AUDIT OF lClXEUNITED STATES 

SECRET SERVICE'S I[NVESTXGAPONS 

This report has been reviewed for public dissemination by the Office of Counsel to 

the Inspector General. Information requiring protection from public dissemination 

has been redacted from this report in accordance with the Freedom of Information 

Act, 5 U.S.C. section 552.

epartment of the Treasury 
DEPARTMENT OF THE TREASURY 

WASH INGTON, D.6. 20220 

March 20, 2000 

OFFICE OF 

INSPECTOR GENERAL 

MEMORANDUM FOR BRIAN L. STAFFORD, DIRECTOR 


UNITED STATES SECRET 


FROM: 	 Dennis S. Schindel 

Assistant Inspector -~ener&.lfor Audit 


SUBJECT: 	 Final Audit Report of the U.S. Secret 

Service's Investigations of Financial 

Institution Fraud 

This memorandum transmits the final report on the Office of 

Inspector General's audit of the United States Secret 

Service's (Service) investigations of financial institution 

fraud (FIF). Our overall objective was to evaluate the 

impact of the Service's investigations in deterring 

financial institution fraud. 

Our review showed that an increasing number of the Service's 

investigations of financial institution fraud had been 

submitted for prosecution. In certain cases, major criminal 

organizations had been disrupted from conducting crimes 

against financial institutions. However, to further 

strengthen the Service's investigations of FIF the Service 

needed to: 

Complete actions to revise case selection criteria and 


complete software enhancements to the Suspicious Activity 


Report database. The Service should also ensure agents 


receive additional training so they can effectively use 


these new enhancements; 


Develop results oriented performance measures and reports 


for these measures that will provide management with data 


on how well the new measures are accomplished; and 


Clarify existing instructions to the field offices on the 


specific situations where the Federal Bureau of 


Investigation should be notified of the Service's 


investigations. 


Additionally, in response to our questionnaire, financial 


institutions and regulators provided comments on how the 


Service could enhance its communications and relationships 


with financial institutions and regulators. These comments 


were provided to officials for their review. 

Page 2 

Our draft report made six recommendations to address the 

issues in this report and strengthen the Service's 

investigations of FIF. In its responses to the draft report, -€

the Service generally concurred with, and has begun or 

planned actions to address our recommendations. In certain 

instances, we believe the Service should establish 

timeframes for completing these actions. The Service's 

official comments have been incorporated into the report and 

included in their entirety as an appendix to the report. 

We appreciate the courtesies and cooperation provided to our 

staff during the audit. If you wish to discuss this report, 

you may contact me at (202) 927-5400 or a member of your 

staff may contact Ms. Roberta N. Rickey at (312) 886-6300. 

Attachment 

CC: James E. Johnson 

Under €Secretary of the Treasury 

for Enforcement 
Overview 

In the late 1980s and early 1990s, bank insiders primarily committed 

fraudulent schemes against fmancial institutions. Today, check fraud and 

counterfeit negotiable instrument schemes by outsiders are the most 

prevalent crime trend confronting the Nation's banlung mfrastructure. 

Estimates of losses resulting from financial institution fraud (FIF) are as 

high as $15 billion a year. Electronic banking, which is anticipated to 

increase 600 percent in the next 2 years, will create new opportunities for 

high technology fraud against financial institutions. 

The US. Secret Service (Service) plays a role in protecting the Nation's 

financial systems by performing FTF investigations. In Fiscal Year (FY) 

1991, Congress provided the Service with temporary authority to 

investigate criminal fraud against Federally insured financial institutions, 

and in 1994, extended this authority to 2004. After this authority 

expires, other statutes ensure the Service will have permanent authority in 

fmncial crime investigations. 

Objectives, Scope, and Methodology 

The Office of Inspector General (OIG) included this review in its Audit, 

Evaluations, and Information Technology Plan for FY 1998, because 

protecting the Nation's financial systems is an important Treasury 

enforcement responsibility. Our overall objective was to evaluate the 

impact of the Service's FIF investigations. Our specific objectives were 

to determine whether the Service: (1) investigations that were 

prosecuted and met the Service's case selection criteria; (2) used 

mformation systems that contain accurate and valid data on investigative 

results ; and (3) interacted with fmancial institutions, regulators, and 

other enforcement agencies to facilitate investigations. 

The audit scope generally covered the Service's FIF investigations for 

FY 1997 and FY 1998 (through August 25, 1998). To accomplish our 

objectives, we analyzed FIF investigative procedures, cases, 

accomplishment reports and other data at Headquarters and four field 

offices. We interviewed officials from other law enforcement agencies 

and U.S. Attorney Offices. Questionnaires were sent to agencies that 

regulate the Nation's financial institutions and to 20 of the larger 

fmancial institutions to obtain lnfonnation about their interactions with 

the Service on FIF investigations. 

OIG-00-070 €U.S. SECRET SERVICE FINANCL4.L INSTITUTION 

FRAUD PROGRAJM Page i 
Audit Results 

The Service's FIF investigations have resulted in increased prosecutions 

in State and Federal courts and disrupted some major schemes to defraud 

banks. In FY 1998, 73 percent of the cases closed Nationwide were 

successfiAly prosecuted with few exceptions. Additionally, the cases we 

analyzed generally met the Service's case selection criteria. Federal 

prosecutors did not prosecute other cases because of various reasons 

including minimal interest. Although not every case will result in a 

prosecution, the Service can help ensure that the most significant 

investigations are initiated by (a) completing efforts to review and refine 

criteria on the types of cases field ofices should initiate, and 

(b) ensuring field offices effectively use enhancements that the Service is 

makmg to its Suspicious Activity Report (SAR) database. Otherwise, the 

Service will have less assurance that it always pursues the most 

significant crimes. 

The Service's FIF performance measure of cases closed, as shown in its 

FY 1998 Annual Perfh-mance Report, did not fully describe the 

accomplishments of the FIF program. Additionally, certain reports on . 

program accomplishments and other data on FIF investigations were not 

always accurate or valid. The Government Performance and Results Act 

(GPRA) emphasizes that agencies are to establish results oriented 

performance measures for programs, and to accurately report on a 

program's accomplishments. Headquarters officials had recognized the 

limitation of the existing performance measure but developing good 

results oriented performance measures for law enforcement programs can 

be difficult. Reports and other data were not always accurate or valid 

because controls for reporting data were either inadequate or not 

followed by employees. Without results oriented performance measures 

and accurate data, the overall quality and effectiveness of the program 

cannot be readily determined.

The Service has participated in working groups and task forces with 

other law enforcement and regulatory agencies, and fmancial institutions 

to combat FIF. However, field offices had not always complied with a 

Service guideline to formally notify the Federal Bureau of Investigation 

(FBI) of FIF investigations that field offices initiated. Adherence to this 

requirement is important to ensure a coordinated law enforcement 

approach to FIF investigations. This condition occurred for various 

reasons, but primarily because field ofice supervisors believed a formal 

notice to the FBI was unnecessary. 

OIG-00-070 €U.S. SECRET SERVICE FINANCL/IlL INSTITUTION 

F'RA.UD PROGRAM. Page ii 
Responses from specific financial institutions and regulators to our €

questionnaire also reemphasized the importance of the Service's activities €

to coordinate with the FBI, fmancial institutions, and regulators. The €

primary concerns to specific financial institutions and regulators are for €

the Service to (a) regularly advise them of FIF investigative priorities, €

@) dedicate resources to FIF investigations, and (c) increase its €

interactions with fmancial institutions and regulators. €

Recommendations and Management Response 

Our draft report, issued on August 6, 1999, made recommendations to €

enhance the Service's (a) case selection criteria; (b) use of Suspicious €

Activity Reports; (c) external performance measures and procedures; €

(d) monitoring reports; and (e) interactions with other law enforcement €

agencies, fmancial institutions, and regulatory agencies. €

The Service, in its October 5 and November €1,1999 responses,

generally agreed with our recommendations. However, the Service did €

not include specific information on the time frames needed to complete €

certain actions. The details of the Service's responses and actions €

initiated to address our recommendations are contained in the body of €

th~sreport. We believe that implementation of these recommendations €

will help strengthen the Service's FIF program and ensure completion of €

the actions initiated or planned by officials. €

OIG-00-070 U.S.SECRET SERVICE FINANCLAL INSTITUTION 

FRAUD PROGXIAM. Page iii 
1 

2 

3 

4 

5 

6 

Page 

EXECUTIVE DIGEST .................................................................................. i €

BACKGROUND ........................................................................................ 1 €

OBJECTIVES,SCOPE, AND METHODOLOGY ................................................. 3 €

AUDIT RESULTS........................................................................................ 5 €

Finding 1 Certain Actions Could Strengthen Efforts To €

Investigate The Most Significant Violations ........................... 5 €

Finding 2 Performance Measurements And Reporting €

Need Improvement ....................................................... 12 €

Finding 3 Communications With Specific €

Outside Parties Could Be Enhanced................................... 20 €

APPENDICES €

Appendix Abbreviations ................................................................. 25 €

Appendix Summary of Questionnaire Responses ................................... 26 €

Appendix Management Response dated October 5. 1999 ........................ 31 €

Appendix Management Response dated November 1. 1999 ...................... 35 €

Appendix Major Contributors To This Report ...................................... 40 €

Appendix Report Distribution .......................................................... 41 €

- - . . 

OIG00-070 U.S. SECRETSERVICE F'INAWU...INSTITUTION 


FRAUD PROGRAiV Page iv 

-- 

Today, the banking industry has stabilized as shown by the reduction €

in the number of fmncial institution failures in the 1990s. As the €

industry continues efforts to minimize insider abuse, however, €

"external fraud" is occurring with increasing frequency against the €

Nation's 10,000 financial institutions. A 1998 survey conducted by €

the American Bankers Association reported that half of the fmancial €

institutions suffered financial losses from check fraud in 1997. €

According to other law enforcement estimates, external fiaud which €

primarily relates to fraudulent negotiable instruments such as checks, €

money orders, currency, debit and credit cards comprise about 60 €

percent of all the fraudulent activity against fmancial institutions. €

Other law enforcement estitnates indicated that if commercial banks €

and other institutions combined their check fraud losses, the losses €

would total $12 to $15 billion annually. Additionally, electronic €

banking, which is expected to increase 600 percent the next 2 years, €

will create new opportunities for FIF through advanced technology. €

To help combat FIF, Congress enacted legislation in 1990' which €

gave the Service concurrent jurisdiction with the Department of €

Justice to investigate fraud, both civilly and criminally against any €

Federally insured fmancial institution. In 1994, Congress extended €

ths authority for the Service to the year 2004.' Upon expiration of €

this authority, Title 18 USC Section 1029 and Title 18 USC Section €

514 will provide the Service with permanent investigative authority €

in financial crime investigations. Using these authorities, the €

Service's goal is to be a leading law enforcemeht agency in the area €

of financial crime investigations, playing a critical role in €

maintaining public trust and confidence in the Nation's fmancial €

systems. €

The Service's Financial Crimes Division (FCD) has the responsibility €

to plan, review and coordinate several types of criminal €

investigations including bank fraud. The Service's Office of €

Investigations (01) through its field offices, has the responsibility to €

conduct the investigations. Investigations are initiated from referrals €

received directly from police departments, fmancial institutions or €

through SARs that fmancial institutions file through the Financial €

Crimes Enforcement Network (FinCEN). The law requires that €

-€

1 Public Law 101-509, Section 528, "Treasury, Postal Service General Government Appropriations Act, €

Fiscal Year 1991," enacted November 5, 1990. 

Public Law 103-322, Section 320923, "Violent Crime Control and Law Enforcement Act of 1994", €

enacted January 25, 1994. €

OIG-00-070 	 U.S. SECmT SERVICE FIiXANC1A.L lNSTITUTION 

FRAUD PROGRAM: Page 1 
financial institutions file SARs for any suspicious financial €

transactions that involve possible violations of banking laws or €

regulations. €

In response to the increase in high technology fraud against financial €

institutions, the Service initiated the Electronic Crimes Special Agent €

Program (ECSAP). The ECSAP provides the Service with the €

capability of conducting sophisticated computer forensic €

examinations in Secret Service ofices throughout the country. €

Field offices also conduct investigations in accordance with the €

policies and procedures in the Service's Investigation Manual. To €

investigate these crimes effectively, the field offices must maintain €

liaison relationships with financial institutions, regulatory agencies, €

law enforcement agencies, and local attorney ofices in their €field

office €community.

The Service records, monitors, and reports the status, disposition, €

and results of its investigations through computerized databases. €

Table 1 shows FIF cases that the Service reported as received, €

closed, and pending, and the related arrests from €FY 1996 through

FY 1998. €

Table 1 

FINANCIAL INSTITUTION FRAU? CASES 

* The above table only includes statisticsfor cases coded as 

which are general FIF investigations that involve Federal 

fiMncia1 imhtiom. 

Service officials explained that the reduction in FIF cases opened 

and closed in 1998, was due to increased protection duties. 

OIG-00-070 

age 2 
The OIG included this review in its Audit, Evaluations, and Information 

Technology Plan for FY 1998. We performed this review because 

protecting the Nation's financial systems is a significant mission of the 

U.S. Department of the Treasury. The Service plays a role in this 

mission by performing FIF investigations. 

Our overall objective was to evaluate the impact of the Service's FIF 

investigations. Our specific objectives were to determine whether the 

Service: (1) performed investigations that were prosecuted and met the 

Service's case selection criteria; (2) used infomation systems that 

contain accurate and valid data on investigative results; and (3) interacted 

with financial institutions, regulators, and other law enforcement 

agencies to facilitate investigations. 

To accomplish our objectives, we conducted fieldwork at the Service's 

Headquarters and at field offices in Charlotte, North Carolina; Chicago, 

Illinois; Los Angeles, California; and Washington, DC. At the Service's 

Headquarters, we evaluated policies, procedures, and other documents 

for FIF and discussed them with officials. Officials from the 01 and 

FCD were also interviewed about their activities and oversight of field .. 

office investigations. The Service's Management and Organization 

Division provided FIF case and arrest data on closed investigations from

a computer database, for FYs 1997 and 1998 (through August 25, 1998). 

We used this data to help us determine the accuracy of certain data and 

reported accomplishments for the program. 

At the four field oftices we visited, we evaluated local policies, 

procedures and documents for FIF investigations. We also sampled 

cases closed by the field offices during FY 1997 and 1998, to help us 

evaluate the (a) accuracy of data entered into the Service's database and 

@) investigative accomplishments. The closed cases that we reviewed 

were limited to cases coded as in the Service's computer database. 

The code is defined as stigations that involve Federally 

insured financial institutions. At three field offices, 15 closed cases with 

the highest dollar losses for each office were evaluated. For each of 

these three offices we also evaluated another 15 cases that were selected 

randomly fiom the remaining closed cases. At the Los Angeles field 

office we only reviewed 15 cases because it had a limited number of 

cases. Most of the cases at Los Angeles consisted of 

investigative work performed for other offices. 

-

OIG-00-070 	 U.S. SECRET SER 

FRAUD PROGRAM Page 3 
It is important to note that our review included only closed cases, €

because an open case can contain Grand Jury material that can only be €

disclosed to individuals involved in these investigations. €

At the four field offices, supervisors and agents were interviewed about 

their use of SARs as a source to initiate FIF investigations. At each field 

office we selected a sample of about 30 SARs to help us determine if the 

offices had evaluated the SARs. The field offices received these SARs 

during calendar years 1997 and 1998 (through October 21, 1998) and the 

2L4R.s involved amounts in excess of .S. Attorneys we 

interviewed explained that fraud abo would most likely be 

considered for Federal prosecution. 

Finally, to evaluate the Service's interactions with other entities, officials €

from the FBI, and U.S. Attorney Offices were interviewed about the €

Service's FIFinvestigations. Also, we either interviewed or sent €

questionnairesto region or district officials from the Federal Deposit €

Insurance Corporation (FDIC), Office of the Comptroller of the €

Currency (OCC), and Office of Thrift Supervision (OTS), which €

regulate the Nation's financial institutions. We also interviewed and sent €

questionnairesto officials from 20 of the larger financial institutions. €

Through these interviews and questionnaires, we obtained information €

about their interactions with the Service on FDF investigations. €

We performed this audit from June 1998 through March 1999. Our 

review generally covered the Service's activities to investigate FLF for 

the period October 1, 1996 through August 25, 1998. 

Our work was conducted in accordance with the Government Auditing 


Standardsissued by the Comptroller General of the United States, and €

included such audit tests as were determined necessary. €

016-00-070 ICE FINANC STITUTION 

Page 4 
Certain Actions Coul trengthen Efforts o Investigate 

The Most Significant 

The Service's FIF investigations have resulted in increasing 

prosecutions in State and Federal courts and disrupted some major 

schemes to defraud banks. In FY 1998, 73 percent of all cases closed 

were successfully prosecuted. Additionally, although the cases we 

analyzed generally met the Service's case selection criteria, Federal 

prosecutors did not prosecute other cases because of various reasons 

including minimal interest. Although not every case will result in a 

prosecution, the Service can help ensure that the most significant 

investigations are initiated by (a) completing efforts to review and 

refine criteria on the type of cases field offices should initiate, and 

(b) ensuring field offices effectively use enhancements that the Service 

is making to its SAR database. Otherwise, the Service will have less 

assurance that it always pursues the most significant crimes. 

Recommendations 

We recommend the Director ensure that officials: €

1. Complete actions to refine case selection guidance to field offices €

based on the trends in financial institution fraud; and €

2. Complete software enhancements that will permit field offices to €

analyze SAR data more efficiently, and ensure field office agents €

have adequate training to effectively use the enhancements to the €

SAR database. €

Management Response and OIG Comments

In its October 5, 1999 response to our first recommendation, the 

Service stated that FCD will continue to provide selection guidance and 

criteria to all offices. Additionally, the FCD will continue to explore 

alternative methods to further enhance the case selection process in this 

area. In its November 1, 1999 response, the Service added that the 

process is explained in 01's case prioritization formula. Additionally, 

the Service stated it provided guidelines to each field office to use in 

weighing the merits of initiating an investigation. 

In its October 5, 1999 response to our second recommendation, the 

Service stated that FCD will ensure that the software enhancements to 

the SAR database will be completed. Once completed, FCD personnel 

will conduct training seminars so all personnel can effectively use the 

OIG-00-070 €U.S. SECRET SERVICE FINANCIAL INSTITUTION 

IERAUD PROGILQM Page 5 
-- 

SAR database. In its November 1, 1999 response, the Service added 

that pending the resolution of any Y2K problems, the software' 

enhancements to the SAR database would be completed within the 

second quarter of 2000. The completion of the enhancements and the 

scheduling of training seminars will depend upon (1) availability of 

funds to complete the software enhancements, (2) availability of agents 

to receive the training, (3) the Service's responsibility in the 2000 

campaign and (4) availability of funds to conduct the training. 

We believe that the Service's responses address the issues surrounding 

both recommendations. The Director should establish a time frame for 

conducting the training seminars. Otherwise personnel may not use the 

SAR database as effectively when enhancements are completed. We 

have requested a copy of the most recent guidelines provided to field 

ofices and of the 01case prioritization formula. 

Details 

The number of FIF investigations that were prosecuted increased from 

FY 1997 to FY 1998. Investigations resulting in convictions should 

help the Service to achieve its strategic goal to deter crimes against 

financial institutions. Table 2 summarizes prosecutions and 

convictions from investigations closed by the Service in FY 1997 and 

FY 1998. 

Table 2 

RESULTS OF CASES CLOSED 

1 Federal Convictions I 5641 36%) . 7171 46%) 

Source: Secret Service Database 

*Excludes "Investigations Orher District" (IOD) cases (562 and 416 in FY 1997 and 

FY 1998 respectively)because these cases are opened by afield ofice to help another 

field ofJce to investigate a case already opened by the other ofice. Duplicate cases in 

the habase (13 and 4 in FY1997 and FY 1998 respectively) were also excluded. 

However, cases closed does include cases with a econdaiy code that are not 

reflected in Table I. 

-

OIG-00-070 U.S. SECRET SERVICE F 

Page 6 
As Table 2 shows, the percentage of cases prosecuted had increased € ' € from 62 percent inFY 1997 to 73 percent in FY 1998. Additionally, €

at the four field offices we visited, specific investigations resulted in €

significant recoveries of funds in addition to convictions. For €

example: €

An investigation was completed of a complex scheme to defraud €

banks around the Nation through the use of counterfeit checks. €

This investigation resulted in restitution of $405,357 to the banks €

and Federal convictions of 12 individuals including the leader of €

the scheme. €

An investigation was completed of another complex scheme that €

used fictitious U.S. Government warrants to dekaud banks and €

fmance companies throughout the United States. This investigation €

resulted in the seizure of $1.2 million and Federal convictions of €

five individuals. €

With respect to State convictions, FCD officials stated that as a result 

of inadequacies in current Federal sentencing guidelines, defendants 

would often face more severe sentences in State court. 

The increase in the percentage of cases prosecuted may, in part, be due €

to Headquarters emphasis to the field offices to develop significant €

cases. In May 1998, 01issued a document that reemphasized high €

~rofilecases bv instructinrr field offices to develor, cases which €

. €

Overall, our analysis of 86 cases at the four field offices showed that €

74 cases met at least 1 of the above criteria. However, 24 of these 74 €

cases had not resulted in prosecutions for various reasons including €

Our analysis of the Service's database showed, however, that although €

certain cases involved significant actual dollar losses, 49 percent of the €

cases closed in FY 1998 involved actual dollar losses of a $1or less. €

OIG-00-070 	 U.S. SECRET SERVICE FINANCIAL LNSTITUTION 

FRAUD PROGRAM Page 7 
Similarly, the database showed that 40 percent of the cases closed in 

FY 1997 involved actual dollar losses of a $1. or less. A breakdown of 

the dollar range of losses is shown in Table 3. 

Table 3 €

CASES PROSECUTED WITH ARRESTS AND €

ACTUAL DOLLAR* LOSSES €

Source: Secret Service Database 

* The term "actual dollar lost" represents the actualmncial loss incurred by an 

individual/f7nancial institution as a result ofthe crime committed. 

Officials explained that the high percentage of cases with actual losses 

of $1 or less was in part due to agents not updating the actual loss 

amounts as the case progressed. As discussed in Finding 2, our review 

of cases confirmed officials' statements that agents did not always enter 

the proper dollar amount for actual losses in the Service's database or 

adequately support the amount. 

Additionally, Headquarters officials explained that they emphasize a 

proactive approach to all agents in investigating FIF. As a result, 

cases may not involve crimes with large actual dollar losses because 

the Service's intent is to stop the crime before it results in large dollar 

losses. 

Accordingly, to help reflect the results of this proactive approach, the 

Service has also directed agents to show the potential dollar loss of 

investigations3. Our analysis of the cases prosecuted with arrest data, 

Potential loss refers to the amount of total exposure or financial loss, which could have occurred if the 

crime had not been stopped. -

OIG-00-070  U.S. SECRET SERVICE FINANCIAL INSTITUTION €

FRAUD PROGRAM Page €
however, disclosed that 46 percent of these cases closed in FY 1998 €

and 37 percent of the cases closed in FY 1997, involved crimes with €

potential losses of $1 or less. As with the actual loss amounts, officials €

explained that field agents might not update potential loss amounts in €

either the case file or the database. Further, officials acknowledged, €

and our analysis of cases confirmed, that agents did not always €

adequately support calculations for potential losses. Consequently, we €

were unable to tell the extent to which cases had stopped crimes before €

resulting in large dollar losses. As discussed in Finding 2, officials €

intend to implement additional controls to address this issue. €

We recognize that not all cases will result in prosecutions or involve €

significant dollar losses. As noted by Headquarters officials and €

shown by our analysis, cases involving crimes with relatively low €

dollar losses were also accepted for prosecution because they can have €

a positive impact on the community. Additionally, officials stated that €

a case might reflect the results of only one defendant. If it is a €

transnational case, the cumulative losses of related defendants are not €

shown on each case. Thus, a case may appear insignificant when €

viewed alone. €

We do not disagree with the Service's comments, however, as a result €

of the above analyses the Service should address two issues which will €

help ensure the prosecutions continue to increase and further enhance €

the program's accomplishments. These issues are discussed in the €

following two sections and include the Service's current efforts to €

address the issues. €

Refine Existing Case Selection Criteria €

The criteria provided by Headquarters in May 1998, for selecting €

investigations is a positive step. However, the types of FIF crimes, as €

explained by officials and described in the Background Section of €this

report, are expected to evolve rapidly. Officials explained that they are €

analyzing FIF crimes continually to detect new trends and provided us €

examples of very recent crimes. They intend to refine criteria for case €

selection and provide field offices with additional information on €

current trends in these types of crimes. We believe that this action can €

be an important element to ensuring that the program achieves €

maximum benefits. €

At the time we completed fieldwork, officials did not have a specific €

date when they expect to advise the field offices of current trends and €

OIG-00-070 €U.S. SECRET SERVICE FNs.INCIAL ICNSTITUTION 

FRAUD PROGM Page 9 
es to case selection criteria. The Director should ensure that this 

step is completed and that criteria are periodically revised. 

None of the four field offices we visited generally use S 

initial source of FIF investigations. The field offices had initiated 8 

investigations - for 82 SARs we sampled. All of the SARs involved

suspicious fmancial activity We could not, 

however, fully determine th field offices evaluated 

the other 74 SARs because of insufficient documentation kept by the 

field offices. 

Field office supervisors expressed the following reasons why they did 

not actively use SARs: 

The field offices received a sufficient number of direct referrals 

from financial institutions and local law enforcement. 

The SARs are not (a) received timely, (b) adequately describing the 

crime and identifying who to contact at the financial institution, and 

(c) sorted to only show the activities that the Service investigates. 

Additionally, SARs may be duplicated for the same incident. 

Consequently, multiple SARs may exist for one case. In such 

situations, it would be unproductive or unnecessary to work each SAR 

individually. 

Headquarters officials concurred with field supervisors that fmancial 

institutions provide information that is inaccurate, insufficient and 

untimely. In a March 11, 1999, memorandum to Treasury's Deputy 

Assistant Secre e Special Agent-in-Charge (SAC) of the FCD 

also stated that if SA& are not generated immediately, the Service's 

ability to proactively investigate certain organized mobile crime 

organizations is seriously reduced. Despite these limitations, the 

noted in a January 1999, OIG report,4had acted to improve 

AR data because of its imp0 e to proactive 

investigations. These actions have included: 

OIG report on "The Financial Crimes Enforcement Network Suspicious Activity Reporting System" 

(OIG-99-032, dated January25, 1999.) 

TI 

age 10 
Steps to more efficiently and timely provide its field offices with a €

listing of SARs information using the Service htranet. Field €

offices can use the Intranet to conduct proactive analysis of SARs €

related data. €

A computer enhancement to "cluster" SARs. "Clustering" refers 

to the electronic identification of common items in SARs such as 

common suspects, addresses, and phone numbers. This 

information can often lead to garnering valuable investigative leads 

and can help increase sentencing exposure. 

Additionally, the Service is expected to complete other enhancements €

to the analytical capabilities of the SAR database and the Intranet. €

These improvements, according to the SAC, will give the Service the €

capability of performing various proactive analyses. Headquarters €

officials stated that field offices are encouraged to maximize the use of €

SARs as an investigativeiintelligence-gathering tool. €

These actions should help improve the use of SARs. As part of this 

effort, the Service should ensure it provides agents with training on the 

analytical use of SAR data and types of queries that can be made. 

Also, the Service did not have a formal directive to the field on the use 

of SAR data. As noted in the SAC'S March 11, 1999 memorandum, 

SARs are used to (a) reach prosecutive thresholds, @) increase the 

exposure of defendants as it relates to Federal sentencing guidelines, 

(c) identify new criminal trends, (d) identify systemic weaknesses 

within financial systems, and (e) initiate new investigations. 

Accordingly, more formal instructions to the field and training to 

investigators would better ensure maximum use of SAX data. 

Otherwise, there is an increased risk that field offices will not 

maximize SARs usage as we observed during our field visits. 

Officials needed to develop a formal timeframe for completing the €

sohare enhancements if the current estimate for the second quarter of €

2000 is not achieved. Officials also stated that training has been €

provided to field personnel. Upon implementation of planned €

enhancements, notification and additional training (if necessary) will be €

provided. €

By completing actions to (a) revise case selection criteria, and 

(b) maximize the use of SAR data, the Service will have greater 

assurance that the percentage of significant cases will be at the highest 

level. Accordingly, the Director should ensure that the appropriate 

Service officials complete the actions discussed in this finding. 

OIG-00-070 	 U.S. SECRET SERVICE FE??Al?iCIAL 

FRAUD PROG age 11 
Finding 2. 	 Performance Measurements And Reporting 

Need Improvement 

The Service's external FIF performance measure of cases closed as €

shown in its FY 1998 Annual Performance Report did not fully €

describe the results of the FIF program. Additionally, certain reports €

on program accomplishments and other data on FIF investigations were €

not always accurate or valid. The GPRA emphasizes that agencies are €

to establish results oriented performance measures for programs, and €

to accurately report on a program's accomplishments. Headquarters €

oKicials had recognized the limitation of the existing performance €

measures but developing good results oriented performance measures €

for law enforcement programs can be difficult. Reports and other data €

were not always accurate or valid because controls for reporting data €

were either inadequate or not followed by employees. Without results €

oriented performance measures and accurate data, the overall quality €

and effectiveness of the program cannot be readily determined. €

Recommendations €

We recommend the Director ensure officials: €

1. Develop (a) results oriented performance measures for external €

reporting; and @) management reports that will provide infomation on €

these measures; and € ppppppppp------------------

2. Complete procedures on how agents are to: (a) determine and suppoa €

the actual and potential dollar losses of FIF investigations, and €

(b) verify the accuracy of actual and potential dollar losses that are €

entered into the computer system. €

Management Response and OIG Comments 

In its October 5, 1999 response, the Service stated that FCD, in 

conjunction with the Chief of the Management and Organization 

Division, will explore various methods to initiate the use of result 

oriented performance measures. The Service believed these new 

methods should serve both internal management reporting needs and 

also meet GPRA reporting requirements. In its November 1, 1999 

response, the Service explained that before it could set a deadline for 

developing and implementing these methods, it was imperative to 

ensure that the measurements will accurately reflect the work being 

done by agents. 

OXG-00-070 	 U.S. SECRET SERVICE FINANCIAL PNSTITUTION 

FRAUD PROG Page 12 
In its October 5, 1999 response to our second recommendation, the 

Service stated that FCD , in conjunction with PI, would develop 

guidelines to improve uniformity in the determination of actual and 

potential dollar losses in FIF investigations. The FCD has also 

initiated efforts designed to institute an auditing program that will 

monitor the accuracy of actual and potential dollar losses that are 

entered in the Master Central Index system. In its November 1, 1999 

response, the Service stated that it expected to provide the field with 

the guidelines and implement the audit program by the end of the 

fourth quarter of 2000. The Service noted, however, that completion 

of these actions may be delayed because of efforts to ensure 

~nforrnationsystems are Year 2000 compliant. 

We believe that the Service's response generally meets the intent of 

both recommendations. However, we continue to believe the Service 

should establish a timeframe to complete development of results 

oriented performance measures and to determine the management 

reports needed to provide information on those measures. Otherwise, 

these actions may not be completed in as timely a manner and officials' 

will remain less able to determine the effectiveness of the FIF 

program. Accordingly, we request the Director establish a timeframe 

for completing these actions or a date by which the Service expects to 

establish a timeframe. 

ppppppppp----------


The Service's performance measure of cases closed 

Details €

describe the accomplishments of the FIF program. 

statistical data on the results of the overall program 

did not fully 

Additionally, 

and on specific 

investigations were either not fully supported or always' reported 

accurately. Improving its external performance measures and 

completeness of reporting for FIF investigations will help the Service 

comply with the requirements of the GPRA. The following two 

sections discuss these areas in greater detail. 

More Meaningful Performance Measures And Reports Are Needed To 

Determine Impact Of Investigations 

At the time we began our review, the Service's primary external 

performance measure for the FIF program was cases closed. To 

develop the annual target number for this measure, officials reviewed 

historical data and then estimated the number of cases they believed the 

Service would close. To illustrate, for FY 1998, officials estimated 

OIGOO-070 U.S. SECRET SERVICE FINANCIAL mSTITUTION 

FRAUD PROGRAM Page 13 
that the Service would close 3,000 cases and included this as the target 

number for FY 1998. 

The number of cases closed, however, does not allow Congress or 

other external reviewers, to fully determine the benefits of the 

program. As discussed on page 8 of hs report, our analysis of cases 

showed that certain investigations had resulted in significant benefits. 

However, we could not determine the overall effectiveness of the 

program because the current external performance measure of cases 

closed is not results oriented. 

Additionally, the number of cases closed includes, as a separate case 

count, the efforts of an office to assist another office in an 

investigation. These efforts are defmed by the Investigative Manual as 

"Investigations Other District" (IOD). An IOD, for example, can 

consist of an agent in a field office interviewing an individual or 

obtaining infomation from a business or other government agency. 

The information the agent obtains is provided to another field office to 

help it complete a case for prosecution. Our analysis of the Service's

database showed that 416 (21 percent) of the 1,979 cases closed in 

FY 1998 were IODs.

Although these IOD activities are necessary to develop the case, the 

IOD should not be counted as a separate case if the IOD consists of an 

interview or obtaining information. External reviewers could 

misinterpret these IODs as investigations of different crimes. 

Headquarters officials explained, however, that an IOD is often a 

multi-district organized criminal investigation and not the investigation 

of a single criminal activity. As a result, FCD officials advised us that 

they would place greater emphasis on assigning multi-district cases a -----*-----. 

separate-number. This step, according to officials will allow for the 

better identification of total losses attributed to a multi-district case that 

is investigated by several offices. 

In such instances, when investigations result in separate prosecutions 

we concur that they should be counted as separate cases. However, 

when the IOD consists of an interview, to assist another office in 

developing a case, that interview should not be reflected as a separate 

case in accomplishment reports. 

Output measures, like cases closed, were long recognized by the 

Department of Justice's Law Enforcement Assistance Administration as 

increasing the risk that management will concentrate on statistics that 

OIG-00-070 	 U.S. SE CIAL INSTITUTION 

FRAUD Page 14 
do not necessarily reflect the overall quality of the program. In 

enacting GPRA, Congress recognized the limitations of output 

measures and emphasized that agencies were to develop results 

oriented performance measures that show the actual impact of the 

program. In other words, Congress intent was to hold agencies 

accountable for program results as measured by the differences the 

program makes in the economy or the lives of citizens. 

Headquarters officials explained that the quantity of cases closed is one 

small part of the overall performance level of any law enforcement 

agency. To rely on this statistic alone would provide an incomplete 

picture of an agency's overall performance. Recognizing this, officials 

explained that they have other performance measures that are used 

internally for program management. Performance reports are 

disseminated to officials and the reports are used for decision makkg. 

For example, for internal purposes, oficials stated they have the 

following measures : 

Indictments and convictions in the highest priority cases such as 

those that involve criminal organizations and result in disrupted 

operations or dismantled infrastructure; 

Effective use of forfeiture, restitution, and recoveries to support 

other investigations and prosecutions; and 

* Percentage of cases resolved by civil settlements. 

Service officials advised us they are developing additional meaningful 

performance measures to better show the results of the program for 

external reporting. However, developing results oriented performance 

measures for external GPRA reporting which satisfy all stakeholders is 

difficult for enforcement programs. Service officials explained that the 

OEce of Management and Budget has recognized that agencies may 

have difficulty in developing good results oriented measures for law 

enforcement programs. Congress has also recognized that 

implementation of results oriented measures is evolutionary in that 

proficiency comes with time and experience. 

To illustrate the difficulty in developing measures for external 

reporting, officials explained that they had offered the f~sttwo internal 

measures listed as examples above to its stakeholders for consideration. 

However, these two measures were rejected. Officials stated that the 

Office of Enforcement agreed that no Treasury law enforcement bureau 

would use these measures after discussions with U.S. Attorney Offices. 

-

OIG-00-070 U.S. SECRET SERVICE F STITUTIOIN 

age 15 
All Department of Justice law enforcement bureaus were also to 

discontinue the use of these measures. There was a concern that 

defense attorneys might claim that their clients were targeted for arrest 

and indictment to meet organizational performance quotas. 

In its effort to develop better performance measures, officials stated the 

Service is a member and active participant, along with other Federal 

law enforcement agencies, in several GPRA measurement advisory and 

working groups. At the conclusion of our review, officials had advised 

us that they intended to include two additional measures in the 

Service's FY 2001 Performance Plan. These measures are actual and 

potential dollar losses from FIF investigations. 

We believe that the efforts of the Service to incorporate additional 

meaningful performance measures is proper. Accordingly, the 

Director should ensure officials include these measures in the Service's 

Performance Plan. Once included in the plan, the Service should 

ensure that the new performance measures are linked to the field 

offices investigative activities. This concept was recently emphasized 

in a May 1997 General Accounting Office (GAO) guideline, Agencies ' . a 

Strategic Plans Under GPRA: Key Questions to Facilitate 

Congressional Review (GAO/GGD-10.1.16). The guideline 

specifically asks, "Are the strategies logically linked to the goals and 

day-to-day activities of the managers and staff?" Also, once 

appropriate FIF performance measures are established, oversight 

reports should be developed to determine if the new measures are 

accomplished. 

As discussed in the next section of this finding, once appropriate 

reports are developed, the Service should ensure that the controls for 

reporting accurate data are adequate. 

Reported Accomplishments Data Not Fully Supported 

The Service's information systems did not fully support 

accomplishment data for either cases closed or for the dollar losses 

associated with the cases. Table 4 summarizes the discrepancies 

between the m;' cases closed that the Service reported for 

FY 1997 an ber of FIF cases recorded in the Service's 

computer database. 

OIG-00-070 SE ERVICE FINANCIAL IN 

UD Page 16 
Table 4 

DIFFERENCES IN CASE CLOSED DATA 

FY 1997 

$129,300,446 

$117,834,320 

SECRET SERVICE REPORTS 

(Feb. 98) 

OIG ANALYSIS 

SECRET SERVICE RESPONSE 

L (April 99) 

1,767 

1,641 

1,741 $125,537,595 

We provided the details of these differences to officials and they 

provided several reasons for the discrepancies. With respect to the 

OIG analysis, they stated that the Service's reports included foreign 

office cases. These cases, however, were not included in the data that 

the OIG analyzed. Additionally, officials indicated that the data given 

to the OIG is from a live database in that employees are adding and 

editing data from prior years. Consequently, data historical in nature 

is changing over time. 

Service officials reviewed our analysis and advised us that their data 

system showed that 1,741 cases were closed or a difference of 26 cases 

from its reported accomplishments. Officials explained that the 

difference between their analysis and the Service's reports does not rise 

to the level of "significant error" as discussed in GAO's Guide to 

Assessing Agency Performance Plans (GAOI GGD-10.1.20). Officials 

added that Treasury's Office of Strategic Planning and Evaluation has 

also stated that historical data not be revised unless there is substantial 

error. Employees, however, did not provide us supporting 

documentation, such as a historical record, to show the adjustments 

that were made to the database after the accomplishments were initially 

reported. Therefore, we could not validate the Service's analysis that 

showed a difference of only 26 cases. 

In our recent report on counterfeit performance measures (OIG-99-093, 

dated June 16, 1999), we recommended and the Service agreed to 

develop procedures for documenting adjustments that employees make 

to accomplishments reported for the counterfeit program. We similarly 

believe that maintaining an accurate record of the detailed transactions 

that support accomplishments and subsequent edits is important. 

Accordingly, the Service should keep a record to support management 

reports. The GPRA also requires that a description of the means used 

to verify and validate measured data be provided in an agency's 

OIG-00-070 	 U.S. SEC T SERVICE FINANCIAL INSTITUTION 

FRAUD PROG Page 17 
performance plans. GAO's Guide to Assessing Agency Annual 

Pel;formancePlans (GAOIGGD-10.1.20) also states: 

In order for measures to be valid and reliable, 

the data on which they are based must be free 

from significant error.. .. Significant 

error...would affect conclusions about the extent 

to which performance goals have been achieved. 

In addition to the differences shown in Table 4, the next two sections 

discuss other issues that impact the validity of the FIF statistical data. 

Better Procedures Are Needed For Calcu1atin.eAnd Reporting Actual 

And Potential Dollar Losses 

The Service field offices did not (a) consistently calculate and support 

calculations of loss amounts for FIF cases, or (b) accurately report 

actual and potential loss amounts in the computer system. The 

following examples illustrate these variances : 

Field offices lacked consistency in the methods used to determine 

the potential loss amounts for crimes involving credit cards. For 

example, two field offices determined the potential loss amount at 

one times the credit card limit whle another office used two times 

the credit card limit. 

Our review of 86 FIF cases for the four sites visited found 

inadequate support in the case files for the calculations of actual 

and potential losses. In 24 cases, the case files lacked adequate 

documentation to support the calculation of the actual loss amounts. 

Similarly, 41 case files lacked adequate documentation to support 

the calculation of the potential loss amounts. 

In 21 of 86 cases, the computer system reflected a different actual 

dollar loss than that shown in the case file. The differences in the 

21 cases ranged from $765 to $9,873,500 for actual losses and had 

a total gross variance of $14,273,283. Zn these 21 cases, the total 

actual dollar loss was $4,601,949 according to the case files. 

Similarly, 13 of the 86 case files reflected a different potential 

dollar loss than that shown in the case file. The potential loss 

amount differences ranged from $1,499 to $9,000,000 and had 

total gross variance of $22,472,116. 

OIG-00-070 	 U.S. SECRET SERVICE FINANCIAL INSTITTUTION 

FRAUD PROGRAM Page 18 
-- 

-- - --- 

-ppppp-----


The Service's Investigative Manual requires field personnel to reflect 

actual losses in an investigation. However, the variances in calculating 

and documenting loss amounts occurred because the manual lacks 

specific procedures that instruct agents on how to calculate and 

document the actual and potential dollar losses for FIF cases. Data 

was not accurately entered in the computer system, in part, because 

procedures do not require an independent verification of data entry for 

FIF case arnounts to ensure the agent accurately recorded the data. 

Currently, the agent is responsible for ensuring the accuracy of data 

entered in the computer system. 

As a result, should the above conditions continue or become more 

significant, managers, Congress and others who use these reports and 

data may arrive at inaccurate conclusions about the program. For 

example, the potential and actual loss amounts are useful to measure 

performance and are needed by U.S. Attorneys and judges to 

determine the significance of the crime. Judges consider the potential 

loss amount for sentencing purposes. 

Officials advised us that FCD is working with the Information 

Resources Management Division to initiate system enhancements, 

which will ensure the accuracy of potential and actual loss amounts 

associated with FIF cases. They intend to implement a procedure that 

requires each field office to revise the potential and actual loss amounts 

to properly reflect the investigations final results in order to close the 

case~h&ecompu~erpsycaseinthecgmputersystem_stemm - - - ­ - - - - - - - - - - - -

Additionally, officials explained that they are actively working with the 

credit card industry to formulate a standard for reporting potential 

losses. Due to potential losses associated with different varieties of 

credit card fraud, (i.e., account takeovers, counterfeit, false 

applications), they anticipate that several categories to report the losses 

may need to be created. 

-

OIG-00-070 	 U.S. SECRET SERVICE FINANCIAL INSTITUTION 

FRAUD PROGRAM Page 19 
Finding 3. Communications With S ecific Outside Parties 

The Service has participated in working groups and task forces with 

other law enforcement and regulatory agencies and financial 

institutions to combat FIF. However, field offices had not always 

complied with a Service guideline to formally notify the FBI of FIF 

investigations that field offices initiated. Adherence to this 

requirement, however, is important to ensure a coordinated law 

enforcement approach to FIF investigations. This condition occurred 

for various reasons, but primarily because field office supervisors 

believed a formal notice to the FBI was unnecessary. 

Responses from specific financial institutions and regulators to our 

questionnaire reemphasized the importance that the Service coordinate 

with them. The primary concerns to specific financial institutions and 

regulators are for the Service to (a) regularly advise them of FIF 

investigative priorities, @) dedicate resources to FIF investigations, 

and (c) increase its interactions with financial institutions and 

regulators. 

Recommendations €

We recomerad the Director ensure officials: 

1. €Clarify to all field offices the specific situations and case types 

where the FBI must be formally notified when an FIF investigation 

is initiated. 

2. €Analyze the results of our questionnaire and determine additional 

actions that could strengthen coordination with both specific 

financial institutions and regulators or with them as a group. 

anagement Response and OIG Comment €

In its October 5, 1999 response to our first recommendation, the 

Service stated that the FCD would ensure that all field offices are 

provided with guidelines on when to formally notify the FBI of the 

Service's FIF investigation. However, in its November 1, 1999 

response, the Service stated that it had not set a specific goal for when 

to provide guidelines to the field offices. First, the FCD must review 

the Memorandum of Understanding (MOW between the Service and 

the FBI to determine if the language in the MOU is current. Once 

FCD has reaffirmed both parties commhnent to the MOU,01 will 

OIG-00-070 U.S. SECRET SERVICE FINANCLAL INSTITUTION 

UD PROGW Page 20 
issue updated guidelines to the field relating to the Service's policy in €

notifying the FBI about the Service's involvement in bank fraud cases. €

Set forth in those guidelines will be instructions requiring the field to €

document their notification to the FBI. Review by field ofice agents €

assigned to fmancial crimes will monitor adherence to the policy. €

In its October 5, 1999 response to our second recommendation, the €

Service stated that FCD has been assigned the task to analyze results of €

the questionnaire. This process has begun and will continue with goals €

to (1) develop a more effective and efficient investigative program, and €

(2) strengthen partnerships with the fmancial community and €

regulators. The FCD will also ensure that when measures are €

implemented to achieve these goals each field office will be notified €

and steps taken to monitor the results. In its November 1, 1999 €

response the Service stated that the analysis would be completed in the €

second quarter of 2000. If necessary, the Service will establish a €

working group to resolve issues raised by the analysis. €

We believe that the Service's response meets the intent of both €

recommendations. The Service's response, however, did not include a . 


date by which the Service expects to complete action to provide €

guidelines to the field offices on when to notify the FBI. We believe a €

timeframe for completing this action should be established. As noted €

in our report, completion of this action is important to ensuring the €

most coordinated law enforcement approach to,FIF investigations. €

We request documentation to support the actions described by the €

Service when the actions are completed. €

Details 

Officials in the FCD and in the field offices have participated in 

various working groups and associations and exchanged information 

regarding crimes against financial institutions. For example, FCD 

officials attend monthly meetings of the Bank Fraud Working Group 

with banking regulators and other law enforcement agencies to discuss 

issues concerning bank fraud. Among the issues that the working 

group has discussed are (a) SAR developments, @) cyberbanking, and 

(c) check fraud or other fraud schemes and actions to combat these 

schemes. Further, the Service is developing a training tool for law 

enforcement agencies that will include detailed descriptions of all types 

of evidence commonly encountered in financial crime investigations. 

The above activities are in accordance with a Service directive that 

requires FCD and Service offices to maintain a liaison with other law 

enforcement agencies, regulatory agencies, and financial institutions. 

OIG-00-070 	 U.S. SECRET SERVICE FIP7ANCIAL INSTITUTION 

FRAUD PROGRcUM Page 21 
The directive indicates that it is imperative that personal contact be 

established at the field level to ensure that the fmancial community and 

prosecutors are aware of the Service's investigative responsibilities. 

The following two sections discuss the Service's interactions with the 

FBI, regulators, and fmancial institutions in greater detail and include 

actions the Service could take to further enhance these relationships. 

Field Offices Should Formally Advise FBI Of Cases Initiated 

Three of the four field offices visited did not comply with a Service 

requirement, implemented in October 1997, to formally notify the FBI 

of FIF investigations initiated. In an October 20, 1997 letter to the 

FBI, the Service's Assistant Director of 01stated that the Service's 

field offices would first call the applicable FBI field office about the 

investigation. The field office would then send a letter to the FBI field 

office within ten days. A primary purpose of the requirement was to 

prevent duplication of investigative effort and to promote efficiency 

and initiate a structured and coherent law enforcement approach on FIF 

investigations. 

Field office supervisors gave various reasons why they did not comply 

with the requirement. At one office, the supervisor indicated the office 

notifies the FBI telephonically when an FIF investigation is opened, 

but indicated written correspondence is an administrative burden. At 

another office, the supervisor indicated that because of the volume of 

FIF, the risk of law enforcement agencies duplicating the Service's 

efforts is remote. Additionally, bank investigators would advise them 

if another agency were investigating the same fraud. Although field 

offices did not always formally notify the FBI, the offices may provide 

an informal notice during interagency meetings or during participation 

on a task force. 

Unless the Service notifies the FBI, there is a risk that the 

Government's effort to investigate specific crimes will not be as 

efficient as possible. For example, our review of 86 FIF cases at four 

field offices, found that the Service initiated three investigations of FIF 

which the FBI also was investigating. As an FBI official explained in a 

December 1998 letter, the FBI and the Service, in accordance with the 

requirement, work together to ensure investigative efforts are not 

duplicated and that crimes are addressed in an expeditious manner. 

FCD officials concurred with the FBI official's comments. They 

explained that duplication of investigative efforts with the FBI was not 

OIG-00-070 €U.S. SECRET SERVICE FINANCIAL INSTITUTION 

FRAUD PROGRAM Page 22 
an issue but they added that they will continuously monitor the 

investigative efforts between the two agencies. 

We concur with officials' comments and believe that adherence to the 

formal reporting requirement will help ensure the effectiveness of these 

monitoring efforts. Accordingly, 01 should ensure field offices 

comply with the guideline to notify the FBI by clarifying the guideline 

and identifying the specific situations where notice to the FBI must be 

made. The revised instructions should then be reemphasized to the 

field offices to comply with the requirements. Headquarters officials 

explained they would advise the Service's Office of Inspections to 

check for compliance with this requirement during their internal 

reviews. 

Interactions With Financial Institutions And Regulators 

Because of the Service's requirement to maintain a liaison with 

regulatory agencies and financial institutions, we contacted large banks 

and regulators of financial institutions about their interactions with the 

Service. The questionnaire responses showed that the following areas 

are of most concern to the financial institutions and regulatory 

agencies : 

* 	 Dedicated Resources to FIF investigation (Refer to responses to 

survey questions 15a and 15b in Appendix.2) 

Thirteen of 17 financial institutions and 5 of the 10 regulatory 

agency omces that responded had comments concerning the 

efficient use and need for additional resources for the Service's 

fraud investigations. Regulators suggested that the Service should 

coordinate its resources with them to combat FIF. For example, 

two financial institutions stated that an investigative unit with little 

or no protection duties for FIF should be formed. Five institutions 

also stated that more agents should be available for FIF 

investigations. 

Better communications and clearly defined FIF investigative 

priorities (Refer to responses to survey questions 150 and 1% in 

Appendix 2) 

From the survey, 7 of 17 financial institutions and 5 of 10 

regulatory agency offices expressed a need for more involvement 

from the Service in areas like networking and on-going 

communications regarding case investigations and trends in FIF. In 

SECRET SERVICE FINANCW INSTITUTION 

UD PROG Page 23 
addition, three institutions and five regulators stated that the 

Service's investigative priorities could be more clearly defined. 

Presentations on FIF topics (Refer to responses to survey 

questions 11, 13a, and 13b in Appendix 2) 

Of those who responded, 14 of 24 financial institutions and 2 of 20 

regulatory agency offices had attended seminars and presentations 

by the Service. Many of them suggested FIF topics that they are 

interested in the Service presenting at educational seminars. 

In discussing these comments, Headquarters officials stated that they 

also believe that the Service could effectively use additional staffing for 

FIF investigations and that prior year appropriations did not include 

specific funds for this program. In reviewing the comments, the 

officials believed that they have a good relationship with members of 

the fmancial service community, especially on referrals. They believe 

the three areas of concern expressed by financial institutions and 

regulatory agencies do not accurately portray their relationships with 

fmancial institutions and regulators as a whole. 

Responses to our questionnaire also indicated the Service interacted 

effectively with specific financial institutions and regulators. 

However, the Service should consider other comments from specific 

fmancial institutions and regulators, where applicable, to further 

enhance its interactions with them. For example, the Service could 

explain to specific banks and regulators its current FIF priorities. 

Regarding comments that regulators provided on SARskase referrals, 

officials stated that regulators do not have a role in this process as it 

relates to law enforcement activities, since SAR data is now available 

from FinCEN. Officials believed Federal regulators would not be able 

to provide significant assistance to their FIF investigative activities. 

However, we believe the Service's liaison with regulators could be 

helpful because regulators also monitor S a and examine financial 

institutions. For example, regulators may identify FIF that institutions 

had not reported, such as fraud by financial institution employees. 

Also, the regulators may be able to assist investigators in gathering 

documentation and testifying. 

OIG-00-070 €U.S. SECRET SERVICE FNANCLiiL ICNSTITmION 

FRAUD PROG Page 24 
-- -- 

Appendix 1 

A 


ECSAP 

FBI 

FCD 

FDIC 

FXF 

FinCEN 

FY 

GAO 

GPRA 

IOD 

OCC 

OX 

OIG 

OTS 

SAC 

SAR 

Electronic Crimes Special Agent Program 


Federal Bureau of Investigation 


Financial Crimes Division 


Federal Deposit Insurance Corporation 


Financial Institution Fraud 


Financial Crimes Enforcement Network 


Fiscal Year 


General Accounting Office 


Government Performance and Results Act 


Investigations Other District 


Office of Comptroller of the Currency 


Office of Investigations 


Office of Inspector General 


Office of Thrift Supervision 


Special Agent-&Charge 


Suspicious Activity Report 


-

016-00-070 €U.S. SECRET SERVICE FINMVCIAL NSTITWION 

EilRAUD PROG Page 25 
Appendix 2 

N 

The questionnaire concerning the Secret Service's FIF Program was sent to 20 larger financial 

institutions and 20 regulatory agency offices (OCC, OTS, and FDIC). The questionnaire responses were 

received from the 20 regulatory agency offices and 19 of the 20 financial iastitutions. Some institutions 

provided more than one response from different geographical areas. Thus, 25 financial institution 

responses were received. The questionnaire participants did not provide responses to all the questions 

and for some questions they provided more than one response. As a result, the percentage shown in each 

question may not total to 100 percent. For each question, the number of responding financial institutions 

or regulatory agency offices is shown in parenthesis. 

The following abbreviations are presented in the survey results: 

FI Financial Institutions 

RA Regulatory Agency Offices 

I. Referral Process 

1. Do you refer significant FIF matters to the Secret 

Service? 

FI (25) RA (20) 

84% 25% YES 

16% 75% NO 

3. Does the Secret Service investigate the most significant 

referrals concerning FIF? 

FI(24) RA (18) 

25 % 5% Yes 

42 % 17% No 

33 % 48 % No basis for judgment 

IX. Commu~cations 

2. How are FIF referrals made to the Secret Service? 

FI(25) RA(16) 

88 % 59% Referral on 

4. Why are FITcases directly referred to the Secret 

Service? 

FI(23) RA ('-15) 

100% 13% Good relationships with 

investigators 

61% 113% Show interest and 

frequently communicate on 

FIF activities 

57 % 13% Good commuTlication of 

case status 

48 % 20% Perform significant 

investigations 

22 % 80% Other (See below) 

Suspicious Activity Report 

(SAR) via FXEN 

72 % 14% Direct referrals to Secret 

Service-Special Agents 

68 % 14% 	 Direct refenais to Secret 

Service- Field Offices 

4% 5 % Others Means 

0% 9% Direct referrals (directly 

communicated) to Secret 

Service- Headquarters 

Other reasons for direct referrals to the Secret Service 

a.) Regulatory agencies (12 regulatory agency ofices responded to the question) 

OIG-00-070 	 U.S. SECRET SERVICE Ffl\J CIAL mSTITUTION 

FRAUD PROG Page 26 
-- 

b.1 FinanciaI Institutions (five financial institutions that responded to the question) 

been shown in the fraud and/or the fraud meets a particular Secret Service's 

5. How often are FIF referrals made to the Secret Service? 

.. 55% 1 None 8% 1 61% 1None I 

6. Identify the types of communication between your organization and the Secret Service? 

I I % ( NO. / % I NO. 1 1 a. telephone 1 100% 1 25 1 67% 1 12 1 

b. networking groups or professional associations 

c. informal conversations 

d. meetings u 

e. correspondences (letters, memorandums) 

f. reports (formal - of activities and results of 

84% 1 2 1 

64% 1 16 

64% I I6 t - - -

44 % 

28 % 

39% 

8 

5 

7 

44 % 

40% 

39 % 

0% 

11 

10 

7 

0 

OIG-00-070 	 U.S. SECRET SERVICE FXNAUC l[NSTITUTION 


FRAUD PROGRAM Page 27 

Is there sufficient exchange of information between the 

Secret Senice and your representative (person 

responsible for FIF investigations) during the 

investigation of a referral (including status reports)? 

RA(19) Written 

10% YES 

32% NO 

58% No basis to judge 

RA(19) 

26% YES 

11% NO 

63% No basis to judge 

Does the Secret Service notify your organization of the 

completed FIF investigations? 

n (25) RA (20) 

36 % 5% YES 

4% 25% NO 

48% 20% Sometimes 

12% 50% No basis to judge 

In general, does the Secret Service make beneficial 

suggestions and recommendations for corrective 

actions and improvements to prevent future Financial 

Institution Fraud? 

FI (22) RA (14) 

45% 29% YES 

55% 71% NO 

Does Secret Service lnform your organization when 

they open an investigation from your referrals? 

FI (25) RA (19) Written 

16% 10% YES 

36% 32% NO 

48 % 58 % No basis to judge 

111. Seminars and Presentations 

11. Has the Secret Service held or participated in any 

seminars or presentations on FIF within the last two 

years that you attended? 

FI (24) RA (20) 

58% 10% YES 

42% 90% NO 

12. What was the benefit of the seminar or presentations: 

FI(14) RA(2) 

77 % 0% Increased awareness of 

Secret Service 

investigations and goals 

regarding FIF 

69 % 100% Increased awareness of 

FIF schemes 

46 % 0% Presented prevention 

philosophies and 

methodologies 

8% 0% Other (Special Inrelligence 

Information) 

0% 0% No Benefit (E~plain) 

13. Are there any specific FIF topics that your 

organization would like Secret Service to present? (See 

below) 

FI(20) RA(18) 

30% 78% YES 

70% 22% NO 

FI (25) RA (19) Oral 

68% 21% YES 

16% 16% NO 

16% 63 % No basis to judge 

esentations (Continuation of Question 13) 

a.) Regulatory agencies (12 regulatory agency offices provided suggestions to the question; some had multiple answers) 

OIG-00-070 U.S. SEC T SERVICE FIN 

Page 28 
Appendix 2 

I0 P ES 

b.) Financial institutions (five institutions provided suggestions to the question; some had multiple answers) 

financial institutions, 


General information relative to industry/regional trends 


Training and intelligence sharing seminars on issues such as check fraud, counterfeit documents and 


money laundering 


Updates on counterfeiting currency, credit card and other access devices 


Updates on beneficial information regarding foreigdethnic fraud rings such as Nigerian, Asian, and 


Russian Groups 


Organized Crirne of financial institutions 


Money Laundering 


Trends regarding credit card fraud 


V. Profile and Trends 

14. In what areas of FIFdo you perceive a threat? Some institutions and regulatory agency offices had multiple answers.) 

1 a. Counterfeit Checks 

b. Check Fraud 

c. Organized Crime Groups 

d. Credit Cards 

e. Identity Fraud 

f. Embezzlement 

g. Debit Cards 

h. Access devices 

rn. Computer Fraud 

n. Electronic Fund Transfer 

o. Consumer Loan Fraud 

p. Desktop Publishing 

q. Mortgage Fraud 

r . Telecommunication Fraud 

s. Counterfeit Securities/Notes 

t. Money Laundering 

u. Structuring 

% Number 1 ofRA I 

1 84% 

- '. 1 21 1 17% I 3 1 L 

72% 18 78 % 14 

60% 15 17% 3 

52% 

52% ( 

13 1 

13 / 

56 % 

17% 1 

10 

3 1 

36% 9 72 % 13 

28 % 7 0% 0 

20 % 5 0% 0 

I I 

8% / I 2 1 I 28% 1 5 

8% 2 0% 0 

4% 1 22 % 4 

4% I 6% 1 1 

4% 1 39% 7 

4% 1 0% 0 

, v. Others (Anyform of inrider abuse) 

0% 0 0% 0 

0% 0 61 % 11 

0% 1 0 6% 1 1 

1 

0% I 0 6% 1 1 

OZG-00-070 	 U.S. SECRET SERVICE FINNCIAL IIUSTImION 

]FRAUD PROGRAN Page 29 
15. The comments On how to improve the Secret Service-FIF Program and program functions were extracted from the survey 

questionnaire. 

a.) The following comments were given by 17 financial institutions; some bad multiple answers. 

6 

5 

RESOURCES 

The agents should stay engaged with the case investigation. There should be a 

balance between the protection and investigation missions while maintaining 

continuity in the case investigation. 

There should be additional resources given to fraud investigation. Also, there 

should be an increase in the number of Secret Service agents for the investigative 

mission. 

2 There should be a separate unit dedicated to fraud investigation with little or no 

protection responsibilities. 

5 

AWARENESS 

There should be more networking by the Secret Service. 

3 

1 

b.) The following comments were given by 10 regulatory agency offices;(some offices had multiple answers). 

The Service should present its FIF program to financial institutions including 

criteria for opening cases, and the Service investigative priorities versus other 

officials law enforcement agencies. 

The Secret Service Management (Headquarters) should have a meeting with 

officials from at least the top 15 banks. 

1 The law enforcement personnel should have an awareness of the banking industry 

and its operations. J 

1 Maintain on-going dialogue concerning case investigations and trends in bank 

fraud 

5 

EWESTIGATM3 PRIORITIES 

Need to clearly defmed RF investigative priorities 

I COMMUNICATIONS 

I 5 I Communication with the regulatory agencies on a regular basis and coordination I 

1 1 and bankers associations f 

2 

2 

1 ) Outreach program direct to the regulatory agencies 

of resources with the regulatory agencies to combat FLF 

More participation in the Bank Fraud Working Group Meetings 

Offer educational seminars and/or short topics presenrations to the bank regulators 

016-00-070 SECRET SERVICE FINANC l[NSTI~ION 

UD PROGRAM: Page 30 
Appendix 3 

Page 1 of 4 

AGE T €

DEPARTMENT OF THE TREASURY 

UNITED STATES SECRET SERVICE ... 

October 5, 1999 €

MEMORANDUM FOR ROBERT K. BRONSTRUP 

OFFICE OF INSPECTOR GENERAL 

DEPARTMENT OF THE TREASURY 

THRU:  Kevin T. Foley €

Assistant Director €

Office of Investigations €

Gordon S. Heddell @ 

Assistant Director 

Office of Inspection 

FROM: Gregory J ~~~e~~ 

Special Agent in €

Financial Crimes Division €

SUBJECT: Response to Recommendations in Audit 

The following attachment is Financial Crimes Division's response to the Department of the €

Treasury's Office of the Inspector General (OIG's), FY 1999,Audit Report on the U.S. Secret €

Service's Investigations of Financial Institution Fraud. This response includes corrective €

measures to be taken with regard to the U.S. Secret Service's investigations concerning Financia1 €

Institution Fraud. €

-

OIG-00-070  U.S. SECWT SERVICE FINANCIAL LNSTITUTION 

FRAUD PROG Page 31 
Appendix 3 

Page 2 of 4 

.. . . The Office of Inspector General's (OIG) report of its audit concerning the U.S. Secret Service's 

involvement in the investigation of Financial Institution Fraud contains six recommendations. 

For each of these recommendations the Office of Investigations has taken corrective action to 

ensure compliance. 

Certain Actions Could Strengthen Efforts To Investigate The Most Significant Violations 

Recommendations: 

* 	 Complete actions to refine case selection guidance to field offices based on the trends in 

financial institution hud; and 

Response: 

* 	 For the past two years the Secret Service, Ofice of Investigations has provided case 

selection guidanceicriteria to all ofices and personnel. The Special Agent in Charge 

(SAIC) of Financial Crimes Division (FCD) will ensure that these actions wilI continue 

with the goal of providing guidance to the offices and their Financial Institution Fraud 

case selection (FIF). Additionally, the SAIC of FCD will continue to explore alternative 

methods (i.e.: supervisors conferences, teleconferences) to Mer enhance the case 

selection process in this area. 

Recommendations 

* 	 Complete software enhancements that will permit field ofices to analyze-SARs data 

more efficiently, and ensure field ofice agents have adequate training to effectively use 

the enhancements to the SARs database. 

Response: 

The Special Agent in Charge of Financial Crimes Division will ensure that the software 

enhancements to the SAR's system which were initiated prior to the Treasury IG audit 

will be completed. Once completed, personnel from FCD will conduct training seminars 

that will allow all personnel to effectively utilize the SAR's database. 

OIG-00-070 	 U.S. SECRET SERVICE FWANCLAL INSTITUTION 

FRAUD PROGRAB4 Page 32 
Appendix 3 

Page 3 of 4 

ANAG €

Performance Measurements and Reporting Need Improvement €

*  Develop (a) results oriented performance measures for externd reporting; and (b) 

management reports that will provide information on these measures; and 

Response: €

*  The Special Agent in Charge of Financial Crimes Division in conjunction with the Chief 

of the Management and Organization Division will explore various methods to initiate 

the use of resuIt oriented performance measures. These new methods should serve both 

internal management reporting needs and also meet the Government Performance and 

Results Act (GPEIA) reporting requirements. 

Recommendations €

*  Complete procedures on how agents are to: (a) determine and support the actual and 

potential dollar losses of FIF investigations, and (b) verify the accuracy of actuaI and 

potential dollar losses that are entered into the computer system. 

Response: €

*  The Special Agent in Charge of Financial Crimes Division in conjunction with the Office 

of Investigations will continue to develop guidelines will provide guidance and 

uniformity in the determination of actual and potential dollar losses in FIF investigations. 

The SAIC of FCD has already initiated efforts designed to institute an auditing program 

that wiIl monitor the accuracy of actual and potential dollar losses that are entered into 

the Master Central Index (MCI) system. 

Once implemented this measure will ensure that prior to closing out a case, office 

personnel must make modifications to the actual and potential Ioss screens. Additionally, 

dollar levels will be established requiring justification for an unusually high 

actual/potential dollar loss figue. 

OIG-00-070 U.S. SECRET SERVICE FINABICIAL INSTITUTION 

FRAUD PROGRAM Page 33 
Appendix 3 

Page 4of 4 

Communications With Specific Outside Parties Could Be Enhanced 

Recommendations 

* 	 Clarify to all field offices the specific situations and case typeswere the FBI must be 

formaIIy notified when an FIF-type investigation is initiated. 

Response: 

The Special Agent in Charge of Financial Crimes Division will ensure that all field 

offices are provided with guidelines and case types for the requirement to formally notify 

the FBI with the U.S. Secret Service is initiating and FIF - type investigation. The SAIC 

of FCD will develop measures to ensure these requirement are met. 

Recommendations 

Analyze the results of our questionnaire and determine additional actions that could 

strengthen coordination with both specific financial institutions and regulators or with 

them as a group. 

Response: 

* 	 The process of analyzing results of the questionnaire has already been initiated. This 

process will continue with the goal being to not only develop a more effective and 

efficient investigative program but also to better strengthen our partnerships with the 

financial community and regulators. The SAIC of FCD will also ensure that when 

measures are implemented to achieve these goals each field office will be notified and 

steps will be taken to monitor the results. 

OIG-00-070 	 U.S. SECRET SERVICE FLNANCLAL INSTITUTION 

FRAUD PROGRAiM Page 34 
November I, 1999 

MEMORANDUM FOR: €ROBERTA N.RICKEY 

DIRECTOR, PROGRAM AUDIT 

OFFICE OF INSPECTOR GENBVL 

DEPARTMENT OF THE TREASURY 

FROM: GREGORY J. REGAN 

SPECIAL AGENT IN CHARGE 

FINANCIAL CRIME3 DIVISION 

U.S. SECRET SERVICE 

THRU: € AD -OFFICE OF INVESTIGATIONS 

AD - OFFICE OF INSPECTION 

SUBJECT: € TREASURY OIG AUDIT 

FINANCIAL INSTITUTION FRAUD 

Rei'erencc is made to the most recent conespondence dated October 14, 1999, concerning 

the U.S.Secret Service Financial Institution Fraud program, as prepared by the 

Department of Treasury OIG Audit staff' 

Further reference is aIso made to the previous submitted by the Special 

Agent In Charge Financial Crimes Division to tfie Treasury OIG Audit Staff dated 

October 5. 1999. 

Below please find our responses to the Treasury OIG Audit Staff's recommendations. 

Recommendation Number 1: 

.'The response should indicate that this process would be formalized in a procedure. A 

procedure would help ensure the process continues if the current SAX assumes another 

position. We will also request supporting documentation to show that the widance has 

recently been provided to the field offices." 

This response included the OIG's comments from a October 14, 1999 memorandum to the Service concerning the Service's 

October 5, 1999 response. The Service's November 1, 1999 memorandum provides responses to each OIG comment. 

OIG-00-070  U.S. SE 

FRAUD Page 35 
Appendix 4 

Page 2 of 5 

Response: 

The current process is spelled out in the Office of Investigation's case prioritization 

formula. Because each district is different and subsequently the crimes affecting that 

district are different we do not believe our investigative mission would be properly 

served by formalizing a procedure when choosing a case. Historically the Secret Service 

has had many successfki investigations because an agent or supervisor familiar with that 

particular district felt the need to become involved in the case. Feedback from the local 

police and financial communities are still our most effective tools when choosing cases. 

By formalizing the procedure for case selection we would effectively remove the Iocal 

SAIC's discretion in case selection. 

Attached please find the guidefines sent to each field office to be used when weighing the 

merits of initiating an investigation. Even thou& these are guidelines which the Office 

of Investigations feels an office should use when selecting a case, this does not preclude 

an office from becoming involved in an investigation which will benefit both the Secret 

Service and the local community. 

Recommendation Number 2: 

"The response should indicate a timeframe for completing the software enhancements 

and for conducting the training seminars. Also, we request documentation supporting 

these actions when they have been completed." 

Response: 

Because of the Treasury Department's focus on Y2K issues and the government wide 

mandate to ensure the uninterrupted operation of mandatory systems, it is anticipated, 

pending the resolution of any Y2K problems, the software enhancements to the SAR's 

database will be completed within the second quarter of 2000. Training seminars that 

will teach agents to effectively utilize the SAR's database will be scheduIed depending 

on a number of factors: availability of funds to complete the software enhancements, the 

availability of agents to receive the training, the Secret Service's responsibility in the 

2000 Campaign. and the availability of fimds to conduct the training. 

When these actions are completed we will furnish the supporting documentation. 

OIG-00-070 €U. SlKXJ3T SERVICE FINANCIAL INSTITUTION 

FRAUD PROG Page 36 
Appendix 

Page 3 of 5 

Recommendation number 3: 

'me response stares that the Service will explore various methods to initiate the use of 

results oriented performance methods. We believe the Service should establish a 

deadline for developing specific measures that are results oriented. Additionally, the 

response does not mention what steps if any are underway to develop management 

reports for these measures. We request supporting information addressing these specific 

matters." 

Response: 

The Office of Investigations is currently working with the Chief of the Management and 

Organization Divisiw to determine the best possible methods to measure results oriented 

performance. Before the Ofice of Investigations can set a deadline for developing and 

implementing these methods, it is imperative to ensure that the measurements will 

accurately reflect the work being done by our agents. In addition the measurement needs 

to take into account the enormous protective responsibilities of each of our agents. We 

do not feel it would be advantageous or is it in the best interest of ail parties, to set an 

arbitrary deadline. Each division is committed to developing and implementing in a 

timely fashion the best possible program for measuring results oriented performance. We 

believe that when the program is developed it will address the concerns of Treasury while 

accurately reffecting the fine work being done by our agents. Once our program is 

established we will provide the necessary supporting documentation. 

Recommendation Number 4: 

"The response does not indicate a date by which the SAIC expects to finish guidelines 

providing guidance and uniformity in the determination of actual and potential dollar 

losses in FIF investigations. Also, the response does not indicate a date by which efforts 

to institute an auditing program will be completed. We request a date by which the 

Service expects to complete these actions and documentation supporting the actions when 

they have been completed." 

Response: 

We believe that by the end of the fourth quarter of 2000, we will be able to provide the 

field with updated guidelines for determining actuaVpotentia1losses in FIF investigations. 

Once again in an effort to provide the most comprehensive and accurate formula for these 

measurements, we do not want to be governed by an arbitraq deadline. 

016-00-070 	 US. SECRET SERVICE FINANCIAL INSTITUTION 

FRAUD PROGRAIM Page 37 
Appendix 4 

Page 4 of 5 

The SAIC of Financial Crimes Division is actively working with both the financial 

community and the Chief of the Management and Organization Division to ensure that 

when the new guidelines are in effect not only will our figures reflect the types of cases 

being worked by our agents but the auditing program will also k in effect ensuring 

quality control. Once again, due to unrelated Y2K issues full implementation of this 

project may be delayed. 

Recommendation Number 5: 

"There appears to be language missing from the response. We request, however, a date 

by which the Service expects to complete action to provide guidelines to the field ofices 

on when to notify the FBI. Additionally, we request a date by which the Service expects 

to complete development of measures to ensure the requirement is met. Once these 

actions have been completed we request the Service provide us supporting 

documentation." 

Response; 

We have not set a specific date for providing guidelines to the field. The SAIC of 

Financial Crimes Division is currently reviewing the MOU between the Secret Service 

and the FBI to determine if the language in the MOU is crrrrent. Once the SAIC has had 

the opportunity to reaffirm both parties' commitment to the MOU, the Office of 

Investigations will issue updated guidelines to the field reIating to the Service's policy in 

notifying the FBI about the Service's involvement in bank fraud cases. Set forth in those 

guidelines will be instructions requiring the field to document their notification to the 

FBI. Review by FCD regional SA's will ensure that the policy is adhered to. 

Recommendation Number 6; 

"We request documentation to show that the analysis of the questionnaire responses has 

been initiated. We also request a timeme by which the Service expects to complete the 

analysis and determine what additional actions, if any will be taken to strengthen 

coordination." 

Response: 

The analysis of the responses to this questionnaire has already been assigned to persome1 

within Financial Crimes Division. Upon completion of that review in the second quarter 

of 2000, it is anticipated that Financial Crimes Division will estabIish a working group 

that will address and resolve any issues raised by the analysis of the responses. 

Upon review of this document, please feel free to contact the coordinator for this project 

ASAIC Edward Kitlas at 202/ 406- 5039. 

OIG-00-070 €U.S. SECRET SERVICE FINANCI[AL lCF\JSTITUTION 

FRAUD PROG Page 38 
Page 5 of 5 

~dditionalInfomation In Response to Recommendation Number I 

The Secret Service believes that the methods used to track performance in counterfeit currency and 

financial crimes investigations, while striving to achieve the same goal must be different. Because the 

Secret Service is the sole repository for counterfeit US.currency, it is relatively easy to track 

counterfeit notes passed, seized, and percentage in circulation. 

When attempting to measure performance in our financial crimes investigations we are faced with an 

entirely different challenge. Some financial institutions are reluctant to categorize losses as fraud and 

instead choose to report these losses as bad debt, while other institutions are reIuctant to report fraud 

because of the fear of having customers lose confidence in the institution. When attempting to 

quantify fraud losses the Secret Service is often dependent upon the financial institutions which 

suffered the losses for our figures. AIthough this information is useful ,this method has proven to be 

somewhat unreliable when evaluating performance. We believe that to present a true overall 

performance measure we need to evaluate factors which are not easy to quantify. 

The Secret Service has Iearned from experience that one of the best ways to measure an office's 

performance in the financial crimes arena is by feedback. By developing and maintaining a 

professional relationship with both the financial and law enforcement communities we are better able 

understand the problems facing each of these communities and address specific problems within 

different regions. Our goal as an agency is not to keep producing greater and greater statistics each 

year. but to identify and address problems which impact our communities. Financial frauds and 

schemes which affect the communities of California and other west coast states may not be the same 

problems affecting communities on the east coast. 

When evaluating a field office's performance, we emphasize a proactive approach. By Iooking at the 

actual and potential fraud losses, we are able to gain an insight into our ofice's abiIity to suppress a 

financial fraud before it was able to adversely affect the community. We also logk at an office's 

ability to develop and investigate cases which invoive organized groups operating in multipie districts. 

Recently we have seen a dramatic increase in the number of financial crimes being committed by 

organized transnational criminal groups. These groups are becoming more sophisticated, and diverse 

in their criminal endeavors. The feedback we receive from our relationships help us formulate an 

strategy which enables us to fidfill our investigative mission while serving the community. 

Another measurement used in the evaluation of our offices is the investigation of new and emerging 

criminal schemes. By stressing the need to be proactive and aggressive our investigation and 

prosecution of newly emerging schemes, we are able to help both the financial and law enforcement 

communities identify systemic flaws and develop technological solutions to these problems, thereby 

has.ing a positive impact upon the community. 

Although statistics can be helpfid when trying to determine the performance of an ofice we have learned 

that in a world where payment systems are global, communications instantaneous, and travel inexpensive 

today's financial crimes are only limited by the imagination of the criminal. To accurately measure our 

success in combating these crimes we need to rely on more thanjust numbers on a sheet, we need to 

humanize the equation. The feedback we receive from our partnerships with local and state police 

departments. state and federal prosecutors, financial institutions and the community in which we operate a11 

help make up the overalI picture of an office's performance. Statistics can be used to either prove or 

disprove a point but, we feel the intangibles often times are the true indicators of an office's performance. 

OIG-00-070 U.S. SECRET SERVICE FII\IANCLAL INSTITUTION 

FRAUD PROGRAfM: Page 39 
OR CONT €

Chicago Field Office 

Roberta N. Rickey 


Robert K. Bronstrup 


Aldon Hedman 


Annette Dunn 


Gary 
Wilk

Director 


Audit Manager 


Auditor 


Auditor 


Auditor 


OIG-00-070  U.S. SECRET SERVICE FlNANCIAlL INSTITUTION 

FRAUD PROGRAM Page 40 
-- 

Appendix 5 

U.S. Department of the Treasury 

Under Secretary of the Treasury for Enforcement 


Assistant Secretary for Enforcement 


Office of Organizational Improvement, Departmental Offices 


Office of Strategic Planning, Departmental Offices 


Office of Accounting and Internal Control, Departmental Offices 


Management Controls Branch, Departmental Offices 


US. Secret Service 

Director 


Assistant Director, Office of Investigations 


Assistant Director, Office of Inspection 


Special Agent-In-Charge, Financial Crimes Division 


Office of Management and Budget 

Treasury Bureau Chief 

-

OIG-00-070 	 U.S. SECRET SERVICE FINAPICIAL 

FRAUD PROG Page 41