ANTI-MONEY 

LAUNDERING

U.S. Efforts to Combat 

Narcotics-Related 

Money Laundering in 

the Western 

Hemisphere

Report to the Ranking Member, 

Committee on Foreign Affairs, House of 

Representatives

August 2017

GAO-17-684

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-684, a report to the 

Ranking Member, Committee on Foreign 

Affairs, House of Representatives

August 2017 

ANTI-MONEY LAUNDERING

U.S. Efforts to Combat Narcotics-Related 

Money Laundering in the Western Hemisphere

Why GAO Did This Study

Proceeds from narcotics-related illicit 

activities are one of the most common 

sources of money laundering in the 

United States. Though difficult to 

accurately determine, in 2015, 

Treasury estimated that drug trafficking 

generated about $64 billion annually 

from U.S. sales. Moreover, the 

Western Hemisphere accounts for 

about a third of the jurisdictions 

designated by State as of primary 

concern for money laundering.

GAO was asked to provide information 

on U.S. efforts to impede illicit 

proceeds from drug trafficking from

entering the financial systems of the 

United States and other Western 

Hemisphere countries. This report 

describes (1) U.S. agency oversight 

and monitoring of compliance with the 

BSA, including collaboration with 

counterparts in other Western 

Hemisphere countries, and (2) State’s

and Treasury’s efforts to build capacity 

in other Western Hemisphere countries 

to combat narcotics-related money 

laundering. 

GAO reviewed laws and regulations; 

interviewed experts and U.S. officials; 

reviewed documents and examined 

State’s and Treasury’s budget data for 

fiscal years 2011 through 2015, the 

most recent at the time of the review,

for anti-money laundering activities. 

GAO selected Colombia, Mexico, and 

Panama—three principal recipients of 

AML support—for site visits, in part, 

because each country was designated 

a major drug transit or illicit drugproducing country from fiscal years 

2014 through 2016.

What GAO Found

U.S. financial regulators oversee and monitor compliance with anti-money 

laundering (AML) requirements of the Bank Secrecy Act (BSA) to prevent, detect, 

and deter the laundering of proceeds from narcotics trafficking and other illicit 

activities using a risk-based examination approach. The Department of the 

Treasury’s (Treasury) Financial Crimes Enforcement Network (FinCEN) 

administers the BSA and related AML regulations, which provides the legal 

framework for combating money laundering. The BSA includes requirements for 

financial institutions to retain various records of customer transactions, verify 

customers’ identity, maintain effective AML programs, and report suspicious 

transactions. FinCEN relies on a variety of U.S. financial regulators and agencies 

to help FinCEN oversee and monitor financial institutions’ compliance with the 

BSA. U.S. financial regulators and FinCEN also collaborate directly with 

counterparts in other Western Hemisphere countries and through international 

working groups to identify and reduce risks to the financial sector by sharing

information and analysis on financial crimes. 

The Departments of State (State) and Treasury support AML capacity-building 

and technical assistance efforts in other Western Hemisphere countries in 

collaboration with the Departments of Justice and Homeland Security and other 

federal agencies. For example, Treasury provides training to support the 

development of legal and regulatory frameworks in partner countries consistent 

with international standards to prevent money laundering. Similarly, State funds 

such training and provides equipment to financial intelligence units in these 

countries to help them detect illicit financial transactions. In fiscal years 2011 

through 2015, State and Treasury allocated about $63 million to support AMLrelated capacity-building and technical assistance in the region, of which $52 

million was from State (see figure). 

Department of State’s Bureau of International Narcotics and Law Enforcement Affairs 

Allocations by Country for Western Hemisphere Anti-Money Laundering Programs, Fiscal 

Years 2011 through 2015 

a

Central American Regional Security Initiative (CARSI) funding included regional programming for Costa Rica, 

Guatemala, Honduras, and El Salvador. b

Other includes funding for Barbados and the Eastern Caribbean, the Caribbean Basin Security Initiative, Jamaica, 

Honduras, Dominican Republic, Paraguay, El Salvador, Guatemala, Ecuador, Haiti, Suriname, Trinidad and 

Tobago, Guyana, and Brazil.

View GAO-17-684. For more information, 

contact Jessica Farb at (202) 512-6991 or 

farbj@gao.gov or Lawrance Evans at (202) 

512-8678 or evansl@gao.gov. 
Page i GAO-17-684 Anti-Money Laundering

Letter 1

Background 3

U.S. Financial Regulators Provide Oversight and Work with 

Counterparts to Identify and Reduce Financial Sector Risks 13

State and Treasury Support Capacity-Building Efforts and 

Collaborate to Combat Money Laundering in Western 

Hemisphere Countries 26

Agency Comments 43

Appendix I Objectives, Scope, and Methodology 45

Appendix II High-Risk and Noncooperative Jurisdictions in the Western 

Hemisphere as Identified by the Financial Action Task Force 49

Appendix III Basel Anti-Money Laundering Ratings for Select Countries in the 

Western Hemisphere, 2016 51

Appendix IV Department of State’s International Narcotics and Law Enforcement 

Affairs Allocations for Anti-Money Laundering 53

Appendix V Department of the Treasury’s Office of Technical Assistance 

Allocations for Anti-Money Laundering Programs in the 54

Appendix VI Comparative Table of Actions Western Hemisphere Countries 

Have Taken to Address Money Laundering as Identified by the 

Department of State 55

Appendix VII GAO Contacts and Staff Acknowledgments 60

Contents
Page ii GAO-17-684 Anti-Money Laundering

Tables

Table 1: Financial Regulators and Money Laundering Techniques 

in Various Financial Sectors 16

Table 2: Anti-Money Laundering (AML) Training Provided by U.S. 

Financial Regulators to Foreign Counterparts in the 

Western Hemisphere, 2011—2015 25

Table 3: High-Risk and Noncooperative Jurisdictions in the 

Western Hemisphere as Identified by the Financial Action 

Task Force (FATF), 2011–2017 49

Table 4: Basel Anti-Money Laundering Index Ratings for Select 

Western Hemisphere Countries, 2016 51

Table 5: Department of State’s International Narcotics and Law 

Enforcement Affairs Allocations by Country or Region for 

Western Hemisphere Anti-Money Laundering Programs, 

Fiscal Years 2011 through 2015 (dollars in thousands) 53

Table 6: Department of the Treasury’s Office of Technical 

Assistance Allocations by Country for Western 

Hemisphere Anti-Money Laundering Programs, Fiscal 

Years 2011 through 2015 (dollars in thousands) 54

Table 7: Comparative Table of Legislative and Other Actions 

Taken by Western Hemisphere Countries to Address 

Money Laundering as Identified by the Department of 

State 55

Figures

Figure 1: Three General Stages of Money Laundering 4

Figure 2: Key U.S. Agencies Involved in Domestic and 

International Anti-Money Laundering Regulatory and 

Capacity-Building Efforts 9

Figure 3: International Narcotics Control Strategy Report Money 

Laundering Priority Countries and Jurisdictions in the 

Western Hemisphere, 2016 11

Figure 4: Department of State’s and Department of the Treasury’s 

Funding Allocated for Western Hemisphere Anti-Money 

Laundering Activities by Fiscal Year 27

Figure 5: Department of State’s Bureau of International Narcotics 

and Law Enforcement Affairs Allocations by Country for 

Western Hemisphere Anti-Money Laundering Programs, 

Fiscal Years 2011 through 2015 29

Figure 6: General Anti-Money Laundering Framework 32
Page iii GAO-17-684 Anti-Money Laundering

Abbreviations

AML anti-money laundering

ASBA Association of Supervisors of Banks of the

Americas

BSA Bank Secrecy Act

CARSI Central America Regional Security Initiative

CFATF Caribbean Financial Action Task Force

CFT counter-financing of terrorism

CFTC Commodity Futures Trading Commission

CTR currency transaction report

DEA Drug Enforcement Administration

DHS Department of Homeland Security

FARC Revolutionary Armed Forces of Colombia

FATF Financial Action Task Force

FDIC Federal Deposit Insurance Corporation

Federal Reserve Board of Governors of the Federal Reserve System

FFIEC Federal Financial Institutions Examination Council

FinCEN Financial Crimes Enforcement Network
Page iv GAO-17-684 Anti-Money Laundering

FINRA Financial Industry Regulatory Authority

FIU financial intelligence unit

FSRB FATF-style regional bodies

GAFILAT Financial Action Task Force of Latin America

GTO Geographic Targeting Orders

HSI Homeland Security Investigations

ICE Immigration and Customs Enforcement

ICITAP International Criminal Investigative Training

Assistance Program

INL Bureau of International Narcotics and Law

Enforcement Affairs

IRS Internal Revenue Service

JSI Judicial Studies Institute

MOU memorandum of understanding

NAIC National Association of Insurance Commissioners

NCUA National Credit Union Administration

NFA National Futures Association

OAS CICAD Organization of American States Inter-American

Drug Abuse Control Commission

OCC Office of the Comptroller of the Currency

OFAC Office of Foreign Assets Control

OPDAT Office of Overseas Prosecutorial Development,

Assistance, and Training

OTA Office of Technical Assistance

SAR suspicious activity report

SEC Securities and Exchange Commission

SRO self-regulatory organization

State Department of State

TFFC Office of Terrorist Financing and Financial Crimes

TFI Office of Terrorism and Financial Intelligence

Treasury Department of the Treasury

UN United Nations

UNCAC United Nations Convention against Corruption

UNDOC United Nations Office of Drugs and Crime

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Page 1 GAO-17-684 Anti-Money Laundering

441 G St. N.W.

Washington, DC 20548

August 22, 2017

The Honorable Eliot L. Engel

Ranking Member

Committee on Foreign Affairs

House of Representatives

Dear Mr. Engel:

Illicit capital flows from narcotics trafficking are one of the most common 

sources of money laundering in the United States, according to the 

Department of the Treasury (Treasury).1 Transnational criminal 

organizations involved in drug trafficking seek to take advantage of any 

gaps in U.S. regulatory and law enforcement processes to place their 

illicit proceeds into the financial system and mask them as lawful. 

Narcotics trafficking is primarily a cash business, and the widespread use 

of the U.S. dollar for international commerce and the vast volume of 

transactions through U.S. banks and other financial institutions make the 

U.S. financial system vulnerable to narcotics-related money laundering. 

Though difficult to accurately determine, in 2015, Treasury estimated that 

drug trafficking generates about $64 billion annually from U.S. sales. 

Moreover, the financial systems of other Western Hemisphere countries, 

where much of the illicit drugs consumed in the United States are 

produced and trafficked, are also vulnerable to money laundering. These 

countries account for more than one-third of jurisdictions designated by 

the Department of State (State) as of primary concern for money 

laundering worldwide. Additionally, it is common for narcotics trafficking 

organizations to be engaged in laundering proceeds from other illicit 

activities, such as illegal mining or human trafficking, according to U.S. 

and foreign officials.

You asked us to provide information on U.S. efforts to prevent, detect, 

and deter illicit proceeds from entering the United States and other 

Western Hemisphere countries’ financial systems. This report describes 

(1) U.S. financial regulators’ oversight and monitoring of compliance with 

the Bank Secrecy Act (BSA) and related anti-money laundering (AML) 

 1

Money laundering is generally the process of converting proceeds derived from illicit 

activities such as narcotics trafficking into funds and assets in the financial system that 

appear to have come from legitimate sources. See 18 U.S.C. § 1956 for statutory 

language criminalizing the laundering of monetary instruments. 

Letter
Page 2 GAO-17-684 Anti-Money Laundering

requirements and efforts to collaborate with counterparts in other Western 

Hemisphere countries, and (2) the activities that State and Treasury 

support to build capacity in other Western Hemisphere countries to 

combat money laundering and how State and Treasury collaborate on 

those efforts.

To address these objectives, we reviewed laws and regulations and 

interviewed experts and officials from State, Treasury, financial regulators 

and other U.S. agencies, as well as counterparts in Western Hemisphere 

countries. We analyzed State’s and Treasury’s budget data for fiscal 

years 2011 through 2015 to identify how much funding the agencies 

allocated for AML capacity-building efforts in Western Hemisphere 

countries. To assess the reliability of the allocations data, we conducted 

interviews with knowledgeable State and Treasury officials about the 

accuracy and completeness of the data and reviewed financial reports. 

We determined that the data were sufficiently reliable for the purposes of 

reporting State’s and Treasury’s allocations for AML activities by year and 

by country from fiscal years 2011 through 2015. To identify examples of 

the ways in which U.S. agencies collaborated on AML activities, we 

developed a short questionnaire on collaboration practices and obtained 

responses from six U.S. federal agencies or departments. In addition, we 

conducted fieldwork in Colombia, Mexico, and Panama, where we 

interviewed U.S. embassy officials responsible for managing and 

implementing AML capacity-building activities and with host-government 

officials such as financial regulators; recipients of State and Treasury 

AML capacity-building and technical assistance; and representatives from 

the private sector, including U.S. and international financial institutions. 

We selected Colombia, Mexico, and Panama for site visits because State 

identified them as jurisdictions of primary concern for money laundering in 

their 2011 to 2016 International Narcotics Control Strategy Reports (vol. 

II). Additionally, each country was designated a Major Drug Transit and/or 

Major Illicit Drug Producing Country from fiscal years 2014 through 2016 

by presidential determination. The site visits were selected to serve as 

informative examples, and the findings are not generalizable across the 

Western Hemisphere. Because the Caribbean and offshore islands near 

the U.S. coastline are transit points for the drug trade and are used by 

criminal organizations to launder illicit proceeds, we also contacted and 

interviewed U.S. and government officials responsible for AML efforts in 

the Bahamas. For additional information concerning our scope and 

methodology, see appendix I.

We conducted this performance audit from May 2016 to August 2017 in 

accordance with generally accepted government auditing standards. 
Page 3 GAO-17-684 Anti-Money Laundering

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.

Money laundering generally takes place in three stages: placement, 

layering, and integration (see fig. 1). In the placement stage, cash is 

converted into monetary instruments, such as cashiers’ checks, money 

orders, or prepaid debit cards, or deposited into accounts with financial 

institutions.2 In the layering stage, these funds are transferred or moved 

into other accounts or other financial institutions to disguise their illicit 

origin. In the integration stage, the funds are used to purchase assets in 

the legitimate economy. Some of the funds may also be used to support 

additional illicit activities. Any financial sector and certain commercial 

businesses can be targets for money laundering operations during one or 

more of these stages. Many of these entities are required to report 

transactions with certain suspicious characteristics to Treasury’s Financial 

Crimes Enforcement Network (FinCEN).3

 2

“Financial institution” is defined in 31 U.S.C. § 5312 to include certain banks, credit 

unions, securities brokers or dealers, insurance companies, money transmitter

businesses, and casinos, among others. According to FATF recommendations, casinos 

are considered designated nonfinancial businesses and professions. For purposes of this 

report, our discussion of the BSA does not address those financial institutions considered 

designated nonfinancial businesses and professions. 

3

For example, in the United States, banks must file Suspicious Activity Reports (SAR) with 

Treasury’s Financial Crimes Enforcement Network (FinCEN) for transactions that involve 

or aggregate at least $5,000 and that the bank knows, suspects, or has reason to suspect 

that the transaction involves funds derived from illegal activities, among other things. See

31 U.S.C. § 5318(g); 31 C.F.R. § 1020.320. 

Background
Page 4 GAO-17-684 Anti-Money Laundering

Figure 1: Three General Stages of Money Laundering
Page 5 GAO-17-684 Anti-Money Laundering

Within the United States, the BSA and related AML regulations provide 

the legal and regulatory framework for preventing, detecting, and 

deterring money laundering.4 The BSA and its implementing regulations 

generally require banks and other financial institutions, such as securities 

broker-dealers and certain types of insurance companies, among others, 

to collect and retain various records of customer transactions, verify 

customers’ identities in certain situations, maintain AML programs, and 

report suspicious and large cash transactions.5 In addition, the United 

States has put in place a variety of AML measures intended to mitigate 

risks, including the following:

• promulgation of regulations requiring reporting by financial institutions 

to promote transparency with regard to the origin of funds;

• providing oversight to financial institutions in the United States by 

federal financial regulators to assess the effectiveness of BSA/AML 

compliance programs and take consequent appropriate legal action, if 

necessary; and

• forming partnerships with other countries through multilateral and 

bilateral treaties and arrangements to promote global AML policies 

and standards and facilitate the exchange of information on suspected 

money laundering activities.

FinCEN was established in 1990 to support government agencies by 

collecting, analyzing, and disseminating financial intelligence information 

to combat money laundering. FinCEN is responsible for administering the 

BSA, coordinating with federal and state regulatory agencies on AML, 

and countering the financing of terrorism (CFT). FinCEN also serves as 

the Financial Intelligence Unit (FIU) of the United States.6 FinCEN is a 

component of Treasury’s Office of Terrorism and Financial Intelligence 

 4

Pub. L. No. 91-508, tits. I and II, 84 Stat. 1114 (1970) (codified as amended at 12 U.S.C. 

§§ 1829b, 1951-1959; 18 U.S.C. §§ 1956-1957 and 1960; and 31 U.S.C. §§ 5311-5314 

and 5316-5332). The Bank Secrecy Act is the commonly used term for the Currency and 

Foreign Transactions Reporting Act, its amendments, and the other statutes relating to the 

subject matter of that act. 31 C.F.R. § 1010.100(e). 

5

See 31 U.S.C. § 5318. 

6

An FIU is a national center for the receipt and analysis of SARs and other information 

relevant to money laundering, predicate offenses, and terrorist financing, and for the 

dissemination of the results of the analysis.
Page 6 GAO-17-684 Anti-Money Laundering

(TFI), which includes other components actively involved in AML efforts.7

Also within Treasury, the Office of International Affairs, the Office of 

Technical Assistance (OTA), and the Internal Revenue Service (IRS) 

have significant roles in AML efforts.

FinCEN relies on financial regulators and other entities to conduct 

examinations of U.S. financial institutions across a variety of financial 

sectors to determine compliance with the BSA and its implementing 

regulations.8 As part of their examination programs, the federal financial 

regulators assess the effectiveness of BSA/AML compliance programs 

through a review of institutions’ records, policies, and procedures for 

compliance with the BSA, including the requirement to identify and report 

suspicious activity. The federal financial regulators that are responsible 

for overseeing financial institutions’ AML efforts include the federal 

banking agencies—the Board of Governors of the Federal Reserve 

System (Federal Reserve), the Office of the Comptroller of the Currency 

(OCC),the Federal Deposit Insurance Corporation (FDIC), and the 

National Credit Union Administration (NCUA)—as well as the Securities 

and Exchange Commission (SEC), which regulates the securities 

markets, and the Commodity Futures Trading Commission (CFTC), which 

regulates commodity futures and options markets. The self-regulatory 

organizations (SRO) that SEC and CFTC oversee—such as the Financial 

Industry Regulatory Authority (FINRA) and the National Futures 

Association (NFA), among others—also have BSA/AML compliance 

 7

In addition to FinCEN, TFI’s components include: (1) the Office of Foreign Assets 

Control, which administers and enforces sanctions based on national security and foreign 

policy priorities; (2) the Office of Intelligence and Analysis, 1 of the 16 U.S. Intelligence 

Community members; (3) the Office of Terrorist Financing and Financial Crimes (TFFC), 

which is responsible for formulating and coordinating anti-money laundering and 

countering the financing of terrorism (AML/CFT) policies and is also charged with 

developing and promoting AML/CFT international standards; and (4) the Treasury

Executive Office for Asset Forfeiture, which administers the Treasury Forfeiture Fund.

8

Under FinCEN regulation, a “federal financial regulator” is defined as the Board of 

Governors of the Federal Reserve System (Federal Reserve), the Office of the 

Comptroller of the Currency (OCC), the Board of Directors of the Federal Deposit 

Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the 

Securities and Exchange Commission (SEC), or the Commodity Futures Trading 

Commission (CFTC). 31 C.F.R. § 1010.100(r). In this report, we refer to the Federal 

Reserve, OCC, FDIC, and NCUA as “federal financial regulators”; we refer to SEC and 

CFTC as “securities and futures regulators.” These regulators, combined with FinCEN, 

IRS, and state regulators, we refer to collectively as “financial regulators.” 
Page 7 GAO-17-684 Anti-Money Laundering

responsibilities for the activities of their members.9 The Federal Reserve, 

FDIC, NCUA, SEC, and CFTC are independent agencies that are not part 

of the executive branch, while OCC is a bureau within Treasury. The IRS 

has the authority to examine financial institutions that are not currently 

examined by financial regulators, such as money services businesses, for 

BSA compliance. For the insurance industry, in addition to any applicable 

federal oversight, state insurance commissioners are responsible for 

supervision as part of their broader prudential examinations of the

insurance sector.

Internationally, U.S. agencies work with multiple multilateral organizations 

to combat money laundering and promote financial stability. These 

organizations include the Financial Action Task Force (FATF), the 

Egmont Group of Financial Intelligence Units (Egmont Group), the Basel 

Committee on Banking Supervision, the United Nations (UN), the 

International Monetary Fund (IMF), and the World Bank.10 FATF is an 

intergovernmental body that sets internationally recognized standards for 

developing AML and CFT regimes and assessing countries’ abilities to 

meet these standards.11 There are also nine FATF-style regional bodies 

(FSRB) that work to promote FATF standards in specific geographic 

locations and to assess countries’ level of implementation of those 

standards. Two FSRBs in the Western Hemisphere—the Caribbean 

Financial Action Task Force (CFATF) and the Financial Action Task 

Force of Latin America (GAFILAT)—include representation from most 

Western Hemisphere countries, providing a mechanism to coordinate 

technical assistance and training. FATF and its FSRBs also work to 

identify specific typologies of money laundering, such as trade-based 

money laundering, and to promote international cooperation in disrupting 

and dismantling those money laundering schemes. The UN has adopted 

treaties and conventions that once signed, ratified, and implemented by 

 9

SROs are nongovernmental entities responsible for regulating their members through the 

adoption and enforcement of rules and regulations governing the business conduct of their 

members. 

10The Egmont Group is an organization of FIUs from 156 jurisdictions (as of August 2017). 

The Egmont Group fosters information exchange between its members and provides 

training and technical assistance to FIUs.

11The United States is a founding member of FATF, and the Office of Terrorist Financing 

and Financial Crimes (TFFC) leads the U.S. delegation to FATF and the FSRBs. The 

assessments that FATF conducts, which it refers to as “mutual evaluations,” are designed 

to assess how well countries have implemented the standards.
Page 8 GAO-17-684 Anti-Money Laundering

member governments have the effect of law and enhance the ability of 

these governments to combat money laundering and terrorist financing.

U.S. agencies, with support from State, provide training and technical 

assistance directly to countries vulnerable to money laundering (see fig. 

2). State is responsible for coordinating all assistance provided by the 

U.S. government to support international efforts to combat illicit narcotics 

production or trafficking.12 Within State, the Bureau of International 

Narcotics and Law Enforcement Affairs (INL) provides the majority of this 

funding.

 12 22 U.S.C. § 2291
Page 9 GAO-17-684 Anti-Money Laundering

Figure 2: Key U.S. Agencies Involved in Domestic and International Anti-Money 

Laundering Regulatory and Capacity-Building Efforts

a

Self-regulatory organizations are nongovernmental entities responsible for regulating their members 

through the adoption and enforcement of rules and regulations governing the business conduct of 

their members.

b

In addition to FinCEN, three other offices within Treasury’s Office of Terrorism and Financial 

Intelligence have a role in anti-money laundering efforts: (1) the Office of Foreign Assets Control, 

which imposes sanctions for money laundering; (2) the Office of Intelligence and Analysis, which is 

engaged in intelligence gathering; and (3) TFFC, which is responsible for policy development and 

international outreach.
Page 10 GAO-17-684 Anti-Money Laundering

Annually, INL also publishes a two-volume report on efforts to combat all 

aspects of the international drug trade that includes an analysis of 

countries identified as “major money laundering countries.”13 See figure 3 

for a map of countries and jurisdictions in the Western Hemisphere 

identified by INL as being vulnerable to money laundering.

 13See, for example, Department of State, Bureau of International Narcotics and Law 

Enforcement Affairs, International Narcotics Control Strategy Report, vol. II (Washington, 

D.C.: March 2016). This report is required under 22 U.S.C. § 2291h. The term “major 

money laundering country” means a country whose financial institutions engage in 

currency transactions involving significant amounts of proceeds from international 

narcotics trafficking. 22 U.S.C. § 2291(e)(7). 
Page 11 GAO-17-684 Anti-Money Laundering

Figure 3: International Narcotics Control Strategy Report Money Laundering Priority Countries and Jurisdictions in the 

Western Hemisphere, 2016

Note: The Department of State identifies “jurisdictions of primary concern” as major money laundering 

countries. According to State, whether a country or jurisdiction should be included in this category is 

based on the significance of the amount of proceeds laundered in the entire financial sector, not only 
Page 12 GAO-17-684 Anti-Money Laundering

on banking transactions or on the anti-money laundering measures taken. State notes that the actual 

money laundering problem in jurisdictions classified as “jurisdictions of concern” is not as acute as in 

those considered to be of “primary concern.” Finally, according to State, while jurisdictions in the 

“other jurisdictions monitored” category do not pose an immediate concern, it is nevertheless 

important to monitor their money laundering situations because, under certain circumstances, virtually 

any jurisdiction can develop into a significant money laundering center.

Treasury’s OTA is the other key provider of assistance to strengthen AML 

measures in other countries in line with international standards.14 INL and 

OTA work with other U.S. agencies, primarily components within the 

Departments of the Treasury, Justice (Justice), and Homeland Security 

(DHS), as well as with financial regulators, to provide capacity-building 

and technical assistance to foreign partners. In addition, FinCEN engages 

in the development of operational policy, guidance, and discussions of 

best practices with other FIUs, designs and delivers courses for Egmont 

Group members, and participates in operational engagements with select 

FIUs on priority topics.

The magnitude and globally integrated nature of the U.S. financial system 

creates opportunities for criminal organizations to take advantage of 

money laundering vulnerabilities. For example, while FATF’s most recent 

evaluation of the U.S. AML regime found it to be effective overall, the 

evaluation also highlighted specific weaknesses in the framework, 

particularly related to identifying the beneficial owners of legal entities 

created in the United States or legal entities that open accounts with U.S. 

financial institutions, which is a vulnerability that illicit organizations could 

exploit.15 Narcotics trafficking organizations can use a variety of means to 

exploit these weaknesses, as well as weaknesses in the financial 

 14Section 129 of the Foreign Assistance Act of 1961, as amended, authorizes the 

establishment of a Department of the Treasury program to provide technical assistance to 

governments and central banks of developing or transitional countries. 22 U.S.C. § 2152. 

15Financial Action Task Force, Anti-money laundering and counter-terrorist financing 

measures - United States, Fourth Round Mutual Evaluation Report (Paris, France: 

December 2016). In 2016, FinCEN issued a final rule to strengthen customer due 

diligence requirements for certain financial institutions and to impose a new requirement 

on these financial institutions to identify and verify the beneficial owners of legal entity 

customers at the time a new account is opened. Under FinCEN regulation, beneficial 

owners are defined as each individual who owns, directly or indirectly, 25 percent or more 

of the equity interests of the entity, and one individual with significant responsibility to 

control, manage, or direct the entity. Financial institutions covered by these new rules 

have until May 11, 2018, to comply. Customer Due Diligence Requirements for Financial 

Institutions, 81 Fed. Reg. 29398 (May 11, 2016) (codified at 31 C.F.R. pts. 1010, 1020, 

1023, 1024, and 1026). However, according to Treasury officials, a requirement for the 

identification of beneficial ownership information at the time a company is created through 

incorporation in the applicable state would require legislation.
Page 13 GAO-17-684 Anti-Money Laundering

systems of countries in the Western Hemisphere, to conceal the illicit 

nature of their proceeds. For example, narcotics trafficking organizations 

can structure transactions below applicable reporting thresholds of U.S. 

financial institutions—transactions involving more than $10,000 in 

currency; use shell corporations to disguise or conceal the ownership of 

accounts at financial institutions; and take advantage of deficiencies in 

compliance requirements for financial institutions within the financial 

system, such as individual weaknesses in the U.S. regulatory framework 

identified by FATF. Drug traffickers can also use more complex 

techniques to conceal the origins of illicit proceeds, such as trade-based 

money laundering, which exploits international trade and financial 

institutions in multiple countries and frequently involves complicit or 

unwitting parties in commercial transactions.16

Financial regulators play a critical role in safeguarding financial markets 

from illicit activity, including money laundering. They provide oversight of 

financial institutions by examining for compliance with the BSA and 

requiring corrective action, including enforcement actions for 

noncompliance with BSA requirements, and by sharing information with 

FinCEN. Their role extends to supporting counterparts throughout the 

Western Hemisphere.

To combat the threat of money laundering, financial institutions—

including certain banks, securities broker-dealers, futures and 

commodities brokers, money services businesses, and insurance 

companies—are required to have written policies and procedures that 

include key AML requirements based on the BSA. Most financial 

institutions are required to develop, administer, and maintain an effective 

program for compliance with the BSA and all of its implementing 

regulations. At a minimum, this compliance program must provide for the 

following:

 16Trade-based money laundering may make use of various schemes such as trading in 

contraband, falsifying the value of merchandise, or misrepresenting trade-related financial 

transactions with the purpose of disguising the origin of illicit proceeds and integrating the 

funds into the financial system. 

U.S. Financial 

Regulators Provide 

Oversight and Work 

with Counterparts to 

Identify and Reduce 

Financial Sector 

Risks

U.S. Financial Regulators 

Oversee Financial 

Institutions’ Compliance 

with BSA Requirements 

Primarily through 

Examinations
Page 14 GAO-17-684 Anti-Money Laundering

• Establish a system of internal controls to ensure ongoing compliance, 

including staff adherence to the financial institution’s BSA/AML 

policies.

• Conduct AML compliance training for appropriate personnel, such as 

those involved in opening accounts at financial institutions.

• Provide for independent testing of BSA compliance—i.e. test 

transactions for adherence to recordkeeping and reporting 

requirements, review filing of SARs17 and currency transaction reports 

(CTR)18 and assess the process for identifying suspicious activity.

• Designate a person or persons responsible for managing BSA 

compliance with sufficient authority and resources to administer an 

effective BSA/AML program.

• Establish, for certain financial institutions, a risk-based customer due 

diligence procedure.19

 17The BSA and its implementing regulations impose an obligation on financial institutions 

to report transactions that involve or aggregate to at least $2,000 or $5,000, depending on 

the institution, are conducted by, at, or through the financial institution; and that the 

financial institution “knows, suspects, or has reason to suspect” are suspicious. A 

transaction is “suspicious” if the transaction (a) involves funds derived from illegal 

activities, or is conducted to disguise funds derived from illegal activities; (b) is designed to 

evade the requirements of the BSA or regulations under the act; or (c) has no business or 

apparent lawful purpose or is not the sort in which the customer normally would be 

expected to engage, and the financial institution knows of no reasonable explanation for 

the transaction after examining the available facts, including the background and possible 

purpose of the transaction. See 31 C.F.R. § 1020.320(a)(2)(i)-(iii) (banks); § 

1022.320(a)(2)(i)-(iii) (money services businesses); and § 1025.320(a)(2)(i)-(iii) (insurance 

companies). 

18Most financial institutions are required to file a report with FinCEN of each deposit, 

withdrawal, exchange of currency or other payment or transfer, by, through, or to such 

financial institution that involves a transaction in currency of more than $10,000. See 31 

C.F.R. § 1010.311. 

19In 2016, FinCEN issued its final rule requiring banks, brokers or dealers in securities, 

mutual funds, futures commission merchants, and introducing brokers in commodities to 

establish risk-based procedures for conducting customer due diligence, including 

identifying and verifying beneficial ownership information for accounts. The financial 

institutions covered by this rule, which do not include money services businesses and 

insurance companies, have until May 11, 2018 to comply. See Customer Due Diligence 

Requirements for Financial Institutions, 81 Fed. Reg. 29,398 (May 11, 2016) (codified at 

31 C.F.R. pts. 1010, 1020, 1023, 1024, and 1026). 
Page 15 GAO-17-684 Anti-Money Laundering

Financial regulators conduct examinations of financial institutions they 

oversee to help ensure compliance with BSA requirements.20 With 

respect to the federal financial regulators, BSA examinations can be 

conducted as part of regularly scheduled safety and soundness 

examinations or to ensure compliance with applicable laws and rules, 

generally occurring at least once every 12 to18 months for most financial 

institutions, or targeted based on risk. The Federal Financial Institutions 

Examination Council, a formal interagency body composed of federal 

financial regulators and state regulator representative bodies that 

prescribes standards for banks and other financial institutions, has 

developed a manual for BSA/AML examinations of banks. For nonbank

financial institutions, SEC and CFTC have separate, nonpublic 

procedures for examinations of the institutions they oversee.21 In 2008, 

FinCEN issued a manual for use by IRS and state regulators that 

provides guidance for examiners to perform risk-based examinations of 

money services businesses. The National Association of Insurance 

Commissioners (NAIC) has developed guidance for use by state 

insurance commissioners to examine insurance companies required to 

have BSA policies.22

Examinations are risk-based, meaning that examiners have the flexibility 

to apply the appropriate level of scrutiny to business lines that pose a 

higher level of risk to the institution. Examiners may consider a broad 

range of risk factors including the type of business, the geographic

location, or the products offered by the institution. Financial institutions 

are expected to complete a BSA/AML risk assessment to identify specific 

products, services, and customers, which financial regulators can use to 

evaluate the compliance programs of financial institutions and scope their 

examinations. Financial regulators we spoke with told us they also rely on 

 20FinCEN has delegated responsibility for examining financial institutions for compliance 

with the BSA to the financial regulators. See 31 C.F.R. § 1010.810(b)(1)-(3), (5)-(6), and 

(9). 

21The SEC and CFTC also share responsibility for examinations with their respective 

SROs. For example, FINRA and SEC both oversee securities broker-dealers, including 

conducting examinations, though FINRA conducts the majority of examinations of firms. 

By contrast, CFTC does not routinely conduct direct examinations of the firms it 

supervises; instead, CFTC oversees the examinations conducted by its SROs such as 

NFA, which conducts most of the audits.

22NAIC is the standard-setting and regulatory support agency created and governed by 

the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. 

territories.
Page 16 GAO-17-684 Anti-Money Laundering

information from FATF mutual evaluations and the Basel AML Index, 

among other sources, to identify specific areas of risk in internationally 

active U.S. financial institutions to focus their examinations, and that risks 

can vary by industry and financial sector.23 For example, FATF publishes 

lists of jurisdictions that it determines, based on its assessments of their 

AML regimes, to be high-risk and noncooperative (see appendix II for a 

list of Western Hemisphere countries identified by FATF as high-risk and 

noncooperative). Table 1 shows the various financial regulators that are 

responsible for ensuring compliance with BSA requirements across a 

variety of financial sectors and the different money laundering risks each 

sector faces.

Table 1: Financial Regulators and Money Laundering Techniques in Various Financial Sectors

Financial sector Financial regulator(s) Common money laundering techniques

used 

Subject to 

BSA/AML 

examination 

(frequency)

Insured depository 

institutions (state and 

federally chartered banks 

and credit unions)

• Board of Governors of the 

Federal Reserve System

• Office of the Comptroller of the 

Currency

• Federal Deposit Insurance 

Corporation

• National Credit Union 

Administration

• State regulators

• Structuring of deposits to avoid reporting 

thresholds.a

• Misuse of correspondent accounts.b

• Misuse of legal entities.

Yes (every 12-18 

months)

Securities broker-dealers 

and mutual funds 

• Securities and Exchange 

Commission

• Self-regulatory organizations 

(securities broker-dealers only)

• Providing customers direct access to the 

securities markets from higher risk 

jurisdictions.

• Masking the identity of subaccount owners.

• Misuse of legal entities to transfer 

ownership across international borders.

Yes (risk-based 

or every 1-4 

years)

Futures and commodities 

brokers

• Commodity Futures Trading 

Commission

• Self-regulatory organizations 

• Masking the identity of subaccount owners.

• Misusing legal entities to transfer. 

ownership across international borders.

Yes (risk-based)

 23The Basel AML Index, compiled annually since 2012 by the Basel Institute on 

Governance, uses publicly available sources to measure the risks of money laundering 

and terrorist financing in countries. The 2016 edition included risk ratings for 149 countries

(see appendix III). The Basel Institute on Governance is an independent, not-for-profit 

organization based in Basel, Switzerland that specializes in corruption prevention and 

public governance, corporate governance and compliance, anti-money laundering, 

criminal law enforcement, and the recovery of stolen assets.
Page 17 GAO-17-684 Anti-Money Laundering

Financial sector Financial regulator(s) Common money laundering techniques

used 

Subject to 

BSA/AML 

examination 

(frequency)

Money services businesses 

and money transmitters

• FinCEN

• Internal Revenue Service

• State regulators

• Structuring of transactions to avoid 

reporting thresholds.

• Using unregistered or unlicensed entities 

for transactions.

Yes (risk-based)

Insurance companies • FinCEN

• State insurance commissioners

• Use of unusual payment methods such as 

cash or cash equivalents.

• Early termination of products without 

regard to losses to the customer.

Yes (at least 

once every 5 

years)

Legend: AML = anti-money laundering; BSA = Bank Secrecy Act; FinCEN = Financial Crimes Enforcement Network

Source: GAO analysis of Department of the Treasury, Financial Action Task Force and agency documents and interviews. | GAO-17-684

a

Most U.S. financial institutions are required to file a report with FinCEN for currency transactions 

exceeding $10,000.

b

A correspondent account is an account established for a foreign financial institution to receive 

deposits from, or to make payments or other disbursements on behalf of, the foreign financial 

institution or to handle other financial transactions related to such foreign financial institution. See 31 

C.F.R § 1010.605(c)(1).

Financial regulators told us that their examiners focus on whether 

financial institutions are complying with BSA requirements and have the 

proper framework in place to detect and report suspicious activity. 

However, during the course of their examinations, if they identify potential 

money laundering or other criminal violations, such as drug trafficking, 

fraud, or tax evasion, they said that they would raise these concerns with 

management and refer such criminal allegations to law enforcement 

counterparts as appropriate. According to officials we spoke with, most 

problems identified by examiners are resolved soon after they are brought 

to the attention of an institution’s management. In serious cases, 

noncompliance with BSA requirements may result in informal actions, 

such as the issuance of a letter outlining compliance issues identified 

through examinations, or increased examination frequency, and formal 

actions that require corrective steps to address problems identified during 

the examination process, such as a consent order or civil money penalty.

FinCEN is authorized to enforce the BSA and impose civil money 

penalties on any financial institution covered by BSA requirements, and 

the financial regulators also can take independent enforcement actions 

against financial institutions.24 For example, we reported that from 

 24The IRS also has authority to assess and collect certain civil penalties. See 31 C.F.R. § 

1010.810(g).
Page 18 GAO-17-684 Anti-Money Laundering

January 2009 to December 2015, financial regulators assessed a total of 

about $1.4 billion in penalties for BSA and sanctions violations.25 More 

recently, in February 2017, FinCEN and OCC jointly assessed civil money 

penalties against a bank that had business dealings in Mexico and 

Colombia for failure to comply with BSA requirements, including failure to 

conduct due diligence on its high-risk customers along the U.S.-Mexico 

border and failure to adequately monitor billions of dollars of transactions 

for suspicious activity.26

In addition to conducting examinations, financial regulators we spoke with 

also reported that they participate in other activities intended to share with 

financial institutions information regarding compliance with BSA 

requirements. Financial regulators we spoke with participate in industry 

conferences and AML-focused working groups and provide training to 

industry compliance personnel to share more information about BSA 

requirements and risks to financial institutions from money laundering. 

For example, NCUA officials told us they provide written supervisory 

guidance to the industry on BSA/AML risks when specific risk exposures 

are identified. Officials from the financial regulators told us they 

participate in multiple conferences related to BSA/AML issues, including 

the Association of Certified Anti-Money Laundering Specialists’ annual 

conference and the American Bankers Association/American Bar 

Association Financial Crimes Enforcement Conference. Additionally, 

FinCEN chairs the Bank Secrecy Act Advisory Group, in which the 

financial regulators participate with private sector representatives to share 

information on money laundering risks and regulatory obligations.27 SEC 

 25This amount includes $651 million assessed concurrently with FinCEN. See GAO, 

Financial Institutions: Fines, Penalties, and Forfeitures for Violations of Financial Crimes 

and Sanctions Requirements, GAO-16-297 (Washington, D.C.: Mar. 22, 2016).

26FinCEN and OCC fined Merchants Bank of California $7 million and $1 million, 

respectively. The FinCEN penalty was based upon, among other things, failure to file a 

SAR for a suspicious pattern of subjects cashing multiple structured checks made out to 

the same individuals in Mexico without providing information on the source of the funds. 

The bank also failed to file a SAR on customers conducting large wire transfers totaling 

over $395 million to unknown entities in Colombia. OCC’s penalty was based, in part, 

upon the bank’s failure to comply with the terms of OCC’s 2010 and 2014 consent orders 

with the bank regarding deficiencies in the bank’s BSA compliance program. 

27The Annunzio-Wylie Anti-Money Laundering Act required the Secretary of the Treasury 

to establish a Bank Secrecy Act Advisory Group consisting of representatives from federal 

regulatory and law enforcement agencies, financial institutions, and trade groups with 

members subject to the requirements of the BSA. Pub. L. No. 102-550, tit. XV, § 1564, 

106 Stat. 3672, 4073 (1992)(codified at 31 U.S.C. § 5311 note). 

U.S. Financial Regulators 

and FinCEN Share 

Information with Financial 

Institutions to Promote 

Compliance with BSA
Page 19 GAO-17-684 Anti-Money Laundering

has published risk alerts on BSA/AML issues, maintains a library of 

publicly available documents on the its website, and engages in outreach 

through conferences and other forums.

FinCEN also provides information that financial regulators can use to 

enhance their examination process and that financial institutions can use 

to improve their BSA compliance and stay informed of risks. FinCEN, as 

the financial intelligence unit, serves as the repository of SARs and CTRs, 

among other required reports, from financial institutions. FinCEN 

conducts analyses of the data and provides access to its database of 

SARs, CTRs, and other BSA reports to financial regulators to enable 

them to use the information to better inform their examination process. 

Financial regulators told us they use the information on the FinCEN 

database to examine financial institutions to see if, among other things, 

the appropriate information has been reported to FinCEN. In addition, 

FinCEN regularly issues bulletins and advisories to financial institutions, 

which can include clarification of or additional reporting requirements for

financial institutions. For example, in January 2016, FinCEN issued real 

estate Geographic Targeting Orders (GTO) for the borough of Manhattan 

in New York City and Miami-Dade County, Florida, that temporarily 

required certain U.S. title insurance companies in Manhattan and MiamiDade County to identify the persons behind shell companies used to pay 

“all cash” (purchases without bank financing) for high-end residential real 

estate.28 In a separate action, in April 2015 FinCEN, in coordination with 

the Department of Homeland Security Immigration and Customs 

Enforcement (ICE)/Homeland Security Investigations (HSI), issued a 

GTO to several hundred businesses in Miami to shed light on cash 

transactions that may be related to trade-based money laundering 

schemes used by drug cartels. FinCEN also advises U.S. financial 

institutions about FATF jurisdictions of concern and how to deal with 

accounts from certain countries following each FATF meeting, as well as 

other criminal financial activities. For example, FinCEN issued an 

advisory in April 2017 that provided financial institutions with guidance for 

managing accounts in countries identified in recent FATF public 

 28In July 2016, this GTO was expanded to include (1) all boroughs of New York City; (2) 

Miami-Dade County and the two counties immediately north (Broward and Palm Beach); 

(3) Los Angeles County, California; (4) three counties in the San Francisco area (San 

Francisco, San Mateo, and Santa Clara counties); (5) San Diego County, California; and 

(6) the county that includes San Antonio, Texas (Bexar County). In February 2017, 

FinCEN renewed this GTO for an additional 180 days. 
Page 20 GAO-17-684 Anti-Money Laundering

documents as having AML/CFT deficiencies and issued two advisories on 

cyber-related risks and crimes in September and October 2016.

U.S. and foreign regulators work together through various means to 

promote international standards and deter money laundering in the 

Western Hemisphere. Specifically, U.S. financial regulators and FinCEN 

share AML information or financial intelligence with and provide training to 

their Western Hemisphere counterparts through international 

organizations such as the GAFILAT and the Egmont Group; through 

informal bilateral arrangements, such as memoranda of understanding 

(MOU); and on an ad hoc basis. These activities include sharing 

information as well as providing training on money laundering typologies, 

practices related to money laundering detection and deterrence, and 

identifying suspicious activity.

Through FATF, the AML/CFT standards-setting body, and its regional 

bodies, the U.S. government and other FATF member countries engage 

in several working groups as a means to share information. These groups 

cover topics such as policy development, which includes revisions to the 

FATF standards; guidance and best practice reporting; international 

cooperation, which identifies high-risk and noncooperative jurisdictions; 

and money laundering and terrorist financing risks. U.S. representatives 

to FATF, which include TFFC, FinCEN, law enforcement, and the 

financial regulators, said these working groups have been valuable in 

allowing them to share information with other countries. Regulators we 

spoke with in other Western Hemisphere countries also recognized the 

importance of FATF and the regional bodies as a valuable means of 

sharing information. For example, in the Bahamas, one regulator we 

spoke with said that the Caribbean Financial Action Task Force (CFATF) 

allows the Bahamas direct access to international discussions on issues 

on bank supervision and AML.

FinCEN and other FIUs also share information bilaterally and through the 

Egmont Group, an international organization that emphasizes sharing 

information among FIUs. As of June 2017, 38 FIUs from countries and 

jurisdictions in the Western Hemisphere were members. The goal of the 

Egmont Group is to provide a forum for FIUs to improve support to their 

respective governments in the fight against money laundering, terrorist 

financing, and other financial crimes. Egmont Group members share 

tactical, operational, and strategic information as it relates to money 

laundering and predicate crimes, such as narcotics trafficking, to assist 

respective law enforcement agencies. According to Treasury 

U.S. Financial Regulators 

and FinCEN Use a Variety 

of Mechanisms to Work 

with Western Hemisphere 

Counterparts to Reduce 

Risks to the Financial 

System
Page 21 GAO-17-684 Anti-Money Laundering

representatives to the Egmont Group, the Egmont Group has also 

delivered courses to FIUs in Latin America and the Caribbean in 

coordination with FSRBs and other international organizations, including 

the Organization of American States. Through the Egmont Group, 

FinCEN staff said that they work with FIUs in the Western Hemisphere to 

exchange information on financial crimes, develop operational guidance 

and best practices for FIUs, and coordinate on capacity development for 

FIUs. FinCEN told us that Egmont Group membership is critical to 

information sharing, as it provides assurances that the member has the 

appropriate policies and procedures in place to respond to and protect 

sensitive information. The FIU in Mexico told us that FinCEN is the main 

U.S. agency that it collaborates with on anti-money laundering activities. 

Where appropriate, Mexico’s FIU conducts joint analysis of account 

information (e.g., deposits and other transactions) with FinCEN and 

shares information and research when there is a U.S. connection to the 

cases that it is investigating.

FinCEN shares information with foreign FIUs pursuant to MOUs. 

According to FinCEN, in some cases, it shares information with foreign 

FIUs without MOUs, provided that those FIUs are members of the 

Egmont Group. FinCEN also shares information pursuant to MOUs with 

foreign regulators for AML/CFT purposes. FinCEN has signed MOUs with 

foreign financial regulators and FIUs, including Egmont Group members, 

as well as FIUs that are not part of the Egmont Group.29 FinCEN’s MOUs 

with foreign financial regulators enable information sharing of AML/CFT 

supervisory information. For example, in 2013, FinCEN entered into an 

MOU with Mexico’s National Banking and Securities Commission in 

support of both countries’ AML mission. Officials from FinCEN said that 

such information sharing with foreign regulators has been beneficial 

because it has allowed for additional collaboration on AML issues of 

concern from a supervisory perspective. Similarly, officials from FIUs in 

Colombia and Panama said that they work closely with FinCEN to share 

information that helps identify suspicious patterns of activities and to 

conduct analyses to detect financial crimes, some of which are related to 

narcotics trafficking. Officials from FinCEN said that they have worked 

closely with the FIUs in Mexico and several Latin American countries to 

identify high-risk banking clients and to share this information with 

Treasury. In addition to sharing information through FIUs, FinCEN also 

 29According to Treasury, where required by the foreign jurisdiction, FinCEN has entered 

into MOUs with foreign FIUs. 
Page 22 GAO-17-684 Anti-Money Laundering

prepares research reports at the request of foreign regulators. For 

example, FinCEN has prepared summaries of activities of concern for 

foreign regulators, including information on bank transactions conducted 

in foreign jurisdictions by persons identified as suspicious. This 

information is provided to the foreign regulator for them to pursue.

U.S. financial regulators also have good working relationships with their 

counterparts in many Latin American and Caribbean countries. For 

example, U.S. and Mexican government agencies share information 

through a bilateral committee devoted to AML efforts because money 

flows and criminal activity across the shared border often involve 

narcotics trafficking and are a significant concern for both countries. The 

committee, which is co-chaired by TFFC, has been working together for 

the past several years and includes representatives from the Federal 

Reserve, OCC, Justice, and Mexican officials and ministers, as well as 

private-sector groups.30

Some U.S. financial regulators we spoke with also explained that in the 

normal course of business they receive formal requests from foreign bank 

supervisors for supervisory information on U.S. banking institutions, 

including AML-related information and may host visits with foreign 

regulators and securities exchange authorities that may lead to sharing of 

information on AML issues. For example, the Federal Reserve 

cooperates with foreign banking supervisors through its participation in 

joint meetings of regulators, both as the home-country supervisor of U.S. 

banking organizations with overseas operations and as the host-country 

supervisor of the U.S. operations of foreign banking organizations. This 

cooperation involves bilateral and multilateral contacts and formal and 

informal information-sharing arrangements. In periodic meetings with 

foreign bank supervisors, they may ask about specific U.S. banking 

institutions and whether there are particular concerns about these 

institutions’ soundness, including with respect to AML issues. Requests 

are typically made in connection with the foreign supervisor’s supervision 

of the U.S. institution’s operations in their jurisdiction or the U.S. 

institution’s proposal to establish a cross-border office in the foreign 

jurisdiction.

 30In addition to the U.S.-Mexico Bilateral Working Group, the Federal Reserve, OCC, and 

FinCEN participate in a U.S.-United Kingdom Bilateral Working Group co-chaired by 

TFFC, as well as public-private dialogues with countries in the Western Hemisphere.
Page 23 GAO-17-684 Anti-Money Laundering

Information sharing also takes place through in-person visits and 

exchange of staff. For example, a representative from a financial 

regulator in the Bahamas we spoke with said that a high-level official from

his agency visited the United States and met with U.S. regulators to 

discuss AML issues related to concerns over correspondent accounts 

with foreign banks, a challenge in the Bahamas. Specifically, there is 

concern that U.S. banks are terminating or not entering into 

correspondent account relationships with banks in certain regions of the 

world over concerns about money laundering and other risks.31 This 

regulator from the Bahamas told us that U.S. counterparts were able to 

help him understand AML standards in the United States and how foreign 

institutions can meet those standards to help allay the concerns of U.S. 

financial institutions. In addition, some U.S. regulators said that they 

occasionally host staff from foreign regulatory agencies to serve in detail 

positions. These staff may come for a few weeks or a couple of months 

and gain on-the-job skills, including those related to AML detection 

practices that they can take back to their country. Similarly, staff from 

some U.S. financial regulatory agencies may be seconded to foreign 

financial regulatory agencies. For example, FDIC has seconded staff to 

the Financial Services Volunteer Corps to support AML projects 

overseas.32

Almost all of the U.S. financial regulators we spoke with reported that they 

had provided some AML training to Western Hemisphere countries in the 

last 5 years. Some of the training has been provided in conjunction with 

other U.S. government agencies or multilateral agencies, and some has 

been provided independently. Training has focused on various aspects of 

building and maintaining an AML regime, including conducting 

examinations and reporting suspicious activity in accordance with FATF 

standards. For example, the Federal Reserve provided training to the 

National Banking and Securities Commission of Mexico on bank 

supervision, which included AML issues. The course provided examiners 

with guidance on proper customer identification and due diligence 

procedures, counterterrorist financing, and suspicious activity reporting, 

as well as high-risk areas, such as wire transfers, private banking, and 

prepaid cards. Similarly, SEC and FINRA have provided several AML-

 31We have ongoing work looking at this issue—commonly referred to as “de-risking”—in 

certain regions.

32The Financial Services Volunteer Corps is a nonprofit, private-public partnership that 

helps build sound financial systems in transitional and emerging market countries. 
Page 24 GAO-17-684 Anti-Money Laundering

technical assistance programs to the Panamanian authorities. The SEC 

assistance included help with legislative reforms necessary to enable the 

Panamanian authorities to better engage in international cooperation in 

financial fraud investigations. SEC and FINRA’s programs supported the 

Panamanian Superintendent of Securities’ effort to satisfy the 

requirement for joining an international information-sharing organization 

for securities commissions.33 Several of the banking regulators reported 

that they have worked closely with the Association of Supervisors of 

Banks of the Americas (ASBA) to provide AML training in Latin American 

and Caribbean countries. This training, sometimes conducted in Spanish, 

has focused on conducting AML examinations, identifying and reporting 

suspicious activity, and working with the FIU in their respective country. 

FDIC officials told us they and other financial regulators have received a 

request from OTA to help with technical assistance in several Latin 

American countries as part of OTA’s capacity-building initiative.

Financial regulators indicated that training has been provided, when 

funding is available, upon request of other U.S. agencies, such as OTA or 

foreign counterparts. Foreign financial regulators we spoke with, who 

received training from U.S. regulators, said that the training was useful 

and helped them to better identify important AML issues. Table 2 provides 

examples of recent AML training that U.S. financial regulators have 

provided to foreign counterparts, including those conducted 

collaboratively with other foreign regulators.

 33The International Organization of Securities Commissions Multilateral Memorandum of 

Understanding Concerning Consultation and Cooperation and the Exchange of 

Information, which the Panamanian regulator was able to join in May 2017, was formed 

after the events of September 11, 2001, and sets an international benchmark for crossborder cooperation among securities regulatory authorities that includes sharing of 

beneficial ownership information and bank and brokerage records on a confidential basis. 

The ability to obtain such records helps securities authorities identify cross-border 

accounts through which money launderers may have moved illicit proceeds. Currently, 

114 jurisdictions are signatories to the International Organization of Securities 

Commissions Multilateral Memorandum of Understanding.
Page 25 GAO-17-684 Anti-Money Laundering

Table 2: Anti-Money Laundering (AML) Training Provided by U.S. Financial Regulators to Foreign Counterparts in the Western 

Hemisphere, 2011—2015

Training provider(s) Countries or regions of 

attendees 

Description of training Year(s) provided

Board of Governors of the 

Federal Reserve System

Aruba, Bahamas, Bermuda, 

Brazil, Canada, Haiti, 

Paraguay

AML examination seminar. 2011—2015

Board of Governors of the 

Federal Reserve System/ 

National Banking and Securities 

Commission of Mexico

Mexico AML training. 2014

Board of Governors of the 

Federal Reserve System/ 

Association of Supervisors of 

Banks of the Americas (ASBA)

Latin America and the 

Caribbean

AML examination seminar. 2011, 2013

Board of Governors of the 

Federal Reserve System/ 

Caribbean Group of Bank 

Supervisors 

Latin America and the 

Caribbean

AML examination seminar. 2015

Federal Deposit Insurance 

Corporation/ASBA

Belize, Costa Rica, 

Dominican Republic, El 

Salvador, Honduras, Mexico, 

Nicaragua, Paraguay

AML examination seminar focusing on 

supervisory examinations, enforcement 

actions, suspicious activity reports, and 

AML information sharing. 

2013

Financial Crimes Enforcement 

Network/ Organization of 

American States Inter-American 

Drug Abuse Control 

Commission (OAS CICAD) / 

Financial Action Task Force of 

Latin America (GAFILAT)/ 

Egmont Group

Caribbean and Central 

America

Egmont Group Strategic Analysis 

Course (in English and Spanish).

2014

Financial Crimes Enforcement 

Network/ OAS CICAD/ 

GAFILAT/ Egmont Group

Central and South America Egmont Group Strategic Analysis 

Course (in Spanish).

2015

Financial Crimes Enforcement 

Network/ State’s Bureau of 

International Narcotics and Law 

Enforcement Affairs 

Caribbean, Central and South 

America

Financial intelligence unit (FIU) 

Information Security Maturity Model and 

Egmont Operational Guidance.

2015

Office of the Comptroller of the 

Currency

Brazil, Canada, Colombia, 

Panama

School for foreign banking supervisors, 

including courses on AML.

Ongoing; held annually

Office of the Comptroller of the 

Currency/ASBA

Brazil, Bolivia, Canada, Chile, 

Colombia, Costa Rica, 

Dominican Republic, 

Ecuador, El Salvador, Haiti, 

Honduras, Mexico, 

Nicaragua, Panama, Uruguay

AML examination seminar. 2012, 2014
Page 26 GAO-17-684 Anti-Money Laundering

Training provider(s) Countries or regions of 

attendees 

Description of training Year(s) provided

Securities and Exchange 

Commission and/ or Selfregulatory organizations

Brazil, Mexico, Panama and 

Peru

Technical assistance including AML 

training sessions.

2013—2015

Securities and Exchange 

Commission

Bahamas (financial 

regulators, attorney general, 

and FIU)

Technical assistance, including a 

session on money laundering and 

securities and capital markets.

2015

Legend: Egmont Group=Egmont Group of Financial Intelligence Units

Source: GAO analysis of financial regulators’ documents. | GAO-17-684

INL and OTA work with other U.S. agencies, primarily components within 

DHS, Justice, and Treasury, as well as with financial regulators, to 

provide capacity-building, training, and technical assistance on money 

laundering countermeasures and financial investigations to their 

counterparts in the Western Hemisphere and around the globe. These 

activities are designed to give financial investigators, regulators, 

supervisors, prosecutors, and the judiciary the necessary tools to prevent, 

detect, and deter money laundering, financial crimes, and related criminal 

activity. INL and OTA reported that they collaborate on these activities 

with other U.S. agencies involved in AML capacity-building and technical 

assistance.

U.S. government-supported AML capacity-building and technical 

assistance projects, including bilateral and multilateral efforts, have 

primarily been funded by State and Treasury. From fiscal years 2011 

through 2015, INL allocated about $52 million for AML capacity-building 

and technical assistance in Western Hemisphere countries, while OTA 

allocated approximately $11.3 million. After more than doubling from 

fiscal year 2011 to fiscal year 2012, driven by an increase in INL funding 

that year, the combined INL and OTA allocations for AML activities in the 

Western Hemisphere declined somewhat in fiscal year 2013, averaging 

about $13 million through fiscal year 2015 (see fig. 4).

State and Treasury 

Support CapacityBuilding Efforts and 

Collaborate to 

Combat Money 

Laundering in 

Western Hemisphere 

Countries

State and Treasury 

Allocated about $63 

Million in Funding from 

Fiscal Years 2011 through 

2015 for Anti-Money 

Laundering Activities in 

Western Hemisphere 

Countries
Page 27 GAO-17-684 Anti-Money Laundering

Figure 4: Department of State’s and Department of the Treasury’s Funding 

Allocated for Western Hemisphere Anti-Money Laundering Activities by Fiscal Year

From fiscal years 2011 through 2015, INL funding was provided for AML 

capacity-building and technical assistance in 24 Latin American and 

Caribbean countries, as well as for certain Western Hemisphere regional 

programs, such as the Caribbean Basin Security Initiative.34 INL’s AML 

funding supported the activities of several other U.S. agencies, including 

DHS, Justice, and Treasury. State officials described a variety of AML 

programming supported by INL funding, including job-related training, 

specialized workshops, and procurement of technical equipment. Various 

types of AML activities are discussed in detail in the section below. 

According to State, INL funded the majority of U.S. governmentsupported AML activities in the Western Hemisphere, though AML-related 

 34In 2009, the U.S. government created the Caribbean Basin Security Initiative to assist 

Caribbean countries to reduce illicit trafficking, advance public safety and security, and 

promote social justice.
Page 28 GAO-17-684 Anti-Money Laundering

spending represented about 2 percent of the total INL Western 

Hemisphere budget over this 5-year period.

INL supported AML activities throughout Latin America and the Caribbean 

but funds were often concentrated among a handful of countries. From 

fiscal years 2011 through 2015, over three-quarters of INL funding for 

AML activities in the Western Hemisphere was allocated to Mexico, Peru, 

Colombia, and Panama as well as for the Central American Regional 

Security Initiative (see fig. 5).35 Mexico received nearly half of INL funds 

for AML activities in the Western Hemisphere in this period, consistent 

with the high priority the United States has assigned the Mérida Initiative’s 

goal of disrupting transnational criminal cartels active in that country.36

For a breakdown of INL funding by country for fiscal years 2011 through 

2015, see appendix IV.

 35In 2010, the U.S. government established the Central American Regional Security 

Initiative (CARSI) to assist Central American countries in their efforts to disrupt criminal 

organizations, combat contraband, support capable governments, and increase state 

presence and regional cooperation.

36According to State, the Mérida Initiative is a bilateral security cooperation agreement 

between Mexico and the United States that began in fiscal year 2008 and provides 

training and equipment support to Mexico’s law enforcement and judicial institutions to 

counteract the illegal trade in narcotics and to strengthen border security.
Page 29 GAO-17-684 Anti-Money Laundering

Figure 5: Department of State’s Bureau of International Narcotics and Law 

Enforcement Affairs Allocations by Country for Western Hemisphere Anti-Money 

Laundering Programs, Fiscal Years 2011 through 2015

a

Central American Regional Security Initiative (CARSI) funding included regional programming for 

Costa Rica, Guatemala, Honduras, and El Salvador.

b

Other includes funding for Barbados and the Eastern Caribbean, the Caribbean Basin Security 

Initiative, Jamaica,

Honduras, Dominican Republic, Paraguay, El Salvador, Guatemala, Ecuador, Haiti, Suriname, 

Trinidad and Tobago, Guyana, and Brazil.

From fiscal years 2011 through 2015, OTA allocated funding for AML 

projects in six Western Hemisphere countries.37 According to Treasury 

officials, OTA’s AML programming is intended to be comprehensive, thus, 

OTA has focused on providing more in-depth assistance to fewer 

countries for longer periods, with most projects lasting 3 to 5 years. OTA 

provides technical assistance through two basic delivery models: a 

resident advisor-based project and an intermittent advisor-based project. 

According to OTA, a resident advisor-based project is anchored by an 

expert advisor living in the counterpart country, typically for a period of 

 37For the purpose of this analysis, we reviewed only those allocations that OTA included 

in its Economic Crimes portfolio which, according to OTA, includes programming that 

assists the development and implementation of AML financing regimes that are compliant 

with FATF standards.
Page 30 GAO-17-684 Anti-Money Laundering

several years, and working side-by-side with officials in the FIU and other 

relevant government institutions. For an intermittent advisor-based 

project, a group of several advisors typically spends 1 to 2 weeks in a 

country four to six times a year over the life of the project working with 

host-country counterparts. Between the on-site visits, the counterparts 

are expected to carry out planned activities that are directed toward the 

objectives stated in a mutually agreed upon work plan. In fiscal year 

2015, OTA allocated about $340,000 for the intermittent advisor program 

in Honduras and about $983,000 for the resident advisor program in Peru 

(see appendix V for a breakdown of OTA funding for fiscal years 2011 

through 2015).

In addition to the funding discussed above, other State and Treasury 

resources indirectly or incidentally support AML-related capacity-building 

or technical assistance in Latin America and the Caribbean, according to 

INL and OTA officials. For example, State’s Office of Threat Finance 

Countermeasures, in conjunction with other bureaus and agencies, 

supports efforts to provide technical assistance to foreign governments 

working against terrorist financing. State’s funding directed to combat 

terrorist financing is not included in the analysis presented above, but, 

according to State officials, some of those funds may support activities in 

the Western Hemisphere that overlap with AML objectives.38 According to 

Treasury officials, OTA also provides more funding, not included in this 

analysis, to broader financial stability and development efforts to ensure 

that financial systems in developing countries, including some in Latin 

America and the Caribbean, are resistant to criminal activity. 

Furthermore, both State and Treasury, along with Justice, contribute 

membership dues to FATF and were similarly not included in the analysis 

above because they support broader AML objectives beyond the Western 

Hemisphere.

State and Treasury officials told us that they consider several key factors 

when allocating resources for AML capacity-building and technical 

 38For example, in Panama, HSI officials told us that HSI led capacity-building to help 

Panamanian authorities identify potential vulnerabilities in their financial regulatory 

processes through the Cross Border Financial Investigations Training, which is 

implemented by HSI and funded by State’s Bureau of Counterterrorism. The training 

program provides foreign partners with the capability to implement international AML 

standards in their investigations, with an emphasis on vulnerabilities associated with new 

technologies and bulk cash smuggling, among other areas. In addition to Panama, in 

fiscal year 2015, this training was also conducted in Argentina, Brazil, Paraguay, and 

other countries throughout the world.
Page 31 GAO-17-684 Anti-Money Laundering

assistance in Western Hemisphere countries. State officials said INL 

identifies programs where it can support AML programming based on 

many factors, including input from country posts, budgetary 

considerations, partner country political will, and strategic priorities. State 

officials said strategic priorities are outlined by the National Security 

Strategy, the U.S. Strategy to Combat Transnational Organized Crime, 

and the U.S. National Drug Control Strategy, among others. For example, 

the 2015 U.S. National Security Strategy notes that the government will 

continue to work within FATF to enlist all nations in the fight to protect the 

integrity of the global financial system.39 OTA officials said they similarly 

target programs toward governments that demonstrate political will and 

are committed to reform. OTA capacity-building and technical assistance 

is also based on requests for support from counterpart governments. 

Information on potential projects comes from many sources, including 

U.S. embassies, other Treasury offices, foreign governments, and 

international organizations such as IMF, as well as from OTA advisors 

already in-country implementing other projects.

As noted previously, INL and OTA are the key providers of AML-related 

assistance. These two agencies collaborate with other U.S. agency 

partners to address the transnational challenges posed by money 

laundering and implement a variety of capacity-building activities for 

foreign partners. These efforts can include training, technical assistance, 

and, in the case of INL, equipment provision, and are intended to help 

foreign countries develop effective AML frameworks, including financial 

regulation, financial intelligence, law enforcement, and prosecutorial and 

judicial processes. According to international standards set by FATF, 

within an AML framework, countries should ensure that government 

entities have effective mechanisms in place that enable them to 

cooperate and, where appropriate, coordinate domestically with each 

other (see fig. 6).

 39The 2015 U.S. National Security Strategy sets out the principles and priorities to guide 

the use of U.S. power and influence in the world, including efforts to promote financial 

transparency and prevent the global financial system from being abused by transnational 

criminal and terrorist organizations as they engage in, or launder the proceeds of illegal 

activity.

State and Treasury 

Support Various Types of 

Capacity-Building 

Activities to Prevent, 

Detect, and Deter Money 

Laundering in Accordance 

with International 

Standards
Page 32 GAO-17-684 Anti-Money Laundering

Figure 6: General Anti-Money Laundering Framework

a

Financial regulators and financial intelligence units also aim to deter money laundering activity with 

enforcement actions, including levying fines.

INL and OTA, in collaboration with other U.S. agencies, notably Justice, 

support the development of international legal and regulatory frameworks 

aimed at preventing money laundering activity by encouraging Western 

Hemisphere countries to adopt legislation and regulations consistent with 

FATF standards. (See appendix VI for a reference table of key AML 

actions that Western Hemisphere countries have taken, including 

legislative activity and other identifying characteristics that can have a 

relationship to a jurisdiction’s money laundering vulnerability, according to 

State.) FATF standards include recommendations on policy and 

coordination, specifically that countries should have national AML 

policies, informed by the risks identified, which should be regularly 

reviewed. From fiscal years 2012 through 2015, Justice’s Office of 

Overseas Prosecutorial Development, Assistance, and Training (OPDAT) 

received funding from INL to provide training in support of the 

Building Legislative and 

Regulatory Capacity
Page 33 GAO-17-684 Anti-Money Laundering

development of AML legislation in Mexico. We met with Justice officials in 

Mexico who explained that their agency’s programs are tailored to fit 

within the partner country’s legal and regulatory framework, including the 

risks that the country faces with regard to money laundering, as well as 

FATF standards. Justice officials noted that training Mexican prosecutors 

and supporting Mexican efforts to promote AML legislative reform are 

critical for long-term change in the country, given some of the challenges 

that Mexican officials identified in the country’s legal and regulatory 

framework. For example, Mexican officials told us that Mexico is currently 

undergoing a FATF evaluation for the first time in a number of years. As 

part of preparing for that process, Mexican officials told us they are 

working to further amend AML standards and guidance to continue 

incorporating a risk-based approach.

INL and OTA also supported capacity-building programs to help ensure 

that Western Hemisphere countries adopted regulations consistent with 

FATF standards regarding requirements for financial and nonfinancial 

supervisors. FATF standards specify that supervisors should have 

adequate authority to supervise, monitor, and ensure financial institutions’

compliance with requirements to combat money laundering, including the 

authority to conduct examinations. In Panama, officials from the 

Superintendent of Banks—a regulatory agency responsible for oversight 

of financial institutions—told us that in the past 2 years (2015 and 2016), 

the agency received training and technical support from OTA, Justice, 

and several U.S. regulators. Officials said that the training—on topics 

including compliance and examination procedures, sanctions, and 

suspicious activity reporting—helped to increase their overall capacity 

and compliance with FATF standards. These standards also state that 

designated nonfinancial businesses and professions, including casinos 

and real estate agents, should be subject to regulatory and supervisory 

measures. Officials from Intendencia, Panama’s regulatory agency 

responsible for the oversight of designated nonfinancial businesses and 
Page 34 GAO-17-684 Anti-Money Laundering

professions as well as free trade zones, described the training they had 

received from U.S. agencies, including a regional training from OTA that 

included officials from Guatemala, El Salvador, and Costa Rica and 

focused on information-sharing. Intendencia officials said OTA also 

provided the agency with training on money service businesses and 

oversight of free trade zones.40

INL and OTA also supported this type of capacity-building for other 

Western Hemisphere countries during our period of review (fiscal years 

2011 through 2015). For example, beginning in fiscal year 2013, OTA 

worked with the Government of Grenada to enhance the country’s 

supervisory capacity of financial institutions and designated nonfinancial 

businesses and professions consistent with risk-based principles.

 40According to FATF, free trade zones are created within jurisdictions to promote trade, 

support new business formation, and encourage foreign direct investment. They provide a 

preferential environment for goods and services primarily associated with exports, 

whereby a minimum level of regulation is imposed on those companies approved to 

operate within the zone, according to FATF. Additional benefits include exemptions from 

duty and taxes; simplified administrative procedures; and duty-free imports of raw 

materials, machinery, parts, and equipment. Free trade zones are located in ports around 

the world. According to FATF, free trade zones are subject to unique laws, regulations, 

and oversight to take into consideration their role in job creation and economic 

development policies. These features provide opportunities for legitimate business but 

also present weaknesses that expose free trade zones to misuse by criminal elements. 

PREVENTION: Panama’s AML Framework 

Includes Designated Nonfinancial 

Businesses

State reported that Panama enacted AML 

legislation in 2015 to address the vulnerabilities 

of nonfinancial businesses and professions, 

which provides an example of a partner 

country’s efforts to strengthen money 

laundering prevention. According to State, 

Panama’s strategic geographic location, 

dollarized economy, and status as a regional 

financial, trade, and logistics center make it an 

attractive target for money launderers. In 2014 

Panama was added to the FATF list of highrisk and noncooperative jurisdictions—a public 

designation of jurisdictions that have strategic 

AML deficiencies for which they have 

developed an action plan with FATF. According 

to U.S. officials, FATF gave Panama a 

successful blueprint to be lifted off the list, and 

the country worked with the IMF and others to 

modify the AML framework. Panama was 

removed from the FATF high-risk and 

noncooperative list in February 2016.

State officials explained that the activities of 

nonfinancial businesses and professions and 

free trade zones represented a key factor 

contributing to Panama’s money laundering 

vulnerability. In Panama, vulnerable 

nonfinancial businesses include casinos and 

currency exchanges, according to Panamanian 

officials. Panama also has 16 free trade zones, 

including the second-largest in the world, which 

according to U.S. officials has been exploited 

by narcotics traffickers due to the lack of 

regulatory monitoring. Officials from Panama’s 

Intendencia—the regulatory agency now 

responsible for oversight of free trade zones—

shared with us oversight plans to monitor the 

free trade zones and nonfinancial businesses. 

They described how a variety of capacitybuilding assistance they received from U.S. 

agencies supported these efforts.

Source: GAO | GAO-17-684
Page 35 GAO-17-684 Anti-Money Laundering

In addition to FinCEN’s collaboration with Western Hemisphere partner 

countries discussed previously, both INL and OTA provide assistance to 

FIUs throughout Latin America and the Caribbean. FIUs are the lynchpin 

in a characteristic AML framework, according to FATF. FATF standards 

call for FIUs to serve as a country’s national center for the receipt and 

analysis of (1) suspicious transaction reports, or SARs, and (2) other 

information relevant to money laundering, associated predicate offenses, 

and terrorist financing; and for the dissemination of the results of that 

analysis. According to OTA officials, the FIU plays a key role in the AML 

regime as the recipient and disseminator of financial intelligence and, as 

such, it is critical that these entities are able to function effectively. INL’s 

and OTA’s support has focused on developing and strengthening partner 

countries’ FIU capacity to collect, analyze, and disseminate vast 

quantities of financial data that are often necessary to help detect and 

deter money laundering activity.

According to our analysis of State’s 2016 International Narcotics Control 

Strategy Report, Volume II, every Western Hemisphere country or 

jurisdiction reviewed in the report has an FIU. INL’s support for several of 

these FIUs included equipment provision and training. For example, INL 

provided funding in fiscal year 2013 for Colombia’s FIU to purchase 

computer servers that supported the acquisition of a new programming 

framework that allows for the processing and storage of very large data 

sets. Colombian officials told us that equipment and training from INL, 

along with other U.S. agencies, has helped the FIU increase its software 

capacity and migrate to newer and more advanced data systems, which 

increases the amount of data they can analyze and the speed of data 

processing. The FIU has over two dozen different databases and several 

billion data entries from which they can connect information provided by 

regulators and other sources and build intelligence profiles, according to 

Colombian officials. With this information, Colombian officials told us the 

country’s FIU is able to perform network analyses to evaluate how various 

individuals and companies engaged in suspicious activities are connected 

to one another. This type of analysis can aid in money laundering cases, 

including those associated with corruption, which is an ongoing challenge, 

according to Colombian officials. For example, Colombian officials 

described how the upgraded programming acquired with INL funds has 

allowed them to investigate the financial linkages involved in the 

Building Financial Intelligence 

Unit Capacity

DETECTION: Colombia’s FIU Evaluates 

Money Laundering Associated with Illegal 

Mining

Colombian officials highlighted how the FIU is 

working with the Colombian Ministry of Mining 

to detect the threat of money laundering 

associated with illegal mining proceeds. 

According to State, despite Colombia’s fairly 

strict AML framework, money laundering, 

whether from illicit drug trafficking, or more 

recently, illegal mining, continues to penetrate 

its financial institutions and affect the overall 

economy. Colombian officials described how 

narcotics traffickers, including the 

Revolutionary Armed Forces of Colombia 

(FARC), have turned to illegal mining to reap 

huge profits. Officials explained that illegal 

mining presents much lower risks and social 

stigma than drug trafficking, although it has 

very negative repercussions including 

significant damage to the environment. 

Colombian officials told us that the illegal gold 

trade has become one of the FARC’s major 

sources of income.

According to Colombian officials, the FIU 

analyzes data on mining production and export 

figures, largely based on the Mining Ministry’s 

annual report and information on imports 

available from commercial partners. A 

comparison of these data allows the FIU to 

detect discrepancies between official export 

and mining production records and the figures 

reported by foreign importers and commercial 

sales.

Source: GAO | GAO-17-684
Page 36 GAO-17-684 Anti-Money Laundering

Odebrecht corruption scandal, including analyzing the levels of potential 

collusion among individuals suspected of engaging in bribery.41

In Mexico, INL provided AML capacity-building for the country’s FIU every 

year from fiscal years 2012 through 2015. In fact, State officials noted that 

much of the funding for AML capacity-building in Mexico was directed to 

Mexico’s FIU, including a large increase in fiscal year 2012 for a 

significant overhaul of the FIU’s computing systems. Specifically, the 

funding was used to upgrade technical infrastructure, including computer 

servers, and provide training for Mexican officials on the systems. 

Mexican officials from the FIU also described training they had received 

from U.S. agencies on evaluating money laundering models and 

typologies, conducting forensic financial analysis, and identifying threats 

associated with virtual currency.42

Both INL and OTA supported capacity-building activities for FIUs in 

several other Western Hemisphere countries during our period of review 

(fiscal years 2011 through 2015). For example, OTA worked with 

Guatemala’s FIU to strengthen the financial intelligence and analytic 

capabilities of the FIU which, according to OTA, helped the FIU 

participate in the successful investigation, prosecution, and conviction of 

money laundering cases. INL provided OTA funding to support the 

Jamaican FIU through technical assistance aimed at strengthening 

analytical skills as well as improving feedback and outreach to regulators 

to increase the quality of suspicious transaction reporting. Additionally, 

INL provided OTA funding to work with Dominica’s FIU to issue guidance 

to improve the timeliness and quality of suspicious transaction reporting 

and to develop standard operating procedures for data receipt, 

processing, and dissemination, among other activities.

In an effort to strengthen the capacity of partner countries in Latin 

America and the Caribbean to undertake financial investigations and 

prosecutions, INL has supported capacity-building activities in 

collaboration with U.S. law enforcement agencies, including the Drug 

Enforcement Administration (DEA) and others. U.S. law enforcement 

 41In December 2016, executives with Odebrecht SA, a large construction company based 

in Brazil with operations throughout Latin America, admitted to paying out extensive bribes 

to Colombian authorities for contracts involving major infrastructure projects. 

42FATF issued policy guidance, Guidance for a Risk-Based Approach to Virtual 

Currencies, in June 2015.

Building Law Enforcement, 

Prosecutorial, and Judicial 

Process Capacity
Page 37 GAO-17-684 Anti-Money Laundering

agencies working in other Western Hemisphere countries told us they are 

primarily focused on active and ongoing criminal investigations with a 

U.S. nexus, but these agencies also support AML capacity-building and 

technical assistance through a variety of activities. For example, DEA’s 

Office of Global Enforcement, Financial Investigations Section, provides 

guidance to DEA’s domestic and foreign offices, as well as foreign 

partners’ law enforcement agencies in Latin America and the Caribbean 

to promote effective techniques in financial investigations. Thus, INL 

supported DEA in building the capacity of the Panama National Police’s 

Financial Investigations Unit, which is tasked with identifying, disrupting, 

and dismantling criminal drug trafficking and money laundering 

organizations operating in Panama. Similarly, during fiscal year 2015, 

DEA provided training on trade-based money laundering, undercover 

financial operations, the development of money laundering profiles, and 

risk assessment strategies to Peruvian law enforcement.

INL has also provided support to DEA-vetted units to help combat money 

laundering.43 According to DEA officials in Colombia, DEA primarily 

focuses on capacity-building, including on-the-job training, for vetted 

financial crimes units it has established within Colombia’s National Police 

and the Office of the Attorney General. Officials from Colombia’s National 

Police told us that the training they had received from U.S. agencies, 

including training that took place in the United States, had allowed them 

to improve investigative capacity. State officials said that both DEA and 

INL have also funded regional information-sharing activities in which the 

Colombia National Police conducted training on investigative techniques 

for counterparts in Guatemala and Honduras. 

 43According to Justice, Congress authorized and approved funding for DEA to create, 

train, and support sensitive investigative unit training programs (referred to as vetted units) 

in key countries critical to the counternarcotics objectives of the United States in the fiscal 

year 1997 Department of Justice Appropriations Act. According to Justice, the conceptual 

basis of this program is to identify and train DEA foreign counterparts to work in sensitive 

bilateral investigations. The personnel selected from their respective countries to 

participate in the program undergo strict security screening.
Page 38 GAO-17-684 Anti-Money Laundering

INL has also supported capacity-building activities in collaboration with 

Justice’s OPDAT focused on developing prosecutorial and judicial 

processes for partner countries. For example, in Mexico, OPDAT 

received funding from INL which, according to Justice officials, was used 

to train prosecutors, police, and others in the justice system to 

investigate, analyze, and build financial crimes cases and to prosecute 

them. Mexican officials told us that prosecutors are still learning how to 

most effectively prosecute money laundering cases in the country’s new 

accusatorial justice system, in which they play a more active role in court 

proceedings than they did under the inquisitorial system.45 Thus, 

prosecutors still need training and support during the transition, according 

to Mexican officials. In support of Mexico’s 2016 transition to an 

accusatorial justice system, OPDAT delivered case mentoring and 

capacity-building programs for judges, prosecutors, and investigators 

focusing on courtroom management, case law, trial advocacy, and 

litigation skills, among other topics. Justice officials said that they meet 

regularly with counterparts from Mexico’s Attorney General’s office. 

Quarterly operational case meetings include representatives from the 

Mexican Attorney General’s office and U.S. agencies such as DEA, ICE, 

the Federal Bureau of Investigations, and IRS. In those meetings, U.S. 

and Mexican officials review ongoing financial crimes cases that have a 

U.S. and Mexico connection. While these discussions focus on active 

investigations, Justice officials told us that training is a standing agenda 

item; OPDAT reviews ongoing training programs and the Mexican 

Attorney General’s office requests additional training as needed.

INL and Justice have participated in prosecutorial and judicial AML 

capacity-building efforts to help partner countries develop and enhance 

asset forfeiture programs which, according to the agencies, are 

implemented according to FATF standards. In the United States, both 

Justice and Treasury operate separate asset forfeiture programs that are 

designed to prevent and reduce crime through the seizure and forfeiture 

of assets, including cash, vehicles, airplanes, jewelry, and collectibles, 

which represent the proceeds of, or were used to facilitate, federal 

 44David A. Shirk, "Criminal Justice Reform in Mexico: an Overview," Mexican Law Review 

[online], vol. 1 no. 6 (January 1, 2011).

45Generally, according to Justice, in an inquisitorial system a judge is actively involved in 

investigating the facts of a case. In the typical accusatorial model, parties are entitled to 

be present and to retain attorneys who appear before a judge, who moderates the 

proceedings, to present evidence and arguments in a case, according to Justice.

DETERRENCE: Mexico’s Capacity to 

Investigate and Prosecute Financial Crimes 

in the Accusatorial System

According to both U.S. and Mexican officials, 

Mexico has a low conviction rate for money 

laundering crimes, which may undermine the 

country’s money laundering deterrence efforts. 

These officials underscored the limited capacity 

on the part of Mexican prosecutors to 

investigate and prosecute money laundering 

cases under the accusatorial justice system to 

which Mexico recently transitioned. According 

to judicial reform experts, in 2008, the Mexican 

Congress passed a constitutional mandate that 

required all levels of government to transition 

from an inquisitorial to an accusatorial justice 

system by 2016.44 The reforms affect nearly all 

aspects of the judicial sector, including police, 

prosecutors, public defenders, the courts, and 

the penitentiary system. The mandate also 

included tougher measures for combating 

organized crime. Mexican officials told us that 

prosecutors are learning how to present 

evidence and question witnesses as part of 

their cases in the new system, including money 

laundering cases that may often entail complex 

financial information. Mexican officials said the 

training that had been provided by U.S. 

agencies has helped prosecutors conduct 

these more complex investigations.

Source: GAO | GAO-17-684
Page 39 GAO-17-684 Anti-Money Laundering

crimes.46 Similarly, FATF standards recommend that countries develop 

asset seizure programs that can prevent criminal property from being 

laundered or reinvested either to facilitate other forms of crime or to 

conceal illicit proceeds. In 2014, INL chaired a working group on asset 

forfeiture that brought together U.S. agency partners, Panamanian 

officials, and the British Crown Prosecutor to build consensus on reform 

efforts. The project, funded by INL and the British government, supported 

the continuing work of the British Crown Prosecutor to assist the 

government of Panama in developing an efficient and effective asset 

management and recovery plan and adopting and implementing a 

modernized regulatory scheme that has provisions for the return of assets 

to jurisdictions outside of Panama.

Similarly, Justice’s International Criminal Investigative Training 

Assistance Program (ICITAP) worked with Colombian officials to support 

the adoption of Colombia’s reformed asset forfeiture law.47 Justice 

officials explained that asset forfeiture is a critical aspect of deterring 

money laundering because seizing these assets from narcotics traffickers 

often renders them unable to continue their operations or at least 

diminishes their capacity to operate. In Colombia, drug traffickers typically 

launder their proceeds by investing in real estate or legitimate 

businesses, which generate lawful income, according to Justice officials. 

ICITAP collaborated with prosecutors and Colombia’s court system to 

draft the reformed asset forfeiture legislation and subsequently supported 

efforts to promote its passage through the Colombian Congress in 2014. 

According to Justice officials, a key aspect of the law was to streamline 

the process and time that it takes to effectively seize the assets of 

individuals and organizations involved in narcotics trafficking. Justice 

officials further explained that after the system was reformed in 2014 to 

accelerate the release of proceeds from the sale of seized assets to 

appropriate government entities, significant assets were seized from 

narcotics traffickers. However, Justice officials said the assets are not 

being properly maintained. According to Justice officials, appropriate 

management of seized assets, a tenet of an effective asset seizure 

 46We previously found that between 2009 and 2015, financial institutions were assessed 

about $5.2 billion in fines, penalties, and forfeitures for violations of BSA/AML regulations 

and $6.8 billion for violations of U.S. sanctions program requirements. See GAO, Financial 

Institutions: Fines, Penalties, and Forfeitures for Violations of Financial Crimes and 

Sanctions Requirements, GAO-16-297 (Washington, D.C.: Mar. 22, 2016).

47According to State, ICITAP receives funding from INL.
Page 40 GAO-17-684 Anti-Money Laundering

program, requires that the assets be sold and the proceeds used to 

benefit law enforcement, prosecutors, and courts. Justice officials said 

this could be an area where future capacity-building support could be 

directed.

From fiscal years 2011 through 2015, INL, in collaboration with U.S. law 

enforcement agencies, supported AML capacity-building and technical 

assistance for foreign partners in the law enforcement, prosecutorial, and 

judicial sectors in several other Western Hemisphere countries, as the 

following examples illustrate:

• INL funded training, provided by ICE, and the acquisition of equipment 

for the Jamaican Constabulary Force’s Major Organized Crime and 

Anti-Corruption Unit to enhance intelligence gathering and analysis 

capacity for financial crime investigations.

• INL funded training provided at the Judicial Studies Institute in Puerto 

Rico where OPDAT trained judges from the Dominican Republic, 

Haiti, Mexico, Guatemala, Honduras, El Salvador, Costa Rica, 

Panama, Peru, Colombia, and Uruguay. Through Spanish instruction, 

practical exercises, and opportunities to observe courtroom 

proceedings, judges were able to learn about evidentiary foundations, 

their role, and courtroom management in an accusatorial justice 

system. According to Justice, this capacity-building, which includes 

training on plea bargaining, criminal procedure, judicial security, and 

opinion writing, is critical to the region, as judges’ roles in an 

accusatorial system are drastically different from those in an 

inquisitorial system, where judges decide cases based on paper files 

behind closed doors. According to Justice, in an accusatorial system, 

judges are responsible for writing opinions, weighing evidence, and 

guaranteeing the rights of both the victims and the accused, all in an 

open courtroom setting.

• INL funded assistance in El Salvador, provided by OPDAT, for 

drafting legislation, implementing regulations, and providing 

equipment for the asset forfeiture units of the El Salvador National 

Civilian Police, the Attorney General’s office, the Supreme Court, and 

the National Asset Management Commission.
Page 41 GAO-17-684 Anti-Money Laundering

During our review, agencies described some of the collaborative practices 

and coordination mechanisms that INL and OTA use, including 

collaboration with other U.S. agencies involved in AML capacity-building 

and technical assistance. Agencies told us they use a variety of 

collaborative practices, such as sharing common goals and objectives for 

AML capacity-building efforts, coordinating planning through agreements 

and reports, and assigning specific coordination-related job 

responsibilities to certain staff, as the following examples illustrate:

• In questionnaires we sent to all of the primary agencies involved in 

AML capacity-building (State, Treasury, Justice, and DHS), agencies 

indicated that they generally share common goals and objectives for 

their AML capacity-building efforts—to enhance partner nation 

capacity to identify and prosecute money laundering and financial 

crimes. Some agencies, specifically INL, OTA, OPDAT, and DEA, 

also identified coordinating mechanisms that helped to define their 

AML strategy, including the Caribbean Basin Security Initiative, 

CARSI, and State’s Integrated Country Strategies.

• State officials told us that when working with other U.S. agencies as 

implementing partners, INL coordinates AML capacity-building and 

technical assistance primarily through interagency agreements. These 

agreements generally lay out program goals, indicators, deliverables, 

and a timeframe for program implementation, according to State 

officials. For example, INL’s 2014 interagency agreement with OTA 

for AML programs to support CARSI includes a summary of the 

project, program activities and a work plan, requirements for financial 

and progress reports, measures of success, and a project timeline. 

State officials told us they rely on OTA or other implementing partners 

to conduct the AML capacity-building or technical assistance activity 

under the interagency agreement but that State officials conduct 

monitoring and evaluation to ensure that the agreed-upon activities 

are conducted and objectives are achieved.

• INL employs AML program managers in several Western Hemisphere 

countries whose job responsibilities include interagency coordination, 

which is a key part in the execution of any program management 

function, according to INL. Guidance from supervisors encourages 

project managers to reach out to key AML stakeholders, including 

U.S. agency partners, international organizations, and government 

institutions. This helps to ensure that programs are implemented 

effectively and avoids duplication of efforts, according to INL. State 

officials told us that, depending on the size of the AML program and 

the INL section in the country, program managers may focus full time 

State and Treasury 

Reported Collaboration on 

Anti-Money Laundering 

Capacity-Building 

Activities
Page 42 GAO-17-684 Anti-Money Laundering

on AML, as is the case in Mexico, or AML may be one component of 

the job, as is the case in Colombia and Panama.

• OTA officials told us that they solicit input from other U.S. agency 

partners during needs-assessment trips to evaluate potential new 

projects and when monitoring existing projects. For example, during 

needs-assessment trips, OTA officials said that they meet with foreign 

partner officials to identify the country’s priority issue areas and that 

they also solicit the perspectives of other U.S. agencies represented 

at the U.S. embassy. When conducting a program review to monitor 

an ongoing project, OTA officials told us that they incorporate the 

expertise and input of all relevant U.S. agencies. These officials often 

include the Legal Attaché from Justice or a Resident Legal Advisor, if 

applicable; other law enforcement representatives; and the INL 

Director, among others. Additionally, OTA officials said that they 

regularly share information about ongoing projects and work plans 

with relevant U.S. agencies, including an engagement calendar that 

outlines their planned capacity-building activities.

U.S. agency officials also told us that they collaborate on the 

implementation of AML capacity-building activities through country teams 

at U.S. embassy posts. In site visits we conducted to Colombia, Mexico, 

and Panama, agencies generally agreed that there was effective 

collaboration at the embassy posts. Collaboration practices include 

working groups at U.S. embassy posts and informal information sharing, 

as shown in the following examples:

• In Mexico, U.S. agency officials told us about an AML-related working 

group that meets to discuss AML issues, including training and 

capacity-building needs. State officials in Mexico also described how 

they seek input from all U.S. agency partners when reviewing funding 

proposals and project status reports, including those for AML 

capacity-building, during bilateral meetings with Mexican officials 

related to the Mérida Initiative.

• In Colombia, U.S. agency officials described how they coordinate 

through several working groups, including an AML working group.

State officials told us that through this working group and regular 

information sharing, U.S. law enforcement agencies that are 

conducting active operations in Colombia, or Justice officials who are 

working with Colombian counterparts on regulatory development, can 

provide input on the types of capacity constraints they are observing 

and discussing with Colombian officials.

• In Panama, Justice officials told us that the Deputy Chief of Mission 

has focused on interagency coordination with regard to money 
Page 43 GAO-17-684 Anti-Money Laundering

laundering. Prior to that leadership, U.S. agencies were working 

somewhat independently of one another. The embassy now has 

several working groups that directly and indirectly deal with AML 

coordination: a monthly AML working group, a monthly 

counterterrorist financing working group, and a monthly law 

enforcement working group that shares insights on money laundering 

issues drawn from active or ongoing investigations.

We provided a draft of this report to the Federal Reserve, FDIC, NCUA, 

OCC, SEC, FINRA, NAIC, Treasury, State, DHS, and Justice for review 

and comment. We received technical comments from State, Treasury, 

DHS, the Federal Reserve, FDIC, FINRA, OCC, and SEC and 

incorporated these comments as appropriate.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Federal Reserve, 

FDIC, NCUA, OCC, SEC, FINRA, NAIC, Treasury, State, DHS, and 

Justice, and appropriate congressional committees. In addition, the report 

will be available at no charge on the GAO website at http://www.gao.gov.

Agency Comments
Page 44 GAO-17-684 Anti-Money Laundering

If you or your staff have any questions about this report, please contact 

Jessica Farb at (202) 512-6991, or farbj@gao.gov, or Lawrance Evans at 

(202) 512-8678, or evansl@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 major contributions to this report are 

listed in appendix VII.

Sincerely yours,

Jessica Farb

Director, International Affairs and Trade

Lawrance Evans

Director, Financial Markets and Community Investment
Appendix I: Objectives, Scope, and 

Methodology

Page 45 GAO-17-684 Anti-Money Laundering

This report describes narcotics-related anti-money laundering (AML) 

efforts in the Western Hemisphere. Specifically, this report describes (1) 

U.S. financial regulators oversight and monitoring of compliance with the 

Bank Secrecy Act (BSA)1 and related AML requirements and efforts to 

collaborate with counterparts in other Western Hemisphere countries, and 

(2) the activities that the Departments of State (State) and Treasury 

(Treasury) support to build capacity in other Western Hemisphere 

countries to combat money laundering and how State and Treasury 

collaborate on those efforts.

To address these objectives, we reviewed prior GAO reports and State’s 

and Treasury’s Office of Inspector General reports and relevant laws and 

regulations. We also reviewed data and documentation and interviewed 

officials from key agencies responsible for enforcing the BSA and 

providing technical assistance for anti-money laundering activities. The 

agencies and offices included in this review were (1) the Department of 

State, Bureau of International Narcotics and Law Enforcement Affairs 

(INL); (2) offices within Treasury’s Office of Terrorism and Financial 

Intelligence, including officials from the Financial Crimes Enforcement 

Network (FinCEN); (3) Treasury’s Office of Technical Assistance (OTA); 

(4) the federal banking regulators—Board of Governors of the Federal 

Reserve System (Federal Reserve), Federal Deposit Insurance 

Corporation (FDIC), National Credit Union Administration (NCUA), and 

the Office of the Comptroller of the Currency (OCC); (5) the Securities 

and Exchange Commission (SEC); (6) the National Association of 

Insurance Commissioners (NAIC); (7) the Financial Industry Regulatory 

Authority (FINRA); (8) the Department of Homeland Security (DHS); (9) 

the Financial Action Task Force (FATF); and (10) the Department of 

Justice (Justice).

We also conducted fieldwork in Colombia, Mexico, and Panama, where 

we met with U.S. embassy officials responsible for managing and 

implementing capacity-building activities and with host-government 

officials, including financial regulators, financial intelligence unit (FIU) 

representatives, and federal prosecutors. Additionally, we met with 

representatives from the private sector in these countries, including anti-

 1 Pub. L. No. 91-508, tits. I and II, 84 Stat. 1114 (1970) (codified as amended at 12 U.S.C. 

§§ 1829b, 1951-1959; 18 U.S.C. §§ 1956-1957 and 1960; and 31 U.S.C. §§ 5311-5314 

and 5316-5332). The Bank Secrecy Act is the commonly used term for the Currency and 

Foreign Transactions Reporting Act, its amendments, and the other statutes relating to the 

subject matter of that act. 31 C.F.R. § 1010.100(e).

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 46 GAO-17-684 Anti-Money Laundering

money laundering compliance staff from U.S. financial institutions. We 

selected Colombia, Mexico, and Panama for site visits because State 

identified each as a major money laundering country in the Western 

Hemisphere in their 2011 to 2016 International Narcotics Control Strategy 

Reports (vol. II). Each of these 3 countries was designated a Major Drug 

Transit or Major Illicit Drug Producing Country from fiscal years 2014 

through 2016. This designation derives from presidential determination 

consistent with the statutory definition of a major drug transit or major 

illicit drug-producing country set forth in section 481(e)(2) and (5) of the 

Foreign Assistance Act of 1961, as amended. Because our second 

objective described INL and OTA coordination efforts for AML capacitybuilding activities, we decided to conduct site visits to countries where INL 

(the primary funder of AML capacity-building) targeted AML funding from 

fiscal years 2011 through 2015. Colombia, Mexico, and Panama 

accounted for about 60 percent of funds allocated for AML capacitybuilding efforts in fiscal year 2015, the last year for which funding data 

were available. We also conducted a series of teleconferences with U.S. 

and host-government officials in the Bahamas. State also identified the 

Bahamas as a major money laundering country in the Western 

Hemisphere in their 2011 to 2016 International Narcotics Control Strategy 

Reports (vol. II). The Bahamas was also designated a Major Drug Transit 

or Major Illicit Drug Producing Country from fiscal years 2014 to 2016. 

The information derived from the site visits and teleconferences were 

selected to serve as informative examples, and the findings are not 

generalizable across the Western Hemisphere.

To describe how U.S. financial regulators examine and monitor financial 

institutions for compliance with BSA and AML policies and how they work 

with other financial regulators in Western Hemisphere countries to detect 

and deter the inflows of illicit funds, we reviewed BSA/AML examination 

procedures for banks as outlined in the Federal Financial Institutions 

Examination Council manual. We also reviewed other industry guidance 

on BSA/AML from SEC, FINRA, and NAIC. To understand how narcoticsrelated money laundering is treated as part of the BSA/AML examination 

process, we interviewed officials from the financial regulatory agencies. 

We also reviewed advisories and bulletins issued by FinCEN that detail 

how financial institutions and regulators should respond to various 

BSA/AML concerns. To understand how financial institutions detect and 

report suspicious activities, we interviewed officials at three large financial 

institutions that conduct business in the United States and other Western 

Hemisphere countries.
Appendix I: Objectives, Scope, and 

Methodology

Page 47 GAO-17-684 Anti-Money Laundering

To describe how U.S. regulators work with their foreign counterparts in 

the Western Hemisphere to combat narcotics-related money laundering, 

we interviewed officials from the Federal Reserve, FDIC, FinCEN, FINRA, 

NAIC, NCUA, OCC, and SEC. In addition, we interviewed financial 

regulators and officials from the financial intelligence units (FIU) in 

Colombia, Mexico, and Panama about their relationship working with 

FinCEN.

To describe how U.S. agencies are helping to build capacity in other 

Western Hemisphere countries to combat narcotics-related money 

laundering and how State and Treasury coordinate these activities, we 

reviewed budget data provided by INL and OTA for fiscal years 2011 

through 2015. Specifically, we reviewed the funds allocated for AML 

capacity building and technical assistance. To assess the reliability of the 

allocations data, we conducted interviews with knowledgeable State and 

Treasury officials about the accuracy and completeness of the data and 

reviewed financial reports. We determined the data were sufficiently 

reliable for the purposes of reporting State’s and Treasury’s allocations 

for AML activities by year and by country from fiscal years 2011 through 

2015.

We reviewed planning documents, reports, and interagency agreements 

to understand the types of AML capacity-building activities that State’s 

INL and Treasury’s OTA fund and implement and as well as what factors 

and priorities the agencies consider when allocating resources. We also 

interviewed officials from State’s INL and offices within Treasury and 

officials from the Departments of Justice and Homeland Security.2

To identify examples of the ways in which U.S. agencies collaborated on 

AML activities, we developed a short questionnaire on collaboration 

practices and obtained responses from six U.S. federal agencies or 

departments primarily involved in AML capacity-building and technical 

assistance in the Western Hemisphere. State’s INL, Treasury’s OTA, 

FinCEN, and offices within the Departments of Justice and Homeland 

Security provided examples of collaboration practices regarding AMLrelated technical assistance and capacity-building. The purpose of 

developing the coordination questionnaire was to identify examples of 

 2

Although we spoke with officials from U.S. law enforcement agencies in the countries we 

visited to understand the types of capacity-building assistance they provide, the 

investigation and prosecution of money laundering crimes in the United States is outside 

the scope of this review. 
Appendix I: Objectives, Scope, and 

Methodology

Page 48 GAO-17-684 Anti-Money Laundering

ways in which these agencies coordinated, not to evaluate generalizable 

outcomes. We also conducted interviews with U.S. officials in U.S. 

embassies located in the Bahamas, Colombia, Mexico, and Panama to 

describe how coordination efforts are implemented in-country for AML 

technical assistance and capacity-building. Additionally, we interviewed a 

variety of foreign officials in these four countries who received AML 

capacity-building and technical assistance from U.S. agencies to solicit 

their perspective on the assistance.

We are presenting the information in appendixes II, III, and VI to provide 

background and context only and, for that reason, we did not assess its 

reliability.

We conducted this performance audit from May 2016 to August 2017 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.
Appendix II: High-Risk and Noncooperative 

Jurisdictions in the Western Hemisphere as 

Identified by the Financial Action Task Force

Page 49 GAO-17-684 Anti-Money Laundering

The Financial Action Task Force (FATF), an intergovernmental body that 

develops and promotes international standards for combating money 

laundering and the financing of terrorism, issues two public documents 

three times a year that identify high-risk and noncooperative jurisdictions 

based on its review of those jurisdictions’ anti-money laundering and 

countering financing of terrorism (AML/CFT) regime. One is the “FATF 

Public Statement” that identifies jurisdictions that have such serious 

strategic deficiencies that FATF calls on its members and nonmembers to 

apply countermeasures to combat the threat of money laundering and 

terrorist financing, as well as jurisdictions to which FATF members and 

nonmembers should apply enhanced due diligence measures based on 

the risks posed by those jurisdictions.1 The second document, called 

“Improving Global AML/CFT Compliance: Ongoing Process,” identifies 

jurisdictions with AML/CFT weaknesses that have also committed to an 

action plan to address those weaknesses.2 From February 2011 through 

February 2017, FATF identified 53 jurisdictions that have been included in 

at least one of its public documents, 12 of which are in the Western 

Hemisphere. Table 3 below shows the jurisdictions in the Western 

Hemisphere that have been identified in FATF’s public documents during 

that period.

Table 3: High-Risk and Noncooperative Jurisdictions in the Western Hemisphere as Identified by the Financial Action Task 

Force (FATF), 2011–2017

Date of FATF publications on jurisdictions with anti-money laundering/countering financing of terrorism 

deficiencies

Jurisdiction 25-

Feb11

24-

Jun11

28-

Oct11

16-

Feb12

22-

Jun12

19-

Oct12

22-

Feb13

21-

Jun13

18-

Oct13

14-

Feb14

27-

Jun14

24-

Oct14

27-

Feb15

26-

Jun15

23-

Oct15

19-

Feb16

24-

Jun16

21-

Oct16

24-

Feb17

Antigua and 

Barbuda

● ● ● ● ● ● ● ● ● - - - - - - - - - -

Argentina - ● ● ● ● ● ● ● ● ● ● - - - - - - - -

Bolivia ● ◉ ◉ ◉ ◉ ◉ ● - - - - - - - - - - - -

Cuba - ◉ ◉ ◉ ◉ ◉ ● ● ● ● ● - - - - - - - -

Ecuador ● ● ● ● ◉ ◉ ◉ ◉ ◉ ◉ ◉ ◉ ◉ ● - - - - -

Guyana - - - - - - - - - - - ● ● ● ● ● ● - -

Honduras ● ● ● - - - - - - - - - - - - - - - -

Nicaragua - ● ● ● ● ● ● ● ● ● ● ● - - - - - - -

 1

FATF also refers to this document as a “call for action.” 

2

FATF refers to this second document as “other monitored jurisdictions.”

Appendix II: High-Risk and Noncooperative 

Jurisdictions in the Western Hemisphere as 

Identified by the Financial Action Task Force
Appendix II: High-Risk and Noncooperative 

Jurisdictions in the Western Hemisphere as 

Identified by the Financial Action Task Force

Page 50 GAO-17-684 Anti-Money Laundering

Date of FATF publications on jurisdictions with anti-money laundering/countering financing of terrorism 

deficiencies

Jurisdiction 25-

Feb11

24-

Jun11

28-

Oct11

16-

Feb12

22-

Jun12

19-

Oct12

22-

Feb13

21-

Jun13

18-

Oct13

14-

Feb14

27-

Jun14

24-

Oct14

27-

Feb15

26-

Jun15

23-

Oct15

19-

Feb16

24-

Jun16

21-

Oct16

24-

Feb17

Panama - - - - - - - - - - ● ● ● ● ● - - - -

Paraguay ● ● ● - - - - - - - - - - - - - - - -

Trinidad and 

Tobago

● ● ● ● ● - - - - - - - - - - - - - -

Venezuela ● ● ● ● ● ● - - - - - - - - - - - - -

Legend: ● = monitored jurisdiction; ◉ = call for action; - = not identified in FATF publication

Source: GAO analysis of FATF documents. | GAO-17-684
Appendix III: Basel Anti-Money Laundering 

Ratings for Select Countries in the Western 

Hemisphere, 2016

Page 51 GAO-17-684 Anti-Money Laundering

The 2016 Basel Anti-Money Laundering (AML) Index, compiled by the 

Basel Institute on Governance, assigns each country a score based on a 

scale from 0 (low risk) to 10 (high risk).1 The Basel AML Index does not 

assess the amount of illicit financial money or transactions but is 

designed to assess the risk of money laundering—that is, to indicate the 

vulnerability of a country to money laundering and terrorism financing 

based on publicly available indicators.

The Basel AML Index is a composite index, meaning that the overall 

score is a weighted average of 14 indicators dealing with AML 

regulations, corruption, financial standards, political disclosure, and the 

rule of law that are aggregated into one overall risk score. The data for 

the indicators are derived from various publicly available sources such as 

the Financial Action Task Force, Transparency International, the World 

Bank, and the World Economic Forum. Table 4 below shows the Basel 

AML index ratings for select countries in the Western Hemisphere in 

2016.

Table 4: Basel Anti-Money Laundering Index Ratings for Select Western 

Hemisphere Countries, 2016

Country Rating

Paraguay 7.44

Haiti 7.32

Bolivia 7.29

Panama 7.09

Argentina 6.74

Dominican Republic 6.74

Venezuela 6.53

Guyana 6.48

Brazil 6.23

Honduras 6.04

Guatemala 5.97

Costa Rica 5.93

Trinidad and Tobago 5.92

Nicaragua 5.84

 1

The Basel Institute on Governance is an independent, not-for-profit organization that 

specializes in corruption prevention and public governance, corporate governance and 

compliance, AML, criminal law enforcement, and the recovery of stolen assets. 

Appendix III: Basel Anti-Money Laundering 

Ratings for Select Countries in the Western 

Hemisphere, 2016
Appendix III: Basel Anti-Money Laundering 

Ratings for Select Countries in the Western 

Hemisphere, 2016

Page 52 GAO-17-684 Anti-Money Laundering

Country Rating

Mexico 5.60

St. Vincent and the Grenadines 5.59

Ecuador 5.48

Grenada 5.18

St. Lucia 5.17

United States 5.17

Uruguay 5.15

Canada 5.00

Chile 4.80

El Salvador 4.69

Colombia 4.55

Dominica 4.40

Peru 4.31

Jamaica 4.16

Source: Basel Institute on Governance. | GAO-17-684

Note: The 2016 Basel Anti-Money Laundering (AML) Index, compiled by the Basel Institute on 

Governance, assigns each country a score based on a scale from 0 (low risk) to 10 (high risk).
Appendix IV: Department of State’s 

International Narcotics and Law Enforcement 

Affairs Allocations for Anti-Money Laundering

Page 53 GAO-17-684 Anti-Money Laundering

The Department of State’s International Narcotics and Law Enforcement 

Affairs Bureau allocated funding for anti-money laundering (AML) 

capacity-building and technical assistance to a variety of countries in 

Latin America and the Caribbean from fiscal years 2011 through 2015. 

Table 5 below shows the Department of State’s International Narcotics 

and Law Enforcement Affairs allocations by country or region for Western 

Hemisphere AML programs in this time period.

Table 5: Department of State’s International Narcotics and Law Enforcement Affairs Allocations by Country or Region for 

Western Hemisphere Anti-Money Laundering Programs, Fiscal Years 2011 through 2015 (dollars in thousands)

Country or region 2011 2012 2013 2014 2015 Total

Mexico - 13,000 3,000 5,000 3,000 24,000

Central American Regional Security Initiativea 1,500 - 3,000 - - 4,500

Peru 250 1,050 1,050 1,050 900 4,300

Colombia - - 1,500 500 2,000 4,000

Panama - - - 1,500 2,000 3,500

Barbados and the Eastern Caribbeanb 500 500 500 500 500 2,500

Caribbean Basin Security Initiativec 1,150 - 800 300 150 2,400

Jamaica 250 250 250 150 900 1,800

Honduras - - 904 500 - 1,404

Dominican Republic 450 50 - - 350 850

Paraguay 318 - 225 - - 543

El Salvador - - - - 500 500

Guatemala - - - - 500 500

Ecuador 150 150 - - - 300

Haiti - 300 - - - 300

Suriname 100 150 - - - 250

Trinidad and Tobago - 65 50 50 - 165

Guyana 100 60 - - - 160

Brazil - 100 - - - 100

Total 4,768 15,675 11,279 9,550 10,800 52,072

Source: GAO analysis of Department of State’s (State) International Narcotics and Law Enforcement Affairs budget data. | GAO-17-684

Note: Although State may not have allocated funding for a country in a certain fiscal year, agency 

officials told us they may still be funding anti-money laundering (AML) activities there from prior fiscal 

year allocations.

a

Central American Regional Security Initiative funding included regional programming for Costa Rica, 

Guatemala, Honduras, and El Salvador.

b

Barbados and Eastern Caribbean funding includes programming for Antigua and Barbuda, 

Barbados, Dominica, Grenada, St. Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines.

c

Caribbean Basin Security Initiative funding included regional programming for Guyana, Jamaica, and 

Suriname.

Appendix IV: Department of State’s 

International Narcotics and Law Enforcement 

Affairs Allocations for Anti-Money Laundering 
Appendix V: Department of the Treasury’s 

Office of Technical Assistance Allocations for 

Anti-Money Laundering Programs in the

Page 54 GAO-17-684 Anti-Money Laundering

The Department of the Treasury’s Office of Technical Assistance 

allocated funding for anti-money laundering (AML) technical assistance to 

several countries in Latin America from fiscal years 2011 through 2015. 

Table 6 below shows the Department of the Treasury’s Office of 

Technical Assistance allocations by country or region for Western 

Hemisphere AML programs in this time period.

Table 6: Department of the Treasury’s Office of Technical Assistance Allocations by 

Country for Western Hemisphere Anti-Money Laundering Programs, Fiscal Years 

2011 through 2015 (dollars in thousands)

Country 2011 2012 2013 2014 2015 Total

Honduras 644 811 891 534 340 3,220

Guatemala 498 468 714 1,236 - 2,916

Costa Rica 455 605 833 - - 1,893

Peru - - 62 635 983 1,681

El Salvador - - 1,194 - 1,194

Uruguay 401 - - - - 401

Total 1,998 1,884 2,500 3,599 1,323 11,305

Source: GAO analysis of Department of the Treasury’s Office of Technical Assistance budget data. | GAO-17-684

Note: Although the Department of the Treasury may not have allocated funding for a country in a 

certain fiscal year, agency officials told us they may still be funding anti-money laundering (AML) 

activities there from prior fiscal year allocations.

Appendix V: Department of the Treasury’s 

Office of Technical Assistance Allocations for 

Anti-Money Laundering Programs in the 
Appendix VI: Comparative Table of Actions Western Hemisphere 

Countries Have Taken to Address Money Laundering as Identified by 

the Department of State

Page 55 GAO-17-684 Anti-Money Laundering

The Department of State (State) identifies a broad range of actions that jurisdictions have, or 

have not, taken to combat money laundering. As reported by State, the actions are indicated 

by a “Y” for yes, which indicates that legislation has been enacted to address the captioned 

items or an “N” for no. According to State, this reference table provides a comparison of 

elements that include legislative activity and other identifying characteristics that can have a 

relationship to a jurisdiction’s money laundering vulnerability, but the data do not imply full 

compliance with international standards. See a description of each criterion following table 

7.

Table 7: Comparative Table of Legislative and Other Actions Taken by Western Hemisphere Countries to Address Money Laundering as Identified by the Department of 

State

Legislative and other actions

Countries / jurisdictions Criminalized 

drug money 

laundering

Criminalized 

beyond 

drugs

KnowYourCustomer 

provisions

Report large 

transactions

Report 

suspicious 

transactions

Cross-border 

transportation 

of currency

Financial 

intelligence 

unit

International 

law 

enforcement 

cooperation

System 

for 

identifying 

and 

forfeiting 

assets

Arrangements 

for asset 

sharing

Anguilla Y Y Y N Y Y Y Y Y Y

Antigua and Barbuda Y Y Y N Y Y Y Y Y Y

Argentina Y Y Y Y Y Y Y Y Y Y

Aruba Y Y Y Y Y Y Y Y Y Y

Bahamas Y Y Y N Y N Y Y Y Y

Barbados Y Y Y Y Y Y Y Y Y Y

Belize Y Y Y N Y Y Y Y Y Y

Bermuda Y Y Y N Y Y Y Y Y Y

Bolivia Y Y Y Y Y Y Y Y Y N

Brazil Y Y Y Y Y Y Y Y Y Y

British Virgin Islands Y Y Y N Y Y Y Y Y Y

Appendix VI: Comparative Table of Actions Western 

Hemisphere Countries Have Taken to Address Money 

Laundering as Identified by the Department of State
Appendix VI: Comparative Table of Actions Western Hemisphere 

Countries Have Taken to Address Money Laundering as Identified by 

the Department of State

Page 56 GAO-17-684 Anti-Money Laundering

Legislative and other actions

Countries / jurisdictions Criminalized 

drug money 

laundering

Criminalized 

beyond 

drugs

KnowYourCustomer 

provisions

Report large 

transactions

Report 

suspicious 

transactions

Cross-border 

transportation 

of currency

Financial 

intelligence 

unit

International 

law 

enforcement 

cooperation

System 

for 

identifying 

and 

forfeiting 

assets

Arrangements 

for asset 

sharing

Canada Y Y Y Y Y Y Y Y Y Y

Cayman Islands Y Y Y N Y Y Y Y Y Y

Chile Y Y Y Y Y Y Y Y Y Y

Colombia Y Y Y Y Y Y Y Y Y Y

Costa Rica Y Y Y Y Y Y Y Y Y N

Cuba Y Y Y Y Y Y Y+ N Y N

Curacao Y Y Y Y Y Y Y Y Y Y

Dominica Y Y Y N Y Y Y Y Y N

Dominican Republic Y Y Y Y Y Y Y+ Y Y Y

Ecuador Y Y Y Y Y Y Y+ Y Y Y

El Salvador Y Y Y Y Y Y Y Y Y Y

Grenada Y Y Y N Y Y Y Y Y N

Guatemala Y Y Y Y Y Y Y Y Y N

Guyana Y Y Y Y Y Y Y+ Y Y N

Haiti Y Y Y Y Y N Y+ Y Y Y

Honduras Y Y Y Y Y Y Y Y Y Y

Jamaica Y Y Y Y Y Y Y Y Y Y

Mexico Y Y Y Y Y Y Y Y Y Y

Montserrat Y Y Y N Y N Y+ Y Y Y

Nicaragua Y Y Y N Y Y Y+ Y Y N

Panama Y Y Y Y Y Y Y Y Y Y

Paraguay Y Y Y Y Y Y Y Y Y N
Appendix VI: Comparative Table of Actions Western Hemisphere 

Countries Have Taken to Address Money Laundering as Identified by 

the Department of State

Page 57 GAO-17-684 Anti-Money Laundering

Legislative and other actions

Countries / jurisdictions Criminalized 

drug money 

laundering

Criminalized 

beyond 

drugs

KnowYourCustomer 

provisions

Report large 

transactions

Report 

suspicious 

transactions

Cross-border 

transportation 

of currency

Financial 

intelligence 

unit

International 

law 

enforcement 

cooperation

System 

for 

identifying 

and 

forfeiting 

assets

Arrangements 

for asset 

sharing

Peru Y Y Y Y Y Y Y Y Y Y

St. Kitts and Nevis Y Y Y N Y Y Y Y Y Y

St. Lucia Y Y Y Y Y Y Y Y Y Y

St. Maarten Y Y Y Y Y Y Y Y Y Y

St. Vincent / the Grenadines Y Y Y Y Y Y Y Y Y Y

Suriname Y Y Y N Y Y Y+ Y Y Y

Trinidad and Tobago Y Y Y Y Y Y Y Y Y Y

Turks and Caicos Y Y Y N Y Y Y Y Y Y

Uruguay Y Y Y Y Y Y Y Y Y Y

Venezuela Y Y Y Y Y Y Y Y Y Y

Legend: Y = yes; N = no; Y+ = jurisdictions whose financial intelligence units (FIU) are not members of the Egmont Group of FIUs

Source: The Department of State’s International Narcotics Control Strategy Report for 2016. Data are current as of December 31, 2015. | GAO-17-684

Note: The Department of State identifies additional legislative and other actions in their International Narcotics Control Strategy 

Report for 2016 not included in this table.
Appendix VI: Comparative Table of Actions 

Western Hemisphere Countries Have Taken to 

Address Money Laundering as Identified by 

the Department of State

Page 58 GAO-17-684 Anti-Money Laundering

1. Criminalized drug money laundering: The jurisdiction has enacted 

laws criminalizing the offense of money laundering related to the drug 

trade.

2. Criminalized beyond drugs: The jurisdiction has enacted laws 

criminalizing the offense of money laundering related to crimes other 

than those related to the drug trade.

3. Know-Your-Customer provisions: By law or regulation, the 

government requires banks and/or other covered entities to adopt and 

implement Know-Your-Customer/Customer Due Diligence programs 

for their customers or clientele.

4. Report large transactions: By law or regulation, banks and/or other 

covered entities are required to report large transactions in currency 

or other monetary instruments to designated authorities.

5. Report suspicious transactions: By law or regulation, banks and/or 

other covered entities are required to report suspicious or unusual 

transactions to designated authorities. On table 7, the letter “Y”

signifies mandatory reporting; Y+ signifies jurisdictions whose 

financial intelligence units (FIU) are not members of the Egmont 

Group of FIUs; “N” signifies no reporting regime.

6. Financial intelligence unit: The jurisdiction has established an 

operative central, national agency responsible for receiving (and, as 

permitted, requesting), analyzing, and disseminating to the competent 

authorities disclosures of financial information in order to counter 

money laundering.

7. Cross-border transportation of currency: By law or regulation, the 

jurisdiction has established a declaration or disclosure system for 

persons transiting the jurisdiction’s borders, either inbound or 

outbound, and carrying currency or monetary instruments above a 

specified threshold.

8. International law enforcement cooperation: No known legal 

impediments to international cooperation exist in current law. 

Jurisdiction cooperates with authorized investigations involving or 

initiated by third party jurisdictions, including sharing of records or 

other financial data, upon request.

9. System for identifying and forfeiting assets: The jurisdiction has 

established a legally authorized system for the tracing, freezing, 

seizure, and forfeiture of assets identified as relating to or generated 

by money laundering activities.

The Department of State’s 

Glossary of Terms for 

Actions Countries and 

Jurisdictions Have Taken 

to Address Money 

Laundering
Appendix VI: Comparative Table of Actions 

Western Hemisphere Countries Have Taken to 

Address Money Laundering as Identified by 

the Department of State

Page 59 GAO-17-684 Anti-Money Laundering

10. Arrangements for asset sharing: By law, regulation, or bilateral 

agreement, the jurisdiction permits sharing of seized assets with 

foreign jurisdictions that assisted in the conduct of the underlying 

investigation. No known legal impediments to sharing assets with 

other jurisdictions exist in current law.
Appendix VII: GAO Contacts and Staff 

Acknowledgments

Page 60 GAO-17-684 Anti-Money Laundering

Jessica Farb, 202-512-6991, or farbj@gao.gov

Lawrance Evans, 202-512-8678, or evansl@gao.gov

In addition to the contacts named above, Juan Gobel (Assistant Director), 

Tom Zingale (Analyst-in-Charge), Bethany Benitez, Lynn Cothern, Emily 

Desai, David Dornisch, Jeffrey Harner, Grace Lui, Jennifer Schwartz, 

Rachel Siegel, and Jena Sinkfield made key contributions to this report.

Appendix VII: GAO Contacts and Staff 

Acknowledgments

GAO Contacts

Staff 

Acknowledgments

(100879)
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