced crime should be weighed against any cost that a reduction in cash would impose on legitimate cash users  One such legitimate group is examined in more detail in the " Lack of Financial Access for Certain Groups " section below  The effect a reduction in cash payments would have on crime should not be overstated, as criminals likely would seek other ways to commit and hide their crimes  For example, the prevalence of cybercrime may increase  Another benefit (from a macroeconomic perspective) of a cashless society cited by economists would be the potential elimination of the practical inability of central banks, such as the Fed, to implement negative interest rates  When an economy is in recession or otherwise performing poorly, one monetary policy response is to lower interest rates  Lower interest rates can spur companies to borrow in order to invest and spur consumers to borrow in order to make additional purchases, thus boosting economic activity and mitigating the impact of recessions  However, many economists believe that policymakers are constrained by a zero lower bound—that whatever policy rate they may set, interest rates in many markets will not fall below zero  The reason is that holding cash offers a zero interest rate  Thus, if the Fed attempted to implement negative interest rates, individuals could avoid those rates by transferring their funds into cash  If holding cash was not an available option, it would be easier for negative interest rates to be transmitted to more financial markets  However, any benefit provided by increasing policymakers' ability to affect the macroeconomy with negative interest rates should be weighed against the cost it would impose on the individual savers whose account balances would decrease in value during a period of negative interest rates  Skeptics of reducing or eliminating the role of cash in the economy assert that cash serves a number of beneficial purposes, and argue that eliminating it would have adverse effects on certain financially vulnerable groups, eliminate an asset that provides safety against cyber vulnerabilities and financial crises, and reduce individuals' privacy  As with potential benefits to a reduction in cash, many of the factors discussed below may not occur wholly as a risk or cost, and they must be weighed against potential benefits when considering their overall impact  If the United States were to move toward becoming a cashless society that required consumers to use noncash, electronic payment services, it could present difficulties for those segments of the population who lack access to the financial system or to an electronic network  Access to electronic payments typically requires an account with some financial institution, usually a bank  Often—and increasingly—it also involves using or accessing a device connected to the internet  However, these factors can present hardships and obstacles for certain vulnerable groups  The Federal Deposit Insurance Corporation reported that in the United States in 2015, 9 million households were unbanked, meaning that no member had a bank account  Of these, 37 8% reported that the main reason was that they do not have enough money to keep in an account, 9 4% reported that fees were too high, and 1 9% reported fees were unpredictable  In total, this indicates almost half of the total unbanked, or roughly 4 5 million households, do not access banking services due to economic obstacles  Sweden has been at the forefront of the move away from cash (see Appendix ), and observers there, including Stefan Ingves, governor of Sweden's central bank, have voiced some of these concerns about going cashless  In addition, anecdotal reporting indicates that retirees in Sweden are finding the change difficult and costly  In the United States, many assert that it would be beneficial to bring the unbanked into the banking system  Nevertheless, if the unbanked engaged with the banking system at a relatively high cost only because cash (which was a less expensive option for them) was no longer available, it would likely be a detrimental outcome for this group  Conversely, if the move to a cashless system led to less costly financial access for this group, they may stand to benefit  Proponents of cash often cite the robustness of physical currency as a payment system  Once in an individual's possession, cash does not rely on financial institutions or information technology (IT) based payment networks  These proponents argue that if payments became entirely electronic, events such as power outages, hacker attacks, or (in the event of future cyber war) a state-sponsored attack would be capable of shutting down the most simple financial transaction—the exchange of money for goods and services  The financial system is already exposed to these threats to varying degrees, but the argument is that the elimination of cash amplifies those risks  Because it functions well as a store of value, cash is a relatively safe asset in which to invest savings with no risk of losses resulting from a decline in a securities value or the failure of financial institutions or other entities  The perceived safety of cash and its non-reliance on financial institutions also makes it desirable in times of financial turmoil or distress, when confidence in such institutions decreases  During these periods, many people prefer assets that are free from credit risk  For some of these individuals, deposit insurance guarantees may not wholly eliminate their fear of losses, whereas the safety of physical currency would  Holding cash, then, could also provide a sense of security to risk-adverse people that may mistrust the financial system  Opening a bank account or otherwise using traditional noncash payment systems generally requires an individual to divulge certain basic personal information, such as name, Social Security number, and birthdate, to a financial institution  Financial institutions store this information and information about the transactions linked to this identity  Under certain circumstances, they may analyze or share this information, such as with a credit-reporting agency  In some instances hackers have stolen personal information from financial institutions, causing concerns over how well these institutions can protect sensitive data  Finally, provided it follows proper legal procedures, the government also can access this information under certain circumstances  Similarly, although new alternative payment systems may offer a degree of anonymity or pseudonymity, these systems still generate an unalterable record of transactions between parties  Cash, by contrast, can be used anonymously, and people may wish to use cash for legitimate purposes to ensure their privacy  Certain consumers who are uncomfortable divulging and generating private information—even basic information that a transaction occurred—may prefer cash to any electronic payment methods  Cash has a number of advantageous features that has made it a simple and robust payment system throughout most of human history  It is difficult to imagine conditions under which cash would be replaced entirely, and disappear from the economy, at least in the near future  Nevertheless, its hegemony as a payment system appears to have come to an end, as electronic payment systems have gained popularity, and the ubiquity of cash acceptance for in-person purchases also seems precarious  If noncash payment systems significantly displace cash and cash usage and acceptance significantly declines, there would be a number of effects (both positive and negative) on the economy and society  Now or in the near future, policymakers may face decisions about whether to impede or hasten the decline of cash and consider the implications of doing so  Two countries provide interesting case studies of market forces drastically changing the way a society makes payments  Sweden In recent years, the use of cash in Sweden has quickly and substantially declined, dropping from 40% to 13% of transactions between 2010 and 2018  In many cases, businesses no longer accept cash, and one survey indicated that two-thirds of small businesses planned to stop accepting cash  Anecdotal reporting indicates that about 5% of bank branches accept cash deposits or offer cash withdrawals  Furthermore, Sweden's central bank is examining the possibility of creating registered accounts for the purpose of issuing currency electronically  Reportedly, many Swedes are generally in favor of the trend (the displacement of cash is due largely to consumer preference), though some have voiced concerns about financial access issues that the change causes for certain groups, such as the elderly  Observers have put forward a number of explanations for the Sweden's growing preference for electronic payment methods such as cards and mobile app enabled payments  One argument asserts that Sweden is an especially technology savvy country  As such, Swedes are comfortable using electronic payment systems, and Swedish companies have developed fast and easy payment technologies, such as iZettle and Swish  Some observers also have suggested that Swedes are especially trusting of institutions and thus have fewer privacy concerns  Some have noted that the timing of the start of the decline in cash use among Swedes coincided with the start of a transition to new Swedish banknotes and coins  They suggest that this spurred people and businesses to make a switch not to the new bills and coins but instead to electronic payment methods  Kenya In 2007, a company named Safaricom—Kenya's largest mobile phone network operator—introduced a "mobile money" service called M-Pesa ("M" stands for "mobile" and "pesa" is the Swahili word for money)  Users of the service download a phone application and deposit cash with M-Pesa employees called "agents " They can then transfer money into any other M-Pesa account using their phone  Originally intended as a service for Kenyans who had moved to a city to earn money to send back home to rural areas, the service became tremendously popular as a general use payment system  By 2016, there were approximately 31 6 million mobile money accounts in Kenya, which had a total population of 47 6 million in 2017  Many observers identify the combination of lack of access to traditional banking services and the proliferation of mobile phones in Kenya as a driving factor for the expansion of M-Pesa and subsequent mobile money services  These observers argue that in Kenya, as with many developing and largely rural nations, both consumers and banks view financial and bank services as a business need of the rich  In 2006, before the introduction of M-Pesa, just 19% of Kenyans had bank accounts and there was 1 5 bank branches for every 100,000 people  However, 54% of Kenyans had their own mobile phone or access to one  Another explanation for the rise of mobile money is that Safaricom successfully identified a large, profitable, and previously untapped market in Kenya  Available mobile technology and its proliferation among the population meant low-cost money transfers could be profitably offered to lower-income consumers  Certain observers assert that the success of M-Pesa has caused Kenyan financial institutions to reevaluate their business models, shifting their focus to offering services to lower-income groups than they previously targeted, and cite the increase in bank accounts and the decline of the average account balances as evidence of this change  As a result, the portion of the Kenyan population with access to some type of formal financial services has grown from 27% in 2006 to 75% in 2017  Although mobile money appears to have filled a market need, the degree to which it has displaced cash should not be overstated  An official at Safaricom estimated in February 2018 that as many as 8 out of 10 transactions are still cash transactions, as Kenyans still reportedly prefer cash for small, in-person purchases because of convenience and using M-Pesa generally involves fees  In addition, workers are still generally paid in cash 

ground_truth: Since 2012, the United States has provided approximately $36 billion in humanitarian assistance to save lives and alleviate human suffering. Much of this assistance is provided in areas plagued by conflict or other issues that increase the risk of financial crimes. The World Bank and others have reported that humanitarian assistance organizations face challenges in accessing banking services that could affect project implementation. GAO was asked to review the possible effects of decreased banking access for nonprofit organizations on the delivery of U.S. humanitarian assistance. In this report, GAO examines (1) the extent to which State and USAID partners experienced banking access challenges, (2) USAID partners' reporting on such challenges, and (3) actions U.S. agencies have taken to help address such challenges. GAO selected four high-risk countries—Syria, Somalia, Haiti, and Kenya—based on factors such as their inclusion in multiple financial risk-related indices, and selected a non-generalizable sample of 18 projects in those countries. GAO reviewed documentation and interviewed U.S. officials and the 18 partners for the selected projects. Implementing partners (partners) for 7 of 18 Department of State (State) and U.S. Agency for International Development (USAID) humanitarian assistance projects that GAO selected noted encountering banking access challenges, such as delays or denials in transferring funds overseas. Of those 7 projects, 1 partner told us that banking access challenges adversely affected its project and 2 additional partners told us that the challenges had the potential for adverse effects. Moreover, the majority of partners (15 out of 18) for the 18 projects noted experiencing banking access challenges on their global portfolio of projects over the previous 5 years. USAID's partners' written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that encountered challenges were USAID-funded. Of those 6 USAID projects, 5 partners told us that these challenges did not rise to the threshold of affecting project implementation that would necessitate reporting, and 1 did not report challenges although its project was adversely affected. Additionally, GAO's review of about 1,300 USAID partner reports found that the few instances where challenges were mentioned lacked sufficient detail for GAO to determine their type, severity, or origin. Without information on banking access challenges that pose potential risks to project implementation, USAID is not aware of the full extent of risks to achieving its objectives. The Department of the Treasury (Treasury) and State have taken various actions to help address banking access challenges encountered by nonprofit organizations (NPO), but USAID's efforts have been limited. Treasury's efforts have focused on engagement between NPOs and U.S. agencies, while State has issued guidance on the topic to its embassies and designated an office to focus on these issues. In contrast, USAID lacks a comparable office, and NPOs stated that it is difficult to find USAID staff to engage with on this topic. Further, GAO found that awareness of specific challenges was generally limited to USAID staff directly overseeing the project. Without communicating these challenges to relevant parties, USAID may not be aware of all risks to agency objectives and may not be able to effectively engage with external entities on efforts to address these challenges. GAO recommends that USAID should take steps to (1) collect information on banking access challenges experienced by USAID's partners and (2) communicate that information both within USAID and with external entities, such as other U.S. agencies and partners. USAID concurred with our recommendations.