Office of the Inspector General

U.S. Department of Justice

OVERSIGHT ★ INTEGRITY ★ GUIDANCE

Audit of the Drug Enforcement 

Administration’s Income-Generating, 

Undercover Operations

REDACTED FOR PUBLIC RELEASE

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REDACTED FOR PUBLIC RELEASE

The full version of this report contains information that the Department considered to be law enforcement sensitive 

and therefore could not be publicly released. To create this public version of the report, the Office of the Inspector 

General redacted (blacked out) portions of the full report. 

Audit Division 20-071 June 2020
i

Executive Summary

Audit of the Drug Enforcement Administration’s Income-Generating, 

Undercover Operations

Objective 

The objective of this audit was to assess the Drug 

Enforcement Administration’s (DEA) management and 

oversight of Department of Justice (DOJ or Department) 

authorized income-generating, undercover operations, 

referred to as Attorney General Exempted Operations 

(AGEO). Through AGEOs, the DEA is authorized to 

conduct undercover financial transactions to infiltrate 

and dismantle drug trafficking and money laundering 

organizations (DTO/MLO). 

Results in Brief

According to DOJ and the DEA, AGEOs target the illicit 

methods DTOs use to launder proceeds and have 

resulted in law enforcement actions that led to 

significant arrests, prosecutions, money and drug 

seizures, and disruptions of DTOs. Yet, these activities

may create serious risks because of the DEA’s 

undercover role in facilitating DTO financial transactions

and benefiting from income earned to support aspects 

of the investigations. We found that DOJ and the DEA 

did not effectively oversee and manage AGEOs to 

ensure the DEA limited undercover activities to 

accomplish the DOJ-approved objectives or disrupt the 

original targets. The DEA also failed to comply with 

certain congressional and DOJ requirements, which 

created a deficient framework for monitoring AGEO 

activities. Additionally, the DEA did not adequately 

assess and leverage its AGEO data to identify and 

pursue targets involved in illicit financial networks. 

Further, the DEA had processes to account for AGEO 

funds, yet we identified instances in which it did not 

adequately safeguard funds from inappropriate use. 

While the ultimate goals of AGEOs support the DEA’s 

mission, the collateral consequence of assisting the 

basic operation of DTOs does not. The DEA and DOJ 

must improve AGEO guidance, oversight, and 

management to ensure that the benefits outweigh risks 

of the DEA engaging in authorized illegal activities. 

Recommendations

Our report includes 19 recommendations to both the 

Department and the DEA to improve management and 

oversight of the AGEOs.

Audit Results

Through AGEOs, the DEA is authorized to participate in 

undercover financial transactions that transfer illegal 

drug proceeds from the point of sale to the point of 

origin. These operations allow the DEA to build criminal 

investigative evidence against DTOs and MLOs. 

Through this authorized investigative technique, the 

DEA may also earn income that it can use to support 

the associated investigation.

Our audit covers DEA AGEOs active between fiscal 

years (FY) 2015 through 2017, through which the DEA

facilitated undercover financial transactions totaling 

tens of millions of dollars each year. According to the 

DEA and Department, these AGEOs have resulted in 

some of DOJ’s most successful money and drug-related 

seizures, arrests, and prosecutions. Notwithstanding

these successes, it is important to recognize that these 

operations also pose significant risks to the U.S. 

government. We found that the DEA did not 

appropriately mitigate AGEO risks because it did not 

consistently implement or follow effective controls,

requirements, and safeguards. In 2018, the DEA 

updated its policies to improve its management of 

AGEOs. However, these updates do not remedy all of 

the concerns identified in this report.

DEA Needs to Fully Comply with Statutory and 

Department Requirements – The DEA did not comply 

with several critical statutory and Department 

requirements; as a result, the DEA did not implement

certain necessary internal controls to safeguard its 

operations. Specifically, the DEA did not appropriately 

inform the Attorney General and Congress of all of the 

AGEO-associated authorized illegal activities it was 

required to report by statute. In addition, despite 

highly publicized problems in undercover operations 

conducted in prior years by other DOJ law enforcement 

components, DOJ did not ensure that all DOJ 

components were subject to and complying with the 

DOJ’s requirements for undercover activities. As a 

result, the DEA’s policies and practices were not 

consistent with certain Department requirements. We 

found this problematic because DOJ previously informed 

the OIG that Department guidelines were being applied 

to all DOJ law enforcement components. 
ii

 

 

 

Executive Summary

Audit of the Drug Enforcement Administration’s Income-Generating, 

Undercover Operations

The DEA also was authorized by the DOJ to operate 

multiple cases within certain AGEOs under a single 

approval, which was not consistent with Department 

policy. Despite historical Department approval for 

these structures, we found that in practice this resulted 

in limited oversight of cases involving certain sensitive 

and high-dollar undercover money laundering activities. 

These deficiencies affected operational and financial 

aspects of the DEA’s AGEO structure and highlighted 

vulnerabilities within DEA’s AGEO environment. 

DEA Should More Clearly Define Operational 

Objectives and Assess AGEO Performance – The 

substantial benefits and potential risks associated with 

conducting AGEOs require the DEA to set appropriate 

and achievable objectives for each operation, which the 

Department must vet and approve. Yet, we found that 

for some AGEOs the DEA set broad initial objectives

that provided significant investigative flexibility to case 

agents, but impaired the ability of DEA management 

and DOJ to oversee the true scope of activities. In turn, 

in the AGEOs that we reviewed, the DEA generally did 

not limit its undercover money laundering activities to 

those necessary to disrupt the initial targets of the 

operation. We determined that DOJ’s and DEA’s

evaluation and monitoring of AGEOs were not 

appropriately rigorous to identify scope expansions and 

operational inconsistencies. For example, in one AGEO 

the DEA pursued multiple high-level DTO targets under 

one authorization and, over the course of a year, added 

other DTOs and a narco-terrorist organization. The 

incorporation of a narco-terrorist organization presented

additional risks that the DEA should have considered for 

a separate authorization and Department approval.

We also found that the DEA did not always leverage 

AGEO information and strategically evaluate the 

laundering connections among AGEOs. Indeed, some 

AGEOs operated for many years and facilitated DTO 

money laundering transactions for extensive periods

without the DEA consistently ascertaining what entities 

were complicit in DTO money laundering activities. In 

some instances, the DEA lacked documentation for 

investigative action taken to pursue entities involved in 

illicit financial networks. These issues are indicative of 

insufficient oversight and undermine the ability to 

assess the success of the DEA’s AGEOs. 

We also found that the DEA did not accurately report 

AGEO achievements. The DEA did not track operational 

achievements in a way that allowed DEA management, 

the Department, or Congress to understand whether 

AGEO operations successfully completed the initial and 

authorized objectives and goals, built cases that led to 

prosecutions, and deprived criminals of ill-gotten gains. 

In fact, we found inflated statistics and significant 

errors in the achievements that the DEA reported.

AGEO Activities Require Additional Oversight – 

Because the financial structures of DTOs and MLOs are 

extremely complex and broad, the DEA’s undercover 

money laundering investigative activities often 

transcend state, continental, and virtual borders. 

Although the DEA stated that it coordinated with 

counterparts, it did not consistently document the 

appropriate approval to conduct authorized undercover 

laundering activities across jurisdictional boundaries, 

which could jeopardize operations and lead to legal 

repercussions for undercover case agents. We also 

noted that the DEA did not establish strict internal 

controls, risk mitigation techniques, and appropriate 

record keeping practices for AGEOs involving virtual 

currency, which we believe increased the potential for 

fraud, waste, abuse, and unauthorized investigative 

activity.

DEA’s Controls over AGEO Financial Activities

Must Be Improved – One of the unique aspects of 

AGEOs is that the DEA is able to use income derived 

from its authorized undercover illegal activity to support 

necessary and reasonable expenses associated with the 

investigation. We found that although the DEA 

generally maintained adequate financial records for its 

authorized undercover transactions and its use of 

project generated income (PGI), the DEA spent PGI on 

cases and operations that did not generate the income, 

in violation of law. In addition, in some instances, the

DEA was lax in executing and tracking the use of PGI 

for travel, equipment, and information because these 

payments were completed outside the DEA’s standard 

purchasing process. While these internal control 

deficiencies increased the potential for fraud, waste, 

and abuse, the DEA has since issued updated 

procedures to better account for authorization, use, and 

disposition of PGI.
AUDIT OF THE DRUG ENFORCEMENT ADMINISTRATION’S 

INCOME-GENERATING, UNDERCOVER OPERATIONS

TABLE OF CONTENT

INTRODUCTION .......................................................................................... 1

DEA AGEO Activities and Associated Legal and Policy Requirements............ 1

Categories of AGEOs .................................................................. 2

Approval, Monitoring, and Closeout Process ................................... 4

AGEO Value to the DEA .............................................................. 6

Previous OIG Activity .......................................................................... 6

OIG Audit Approach ............................................................................ 7

AUDIT RESULTS.......................................................................................... 9

The Department Must Clarify Policy Matters and the DEA Must Fully Comply 

with Statutory and Department Requirements ................................ 9

The DEA Should More Clearly and Accurately Define Operational Objectives, 

Assess AGEO Performance, and Report AGEO Results .................... 12

The DEA and DOJ Must Improve the Review of AGEO Objectives, 

Scope, and Duration........................................................ 13

Increased Oversight of Following and Documenting Investigative Leads 

and Actions is Necessary to Maximize Operational Outcomes and 

Reduce Risks.................................................................. 16

The DEA Needs to Mitigate Risks associated with the Potential 

Overreliance on Confidential Sources in AGEOs.................... 21

The DEA Must Accurately Track and Report AGEO Achievements ..... 22

AGEO Activities Require Additional Oversight ........................................ 25

The DEA and DOJ Need to Evaluate the DEA’s Approval Structure for 

Cases in Shelf and Border AGEOs ...................................... 25

The DEA and DOJ Should Establish a Formalized Process to Ensure 

USAO Coordination and Concurrence for Cross-Jurisdictional 

AGEO Activities .............................................................. 27

The DEA Should Obtain Proper Written Concurrences for Transnational

Activity ......................................................................... 28
Virtual Currency-Related Activities Need More Structured Procedures 

and Increased Oversight .................................................. 30

AGEO Financial Activities ................................................................... 32

The DEA Should Implement Better Controls over AGEO Financial 

Activities ....................................................................... 32

The DEA Needs to Improve Compliance with Requirements for 

Safeguarding Undercover Information ................................ 36

CONCLUSION AND RECOMMENDATIONS....................................................... 38

STATEMENT ON INTERNAL CONTROLS.......................................................... 42

STATEMENT ON COMPLIANCE WITH LAWS AND REGULATIONS......................... 43

APPENDIX 1: OBJECTIVES, SCOPE, AND METHODOLOGY ................................ 44

APPENDIX 2: CONSOLIDATED LISTING OF DEA NON-COMPLIANCE OR 

INCONSISTENCY WITH STATUTORY AND DEPARTMENT REQUIREMENTS ... 47

APPENDIX 3: THE DRUG ENFORCEMENT ADMINISTRATION’S RESPONSE TO THE

DRAFT REPORT ................................................................................ 49

APPENDIX 4: OFFICE OF THE DEPUTY ATTORNEY GENERAL’S RESPONSE TO THE 

DRAFT REPORT ................................................................................ 56

APPENDIX 5: OFFICE OF THE INSPECTOR GENERAL ANALYSIS AND SUMMARY OF 

ACTIONS NECESSARY TO CLOSE THE REPORT ...................................... 58
1 

INTRODUCTION 

The Drug Enforcement Administration’s (DEA) 2017 National Drug Threat 

Assessment estimated that annual illicit drug sales in the United States totaled

$64 billion. In order to conceal the illegal origin of the proceeds, drug trafficking 

organizations (DTO) develop schemes or hire money laundering organizations 

(MLO) to launder the funds through financial networks or legitimate marketplaces. 

The DEA has stated that preferred laundering methods DTOs and MLOs use include 

bulk cash smuggling, trade-based money laundering, and structured payments

through the formal banking sector. These methods may involve high-dollar

financial manipulation and a large volume of transactions, thus making it difficult to 

distinguish and trace the illicit proceeds. The DEA employs undercover techniques

authorized through investigations referred to as Attorney General Exempted

Operations (AGEOs) as one of its tools to combat this activity and deprive DTOs of 

these funds. Through AGEOs, the DEA becomes an active participant in the money 

laundering schemes of DTOs and MLOs. According to DOJ and DEA officials, this 

technique allows the DEA to investigate, target, and disrupt illicit financial activities 

of these entities, and has led to significant arrests, prosecutions, and seizures. 

During our audit, we found that between fiscal years (FY) 2015 and 2017, the DEA

managed through which it documented undercover money laundering 

activity totaling more than . Throughout our audit, DEA Special Agents 

emphasized that AGEOs were essential to disrupting DTOs and fulfilling the DEA’s 

mission. According to the DEA, these undercover operations led to significant law 

enforcement actions including arrests and seizures of cash, assets, and illegal drugs

in the United States and abroad. 

DEA AGEO Activities and Associated Legal and Policy Requirements

As authorized first in FY 1985 by Public Law 98-411, the DEA can seek 

approval from the Attorney General to establish an AGEO, which provides the DEA

the ability to conduct certain sensitive investigative activities.1 These activities 

include opening and operating a commercial business, obtaining real property, 

depositing funds into a financial institution, and using proceeds earned to offset 

reasonable and necessary expenses incurred during the operation. Within that law, 

Congress also incorporated essential oversight and reporting responsibilities. 

Subsequently, the Department of Justice (DOJ or Department) established guidance 

for undercover operations in the Attorney General Guidelines on the Federal Bureau 

of Investigation’s Undercover Operations (AG FBI Undercover Guidelines) and the 

Baseline Risk Assessment and Mitigation Policies for Law Enforcement Operations in 

Criminal Matters (Department Risk Mitigation Memorandum). This Department 

guidance provides authorization procedures and other requirements to ensure that 

undercover operations are properly designed and implemented. The DEA also 

established and disseminated AGEO guidance in various sections of its Agents 

Manual and correspondence from 2004 through 2015. In April 2018, the DEA 

promulgated a comprehensive AGEO Policy that incorporated and superseded the 

1 In 1992, Public Law 102-395 superseded previous authorities, and Section 102 of this law 

renewed AGEO provisions, which became in effect indefinitely under Public Law 104-132 

Section 815 (d). 
2 

previously disseminated DEA guidance. According to the DEA, the 2018 policy

formalized a wide range of ongoing and new practices, procedures, and oversight 

mechanisms, including defining and establishing requirements for different types of 

AGEOs to ensure consistency for initiating, reporting, auditing, training, managing, 

and closing AGEOs. This guidance was designed to assist DEA personnel in 

conducting complex financial investigations while maintaining strong internal 

controls over investigative and accounting activities. Our audit evaluated AGEOs 

operating during the scope of our audit, which was FY 2015 through FY 2017. As 

appropriate, we considered whether and to what extent DEA’s April 2018 policy

addressed findings associated with our audit. 

Through AGEOs, the DEA often uses a confidential source (CS) or undercover

agent

. In other instances,

 The following figure provides an example of this undercover 

activity.

Figure 1 

Source: OIG depiction of the DEA’s undercover activity

The DEA may acquire income through its AGEO activities because it is 

 The DEA refers to revenue from these fees as Project Generated 

Income (PGI). Depending on the circumstances of the AGEO, the DEA either must 

forfeit the PGI to the Assets Forfeiture Fund or may use the PGI to offset necessary 

and reasonable expenses of the case in which the DEA earned the income.2

Categories of AGEOs

To qualify for and propose the use of an AGEO, DEA Special Agents must 

have an open case that has identified financial-related illicit narcotics activity. The 

2 The Assets Forfeiture Fund is a dedicated financial repository for proceeds relegated to the 

fund from criminal prosecutions, civil actions, or potentially prohibited items.
3 

authorizing statute governing AGEOs requires the DEA to seek Attorney General 

approval when it acquires funds through investigative activity, deposits these funds 

into a legitimate bank account, and utilizes PGI earned from the undercover 

activity. In establishing its use of these sensitive investigative techniques, the 

public law, as well as Department and DEA policies, require the DEA to receive

authorization from the Department to operate AGEOs. Between FYs 2015 and 

FY 2017, the DEA used three types of AGEOs: Shelf AGEOs, Full AGEOs, and 

Border AGEOs. 

Shelf AGEOs: 

 operates a Shelf AGEO to facilitate 

investigations.3 Case agents use the Shelf when they determine that 

conducting limited undercover money laundering activity would help either 

assess the viability of a long-term financial operation or provide sufficient 

evidence in the short-term. According to the DEA Special Agents Manual, a

single Shelf AGEO can be associated with multiple DEA cases, which are 

subject to an initial laundering cap per case, and require the 

approval of a DEA Field Division Special Agent in Charge (SAC). The Agents 

Manual also stipulates that any funds generated through laundering activities 

associated with a Shelf AGEO cannot be spent unless the case becomes a Full 

AGEO. 

Full AGEOs: Full AGEOs are case-specific and designed to facilitate multiple 

transactions executed within a single investigation with the primary goal of 

dismantling a specifically targeted criminal organization. These AGEOs are 

subject to an initial laundering cap and must receive Department 

approval prior to operation. Prior to seeking approval to operate a Full 

AGEO, case agents generally utilize the Division’s Shelf AGEO to assess the 

necessity of using financial investigative techniques available under Full 

AGEOs. The public law and the Agents Manual allow the DEA to use PGI 

earned in these AGEOs to offset reasonable and necessary costs of the 

operation. 

Border AGEOs: A Border AGEO is a hybrid between a Shelf AGEO and a Full 

AGEO and must have a nexus to illegal activity along the Southwest Border. 

These AGEOs facilitate transactions for multiple, independent cases, and all 

cases within the AGEO are subject to an overall initial laundering 

cap. The DEA may use PGI to support the individual cases. According to a 

Border AGEO initial authorization, inclusion of a specific case in a Border 

AGEO must be approved at DEA headquarters. The DEA established Border 

AGEOs because of the high level of criminal activity along the Southwest 

border of the United States, which the DEA stated required multiple money 

3 During our audit review period, the DEA had 21 field offices, but in January 2018, the DEA 

created 2 new domestic division offices, which increased the number of field offices to 23. The DEA 

informed us that , bringing the total 

, but we did not audit the new AGEOs because they were not active during our audit review period. 
4 

laundering investigations to operate simultaneously without draining the field 

offices’ financial resources. 

From FY 2015 to FY 2017, the DEA had active AGEOs in various stages of 

operation. Over those 3 years, the DEA spent over $8.3 million generated from the 

and AGEOs authorized to use PGI for reasonable and necessary 

expenses, primarily on investigative travel, cell phones, and CS payments. The 

following table provides information on AGEOs that the DEA operated.4

Table 1 

Summary of AGEOs between FY 2015 and FY 2017

AGEO 

Category

Number 

of 

Active 

AGEOs

Undercover 

Financial 

Transaction 

Totals

PGI Earned PGI Expendeda 

Shelf $2,685,955 Not Applicable

Full 5,347,745 $7,962,348

Border 424,470 413,015

a The DEA expended more money than earned for Full AGEOs because it expended PGI 

earned prior to FY 2015.

Source: OIG Summary of DEA Data

Approval, Monitoring, and Closeout Process

The DEA’s active involvement in money laundering transactions can assist

DTOs in obtaining drug trafficking proceeds and contribute to the DTOs’ ability to 

operate. While the ultimate goals of AGEOs support the DEA’s mission to disrupt 

and dismantle DTOs, the collateral consequence of temporarily assisting the basic 

operation of DTOs does not. As such, the DEA Administrator and the Attorney 

General, by law and Department policy, must approve the establishment of all 

AGEOs in order to provide exemption from certain legal restrictions and 

authorization to conduct otherwise illegal activities. To fulfill this requirement, DEA 

field offices submit AGEO proposals through the DEA Sensitive Activity Review 

Committee (SARC). According to the DEA’s Agents Manual, the SARC is comprised 

of both DOJ and DEA representatives. At the time of our review, the DEA 

representatives included the Chief of Global Enforcement, the Chief Counsel, the 

appropriate Office of Global Enforcement Section Chief(s), the Chief of the

Undercover and Sensitive Investigations Section, relevant domestic Special Agents 

in Charge or Regional Directors of international offices, and case agents.5 The DOJ 

representatives on the SARC for AGEO approval are from the Criminal Division’s 

Money Laundering and Asset Recovery Section (MLARS), Narcotic and Dangerous 

Drug Section (NDDS), and Office of International Affairs (OIA). 

4 The financial information presented in this table was provided by the DEA’s contracted AGEO 

accountant and was not audited in its entirety.

5 In 2019, the DEA reorganized its headquarters structure and the components responsible 

for overseeing sensitive activities. Our report does not reflect these changes, in particular the 

updated component names, because they occurred outside the scope of our audit.
5 

For each new proposed AGEO, the SARC meets to review an overall 

undercover investigation proposal submitted by the case agents, and, if approved, 

sends the proposal through higher-level management outside the SARC. The DEA 

Administrator and the Deputy Assistant Attorney General (DAAG) for MLARS and 

NDDS, whom the Attorney General has delegated as the final approval authority for 

DEA’s AGEOs, must review AGEO proposals that have been approved and forwarded 

by the SARC. In addition to the initial AGEO approval process, the DEA Agents 

Manual requires AGEOs to be reauthorized every 6 months by the SARC Chair. To 

obtain SARC reauthorization, field offices prepare and submit 6-month extension 

requests that document activity that has occurred and express the need to continue 

the AGEO. 

In addition to the SARC operational oversight, various DEA policy documents 

include provisions that financial activities of each active AGEO are subject to

multiple layers of monitoring by DEA headquarters and local management, 

including Group Supervisors, Assistant Special Agents in Charge, and SACs. For 

example, prior to conducting an undercover money laundering transaction, Special 

Agents must request and receive permission from the DEA headquarters Office of 

Global Enforcement, Financial Operations (OGF), which vets the validity of the 

transaction and the approvals received. OGF also assists case agents with 

administrative or operational requirements. Local management must review all 

AGEO financial activity monthly and send quarterly operational and financial reports 

to OGF throughout the duration of the AGEO. Specifically, when a case agent

requests to expend PGI to support the investigation, local management must 

approve the action first. Depending on the type and total dollar amount of the 

expense, the office may also need OGF approval for a PGI expenditure, as is the 

case with equipment purchases over $500. The DEA has also established an annual 

compliance review for each AGEO, examining not only the execution of undercover 

money laundering transactions, but also how DEA offices have used PGI to support 

the AGEO.

DEA Special Agents maintain responsibility for the day-to-day investigative 

and administrative requirements of each AGEO. Once OGF approves a money 

laundering transaction, case agents deconflict the investigative intelligence received 

from the target or CS regarding the transaction, such as target 

with information obtained through previous or other 

current AGEOs.6 After the transaction takes place, case agents prepare a report of 

investigation regarding the money laundering activity and complete OGF forms to 

document the financial aspect of each transaction, such as the amount of funds 

laundered and PGI earned.

When case agents determine the investigation no longer requires AGEO 

activity, the office submits to the SARC Chair a request to close the AGEO. The 

DEA’s Inspection Division then conducts a final review to ensure that the 

responsible personnel have closed the operation appropriately by ceasing all 

6 Deconfliction is a law enforcement procedure to ensure that in an instance where different 

entities may be targeting or encounter the same criminal or criminal organization there is no adverse 

investigative overlap, such as exposing a CS or undercover agent. 
6

undercover financial activity, closing bank accounts and businesses, reviewing 

financial statements, forfeiting any unused PGI to the Assets Forfeiture Fund, and 

placing into service any usable inventory purchased with PGI. For additional 

accountability over the sensitive investigative activities authorized, the authorizing 

statute requires that the DEA report the number of AGEOs authorized and 

operating, as well as the results of any closed operation, to Congress in an annual 

report. The authorizing statute also requires the DEA to conduct audits of 

completed AGEOs and report the results of such audits to the Attorney General and 

Congress.

AGEO Value to the DEA

During our audit, many DEA and DOJ officials expressed to us that they 

believed the sensitive undercover activities executed through AGEOs were essential 

to the DEA’s accomplishment of its mission to disrupt and dismantle DTOs. In 

particular, officials stated that AGEOs allow the DEA to infiltrate and reach the top 

echelons of these organizations. Officials recounted numerous indictments against 

high-level members of DTOs and a settlement against a financial institution, which 

resulted from AGEOs. Moreover, the DEA stated that the 16 judgmentally selected 

AGEOs that the OIG reviewed on-site at DEA field offices made hundreds of law 

enforcement actions possible. The DEA further stated that these actions 

contributed all, or in part, to seizures totaling $1.4 billion in cash and assets, 83 

tons of cocaine, 782 kilograms of heroin/fentanyl, 1,204 kilograms of 

methamphetamine, and more than 1,400 arrests in the United States and abroad. 

However, as discussed later in our report, we have concerns regarding errors and 

discrepancies with the DEA’s process for tracking and reporting AGEO statistics. 

Nevertheless, we acknowledge the importance and value that the DEA places on the 

use and outcomes of its AGEOs.

Previous OIG Activity

The DOJ OIG has previously reviewed matters related to undercover 

operations that implemented high-risk sensitive investigative activities similar to 

the DEA’s AGEOs. In 2012 and 2013, the OIG issued two reports related to the 

Bureau of Alcohol, Tobacco, Firearms and Explosives’ (ATF) undercover operations. 

In 2012, the OIG reviewed ATF’s Operation Fast and Furious, which highlighted 

serious management flaws and substantial risks ATF posed to the Department by 

using certain investigative strategies.7 In 2013, the OIG also issued an audit of 

AGEO activity conducted by the ATF, which recommended the Department improve

the consistency of sensitive investigative activity approval across law enforcement 

components.8 Both reports contained recommendations that the Department 

should develop policies for all law enforcement components to conduct undercover 

activity with appropriate safeguards. In response to these reports, the Deputy 

7 U.S. Department of Justice Office of the Inspector General, A Review of ATF’s Operation Fast 

and Furious and Related Matters, Oversight and Review Division (September 2012, Re-issued 

November 2012).

8 DOJ OIG, Audit of the Bureau of Alcohol, Tobacco, Firearms and Explosives’ Use of IncomeGenerating, Undercover Operations, Audit Report 13-36 (September 2013).
7 

Attorney General issued the Department Risk Mitigation Policy Memorandum. This 

memorandum requires Department law enforcement and prosecutorial components 

to implement various safeguards when conducting sensitive investigative activities, 

and specifically addresses income-generating, undercover operations. We used 

criteria from the memorandum in our audit.

In 2015, the OIG teamed with other agencies to conduct an investigation 

leading to a finding that a former DEA Special Agent committed criminal acts of

extortion, money laundering, and obstruction during an undercover investigation on 

the Dark Web.9 The team determined that, while in an undercover capacity, the 

former DEA Agent both solicited and accepted the proceeds from illegal activity in 

the form of virtual currency payments and deposited the amounts into a personal 

account. We used information from this investigation to evaluate certain risks 

associated with virtual currency investigations.

Additionally, confidential sources play a critical role in developing AGEOs. In 

July 2015 and September 2016, the OIG issued two audit reports related to the

DEA’s CS program.10 These reports are relevant because the OIG recommended 

the DEA establish stricter internal controls to ensure that payments made to CSs 

are consistently, accurately, and completely recorded. 

OIG Audit Approach

Our objective was to assess the management and oversight of the DEA’s 

AGEOs, including the initiation and classification of these operations, the controls 

over and use of funds during operations, and the disposal of proceeds at the 

conclusion of these operations. To accomplish this objective, we conducted over 80

interviews with Department and DEA headquarters officials, as well as field office 

Special Agents and Task Force Officers. We also interviewed 13 Assistant United 

States Attorneys (AUSA) who had participated or collaborated with the DEA on 

various AGEOs.

We conducted site visits at the DEA’s offices in

 During these 

site visits, we reviewed operational reporting and associated accounting 

documentation of 16 judgmentally selected AGEOs. The AGEOs we reviewed 

on-site engaged in undercover money laundering activities totaling approximately

31 percent of the overall total AGEO activity, earned around $2.1 million in PGI, 

and spent over $2.2 million in PGI during our review period. We also reviewed 

various aspects of the total AGEOs active during FY 2015 through FY 2017. 

Because some were open for significant periods of time, our review of these AGEOs 

9 DOJ press release, “Former DEA Agent Sentenced for Extortion, Money Laundering and 

Obstruction Related to Silk Road Investigation,” posted October 19, 2015. 

10 DOJ OIG, Audit of the Drug Enforcement Administration’s Confidential Source Policies and 

Oversight of Higher-Risk Confidential Sources, Audit Division 15-28 (July 2015) and Audit of the DEA’s 

Management and Oversight of its Confidential Source Program, Audit Division 16-33 (September 

2016).
8

was not limited to the FY 2015 through FY 2107 timeframe. Additional information 

about our approach to this audit is included in Appendix 1.
9 

AUDIT RESULTS

DEA and Department officials told us that AGEOs provide the DEA with an

effective undercover methodology for infiltrating DTOs’ financial structure, thereby 

depriving DTOs of illicit proceeds. Further, AGEOs have resulted in successful 

prosecutions of members of DTOs, settlements with banking institutions, and 

seizures of illicit drugs, all of which further the DEA’s mission to disrupt drug 

trafficking. Despite these stated achievements, we identified significant 

weaknesses in the DEA’s oversight of AGEO compliance with applicable laws and 

policies, operational performance, and financial management. We found that the 

DEA did not comply with several critical requirements in both the authorizing 

statute and Department guidance that would have resulted in stronger internal 

controls and better oversight of the operations. In addition, we identified various

deficiencies related to DEA and Departmental oversight for evaluating and 

monitoring the risks presented by AGEOs, as well as measuring the achievement of 

goals and objectives. We found that DOJ and DEA officials downplayed the risk of 

allowing illicit funds to “walk” and filter through legitimate and illegal financial

channels. Moreover, the DEA did not consistently document all of its AGEO 

activities nor sufficiently record its follow through on potential and known illegal 

activity of businesses and entities involved in money laundering. The DEA also did 

not consistently ensure that it obtained and documented appropriate approval for 

AGEO activity that transcended national, transnational, and virtual landscapes. 

Further, the DEA’s internal controls over financial AGEO activity did not account 

adequately for the risk of mismanagement associated with the use of PGI. 

Together, these issues not only undermine the DEA’s use and oversight of its 

AGEOs, but also increase risks associated with the safety and security of DOJ 

equities, , and public safety. Overall, we made

19 recommendations, 4 to the Department and 15 to the DEA, to improve the 

DEA’s use and oversight of its AGEOs. 

The Department Must Clarify Policy Matters and the DEA Must Fully Comply 

with Statutory and Department Requirements

Undercover operations afford law enforcement agencies, including the DEA, a 

mechanism to infiltrate criminal enterprises and obtain information about criminal 

tactics and techniques. DOJ and DEA officials told us that a significant risk of

AGEOs is that the DEA provides DTOs with resources and tools to sustain operations 

and further their illicit drug trafficking activities. In addition, these operations 

provide the DEA with the extraordinary ability to benefit from authorized 

undercover illegal activities, because it can use income generated from them to 

offset costs of investigations. In order to provide oversight of the use of these 

authorities, Congress established reporting requirements and the Department 

instituted policies and approval processes as discussed below. However, we found 

instances in which the DEA was not in compliance with these requirements, or its 

internal policies and practices were not consistent with Department guidance. 

In 2012, the Attorney General established the Risk Assessment Working 

Group (RAWG), in part, because of the risk management issues identified in the
10

ATF’s Operations Fast and Furious and Wide Receiver and the findings and 

recommendations of the OIG’s report on these sensitive investigative operations.11

The RAWG, which was comprised of participants from DOJ litigating and law 

enforcement components, evaluated the Department’s procedures for assessing risk 

in law enforcement investigations and operations and prompted the issuance of the 

Department’s Risk Mitigation Policy Memorandum. This policy required relevant law 

enforcement components, including the DEA, to conduct a review of previously 

established policies and procedures to ensure that they reflected the baseline 

principles outlined in the Department’s Risk Mitigation Policy Memorandum. 

According to the memorandum, law enforcement agents and prosecutors should be 

mindful of whether the investigative intelligence and results of undercover 

operations outweigh the risks associated with these endeavors. The memorandum 

specifically states that these officials should consider whether “benefits of any 

operation ... outweigh the potential public safety risks as the investigation moves 

forward.”

In addition, during the OIG’s 2016 follow-up review of recommendations 

associated with its report on Operations Fast and Furious and Wide Receiver, the 

Department represented to the OIG that the Attorney General decided that all of 

the DOJ law enforcement components should comply with the AG FBI Undercover 

Guidelines.12 However, Department officials stated that revising the AG FBI 

Undercover Guidelines document to specify that it applies to all DOJ law 

enforcement components, not just the Federal Bureau of Investigations (FBI), was 

not warranted because the RAWG confirmed that DOJ law enforcement 

components’ undercover policies complied with these guidelines. However, we 

found that the DEA was unaware that it was subject to the AG FBI Undercover 

Guidelines. In fact, DEA officials stated that they believed the AG FBI Undercover 

Guidelines only applied to the FBI and did not extend to the DEA. Further, despite 

the Department’s belief that all DOJ components had policies compliant with the AG 

FBI Undercover Guidelines, we determined that DEA policies and procedures related 

to its AGEOs were not fully consistent with Department policies.

In September 2018, the Acting DAAG responsible for Department oversight 

of AGEOs stated that the AG FBI Undercover Guidelines informed his decisions 

related to authorizing DEA’s AGEOs and acknowledged that the Department should 

clarify whether these Guidelines apply to all DOJ law enforcement components. 

When we discussed this matter in October 2019 with officials in the Office of the 

Deputy Attorney General (ODAG), they stated that there is a lack of clarity as to 

whether the specific requirements in the AG FBI Undercover Guidelines apply to the 

DEA and other Department components. These officials acknowledged that DOJ 

must make a formal determination and establish what specific Department

guidance applies to the DEA’s undercover activities, in particular its AGEOs.

11 DOJ OIG, A Review of ATF’s Operation Fast and Furious and Related Matters, Oversight and 

Review Division (September 2012, Re-issued November 2012).

12 DOJ OIG, A Review of DOJ’s and ATF’s Implementation of Recommendations Contained in 

the OIG’s Report on Operations Fast and Furious and Wide Receiver, Oversight and Review Division 

(February 2016).
11

Given the risks and sensitivities associated with AGEOs and the frequency 

with which they are used, we believe that it is essential for the Department to have 

an appropriately rigorous body of policy to help ensure that the risks are mitigated 

consistently and adequately by all DOJ law enforcement components. As such, 

although we acknowledge the lack of clear and formalized guidance attributing the 

requirements in the AG FBI Undercover Guidelines to the DEA, we still evaluated 

where the DEA did not exercise risk mitigation strategies and requirements 

contained in this Department guidance. The following examples demonstrate 

instances where the DEA’s policies and procedures were, at times, less stringent 

than the measures and controls in the AG FBI Undercover Guidelines.

• The AG FBI Undercover Guidelines include a requirement to submit to the 

Attorney General, Deputy Attorney General, and the Assistant Attorney 

General for the Criminal Division an annual report on the undercover review 

committee’s approval and, in some cases, assessment of proposed 

undercover operations. The DEA confirmed that it only sent an annual report 

to the Attorney General addressing the number of AGEOs, which is not 

consistent with the guideline to provide an annual report of the undercover 

review committee’s activities.

• The AG FBI Undercover Guidelines include a requirement that the undercover 

review committee approve each individual investigation that establishes, 

acquires, and utilizes a business entity; or conducts money laundering 

transactions involving an aggregate amount exceeding $1 million. The DEA’s 

policies and Department-approved authorizations did not align with these 

requirements for cases operating within its Border and Shelf AGEOs. This is 

discussed in greater detail in the AGEO Activities Require Additional 

Oversight section of this report.

Further, we found other instances where DEA policy and practice did not 

follow statutory requirements and Department policy:

• Public Law 102-395 requires the DEA to submit an annual report to Congress 

regarding the number and results related to initiated, active, and closed 

undercover operations. Although the DEA has provided reports to the 

Attorney General, it had not provided these reports to Congress since at least 

2006. The DEA acknowledged in a January 2012 briefing to the Department

that it was unable to confirm that the required congressional reporting had 

been satisfied. When we requested evidence of DEA’s congressional

reporting over 6 years later in July 2018, DEA informed us that reports were

not submitted to Congress during this timeframe.

• Public Law 102-395 also requires the DEA to conduct a detailed financial 

audit of each undercover investigative operation and submit the results in 

writing to the Attorney General and Congress within 180 days of closing an 

operation. The DEA has no record of ever reporting any financial audit 

activity to Congress or the Attorney General, and, during our scope, did not 

complete audits within such a timeframe.
12

• The Department’s Risk Mitigation Policy Memorandum requires the DAAG to 

reauthorize investigations involving PGI every 6 months. Although all of the 

DEA’s AGEOs earn PGI, we found that the DEA has generally only sought 

DAAG approval for the initiation and monetary cap increase of AGEOs, as 

discussed in detail in the following section of the report: The DEA Should 

More Clearly and Accurately Define Operational Objectives, Assess AGEO 

Performance, and Report AGEO Results.

• The authorizing statute and the Department’s Risk Mitigation Policy 

Memorandum also institute specific safeguards over the use of PGI. One of 

those safeguards is a requirement that the DEA expend PGI only in the

AGEOs and cases that generated the income. We found numerous instances 

where the DEA violated this requirement. The DEA also did not conduct 

timely headquarters reviews of Full and Border AGEOs, as prescribed by the 

Department policy. These noncompliance issues contributed to an overall 

internal control structure that was not always effective and efficient, which 

we describe in further detail in the AGEO Financial Activities section of this 

report.

We are concerned about the DEA’s lack of adherence to policies and 

oversight requirements given the Department’s recent efforts to focus on evaluating 

law enforcement components and ensuring that they employ necessary risk 

mitigation controls and measures for undercover operations. Moreover, because 

the DEA has not provided reports to Congress, there is limited Congressional insight 

into the DEA’s use of this investigative technique involving certain authorized

undercover illegal activities and the benefits it provides to the American taxpayer.

We recommend that the Department make a formal determination as to 

whether the policies within the AG FBI Undercover Guidelines apply, in their

entirety or in specific instances, to all DOJ law enforcement components; or if the 

Department must issue new guidance to govern undercover operations that are 

initiated by DOJ law enforcement components outside of the FBI. Once the 

Department makes a determination, we recommend that the Department 

coordinate with the DEA to ensure that the DEA’s policies reflect necessary 

measures and controls stipulated in applicable Department guidance for undercover 

activities.

In addition, we recommend that the DEA formalize a procedure to develop

and monitor the dissemination of all required AGEO financial and performance 

reports to Congress and the Attorney General, as outlined in the authorizing 

statute.

The DEA Should More Clearly and Accurately Define Operational Objectives,

Assess AGEO Performance, and Report AGEO Results

Through the Department Risk Mitigation Policy Memorandum, the 

Department advises its law enforcement agents and prosecutors to remain mindful 

throughout each undercover operation of whether the benefits of an operation 

continue to outweigh the potential public safety and investigative risks. As an 
13

acknowledgment of these risks, the DEA’s Agents Manual states that authorized 

undercover operations may continue for the time necessary to achieve the 

established objectives. However, in the AGEOs that we reviewed, we found that 

the DEA generally did not limit its undercover money laundering activities to the 

minimum necessary to disrupt the initial targets of the operations. As a result, 

some of these operations lasted for several years. During these extensive 

operations, the DEA did not consistently follow the trail of illicit funds and the leads 

generated by AGEOs, follow up on money laundering transactions, or sufficiently 

document investigative actions taken on these potential illegal activities. The DEA 

also relied upon CSs to establish and sustain AGEOs, but did not employ adequate 

procedures for vetting and monitoring CSs’ financial activities in these high-risk 

operations. Finally, we found inadequacies in the DEA’s reporting of AGEO 

achievements including imprecise statistics that could have affected the 

Department’s evaluation of the benefits and impacts of an AGEO.

The DEA and DOJ Must Improve the Review of AGEO Objectives, Scope, and 

Duration

According to the DEA’s Agents Manual, to initiate a Full AGEO, DEA field 

offices must develop a formal proposal that conveys specific objectives and targets,

and submit this proposal to the DEA SARC and the DAAG.13 This proposal must 

also contain a summary of the case, factual predicates for the case, 

accomplishments to date, and an investigative action plan, as well as additional 

information. In addition, because of the sensitivity of undercover activities and 

potential for negative outcomes, the AG FBI Undercover Guidelines, the DEA Agents 

Manual, and the Department’s Risk Mitigation Policy Memorandum all emphasize 

the importance of realistic objectives and appropriate timeframes for undercover 

operations. For example, the DEA Agents Manual requires AGEOs to achieve their

objectives in the least amount of time possible and to submit 6-month extension

requests to the SARC Chairperson when they determine that undercover activity 

should continue beyond the initial 6-month SARC approval.14 Similarly, the 

Department Risk Mitigation Policy Memorandum requires the DEA to seek and 

obtain DAAG approval every 6 months for AGEOs.

During our review, we found that some investigative objectives recounted in 

Full AGEO proposals appeared similar from one AGEO to another and, at times, 

particularly far-reaching. For instance, multiple Full AGEO proposals had a stated 

objective of “completely disrupting and dismantling the criminal network whose 

existence enables the targeted organization to regenerate.” Another common 

objective was to “identify, arrest, and prosecute domestic and international drug 

traffickers, money launderers, and currency couriers.” While these objectives are 

compelling and consistent with the DEA’s mission, the lack of specificity, including 

the lack of estimated timeframes and targets, hinders the DEA’s ability to manage 

13 As noted, the SARC is a DEA-led committee with representatives from various DEA offices, 

as well as DOJ that has the responsibility for examining certain operational proposals to ensure the 

plans for proposed sensitive investigative activities are well-founded and all issues of concern are 

sufficiently addressed.

14 The SARC Chairperson is the DEA’s Chief of Enforcement Operations.
14

and assess the operations. When we brought this issue to the DEA’s attention, DEA 

officials told us that greater specificity could stifle the operation and would not allow 

the DEA the investigative flexibility necessary to follow leads generated, such as the 

identification of new targets or different DTO trends. However, we believe more 

specific goals would allow for greater oversight and ensure that DEA headquarters, 

the SARC, and the DAAG are continually aware of the AGEOs’ progress and 

strategic direction.

Additionally, we evaluated the DEA’s process for monitoring and assessing 

the benefits of the AGEOs and the status of the initial objectives of the operation. 

As discussed, the DEA monitors and evaluates ongoing AGEOs through the SARC’s 

review and approval of AGEO 6-month extension requests. In practice, the DEA

includes DOJ Criminal Division SARC representatives in this process, but does not 

comply with the Department Risk Mitigation Policy Memorandum’s requirement that 

the DEA seek and obtain DAAG approval every 6 months for AGEOs. In contrast,

the DEA seeks reauthorization from the DAAG if a reauthorization includes a 

request for approval to launder money above initially designated thresholds. By not 

incorporating DAAG approval in its reauthorization process, the DEA limited critical 

Departmental oversight of its AGEOs and reduced the DEA’s accountability for 

achieving the intended result. The DEA stated that it received Department 

oversight through the inclusion of its three Criminal Division SARC representatives, 

which include attorneys from NDDS, OIA, and MLARS. While we agree that these 

representatives provide substantive oversight and coordination, there is no 

delegation that their role on the SARC replaces the requirement in the Department 

Risk Mitigation Policy Memorandum that the delegated authority to approve these 

operations is the DAAG.

To determine whether the 6-month extension requests addressed the goals, 

including disrupting the initially authorized targets, we judgmentally selected

10 AGEOs for review. We found that the extension requests discussed how 

extending the AGEO authority would continue the investigation, but did not 

specifically address the status of completing objectives or consistently report the 

investigative status of targets. Instead, field offices used these requests as a way 

to convey to the SARC deviations in the initially approved AGEO proposal, including

changes in the scope of the operations. The SARC continued to approve AGEO 

operations despite a general absence of written information tied directly to 

accomplishing the original objectives or disrupting the original targets. DEA officials 

stated that this type of information may be communicated through further 

discussion with case agents. Although we acknowledge the DEA’s authority to 

direct investigations, AGEOs contain sensitive investigative activities that require 

Department and Congressional oversight. Because these changes were not 

consistently presented to the DAAG, as required, the DAAG was not able to assess 

whether an AGEO was placing the Department at unnecessary risk. The following 

examples highlight incidents related to AGEO changes that we believe should have 

required additional oversight and evaluation of risk.
15

Change in Scope In one Full AGEO that operated from January 2011 to April 2017, the 

SARC and DAAG initially approved the AGEO to target several 

subjects within two high-level DTOs. In the first two 6-month extension requests (submitted to 

the SARC but not the DAAG), the DEA identified three additional high-level targets within 

different DTOs, one of whom was a narco-terrorist. Over the 6-year life of this AGEO, the DEA 

generated over $1.7 million in PGI and reported that it laundered almost $20 million for DTOs 

(including the DTOs that were not initial targets authorized by the DAAG). The addition of a 

narco-terrorist was inconsistent with the initial DTOs targeted by the AGEO. In addition to the 

Department Risk Mitigation Policy requirement that the DEA submit 6-month extension 

requests to the DAAG, the AG FBI Undercover Guidelines has a requirement that the

headquarters review committee evaluate whether a change in scope of an AGEO necessitates a 

new authorization from the DAAG. Because of the sensitivity and additional risks involved in 

investigating narco-terrorists, we believe that the addition of this target should have immediately 

alerted the SARC that this target did not fall within the initial scope of approved activity and 

should have been considered for a separate AGEO with specific oversight of the atypical 

objective. We also believe that the SARC should have considered making the DAAG aware that 

the risks associated with this operation had changed.

Change in Target For an AGEO that operated from April 2011 to January 2017, we 

found that the initial intent of the AGEO was to disrupt a specific

money laundering network. According to case information, the initial targets were apprehended

by October 2013. However, the AGEO case agents 

to pursue different money launderers and maintained the AGEO through the original 

authorized proposal because: (1) the targets had an investigative connection, (2) the AGEO was 

already established, and (3) the AGEO contained excess PGI that the case agents could spend. 

An overview of the new targets was included in a 6-month extension request to the SARC, but

the changes in this AGEO were never presented to the DAAG because the reauthorization 

followed the DEA’s process of approval through the SARC Chair. We believe that once the 

purpose of the AGEO, as originally authorized, was achieved, the SARC should have required 

the field office to end the AGEO and submit a new proposal to facilitate a thorough assessment 

of the new objective, investigative action plan, and associated risks.

Length of AGEOs We found two instances where AGEOs were open for many years— one 

for 11 years and one for 10 years—each with lengthy periods

during which money laundering activities did not occur yet the use of PGI continued. The 

11-year AGEO was a closed Border AGEO that operated between May 2006 and August 2017. 

The DEA did not use this AGEO for any undercover money laundering activity between FYs 2015 

and 2017. Prior to that, the AGEO was not used between December 2007 and July 2011. The 

10-year AGEO was a Full AGEO that operated between April 2005 and February 2015 and had 

two lengthy gaps in activity between November 2005 and April 2007 and between September 

2011 and February 2015. During these times, no undercover money laundering activities took 

place. The duration of these operations highlights the problem that these AGEOs were operating 

longer than necessary to achieve the investigative objective(s).

Within the first two examples above (“Change in Scope” and “Change in 

Target”), the DEA realized significant achievements: the first AGEO attained 

sanctions on DTOs, indictments of high-level drug-traffickers, and actionable 

intelligence on a narco-terrorism organization; while the second example 

dismantled a money laundering cell operating in Latin America, the United States, 

and Europe. However, the SARC did not document when the field office exceeded 

the original DAAG-approved purposes of these AGEOs by either completely 

changing or continuously expanding the targets. Although the general goals of the 

AGEOs did not change, the addition of targets and different organizations impacted

the direction and duration of the AGEOs. Thus, in both cases we found that the 
16

DEA’s practice was less stringent than the AG FBI Undercover Guidelines 

requirement that a headquarters review committee (i.e., the DEA’s SARC)

determine whether a new AGEO is necessary if there is a significant change in 

either the direction or objectives of an undercover operation. In fact, according to 

senior DEA officials, the DEA defines a change in scope in AGEOs as the addition of 

a sensitive investigative activity 

that has not already been 

approved by the SARC or an increase in the money laundering cap for the AGEO. 

According to the SARC Chair, the DEA believes that because AGEOs relate to the 

same criminal conspiracy of transporting drugs into the United States, the inclusion 

or removal of individual targets generally does not affect the original authorized 

purpose. This interpretation does not contemplate the intent of the AG FBI

Undercover Guidelines requirement to evaluate the impact new targets may have 

on the direction or balance of risks in a particular operation. Further, the Acting 

DAAG told us that it would be important to review changes in the scope of AGEOs

and new operational plans where the DEA adds high-level targets because these 

changes require an updated review of risks versus the reward of the operation.

In the AGEO policy it issued in April 2018, the DEA incorporated a new 

requirement for initial proposals to contain information on the targets and their role 

in the same criminal conspiracy. According to the policy, “these requirements are 

designed to prevent a situation in which multiple money laundering operations, 

targeting members of completely separate trafficking cells, are conducted under the 

authority of one AGEO.” Although this policy is an improvement to the DEA’s 

previous control environment, it does not require the DEA to define additional 

target relationships in subsequent approvals by the SARC to reevaluate the reward 

versus the risk of potentially significant scope changes to AGEO operations, which is 

a requirement in the AG FBI Undercover Guidelines. It also does not address the 

necessity for DAAG approval on the 6-month extension requests, as required by the 

Department Risk Mitigation Policy Memorandum.

To ensure prudent use of the sensitive investigative activities of AGEOs, we 

recommend that the DEA implement a process through which: (1) DEA field offices 

establish specific, actionable, and measurable goals for each AGEO that are clearly 

presented to the SARC; and (2) the SARC documents its robust examination of 

each AGEO’s duration, any significant periods without undercover activity, and 

accomplishment of goals. In addition, we recommend that the DEA ensure that the 

DAAG reviews and approves all 6-month extension requests, as required by the 

Department. The DEA should also develop a process for field offices to submit 

formal requests for SARC evaluation and seek DAAG approval for any change in 

either the direction or objectives of an approved undercover operation, including 

the addition or removal of high-level AGEO targets, which would be consistent with 

Department guidance issued in the AG FBI Undercover Guidelines.

Increased Oversight of Following and Documenting Investigative Leads and Actions 

is Necessary to Maximize Operational Outcomes and Reduce Risks

As recognized publicly, DTOs are not only involved in drug trafficking, but 

also participate in violent crimes and have been linked to terrorism. This elevates 
17

the risks that the DEA’s involvement in money laundering activity may 

inadvertently support particularly egregious criminal activity. Despite these risks, 

officials in the DEA and in the Department conveyed the idea that allowing money

to “walk” is not as inherently risky as letting drugs or guns “walk.” DEA and 

Department officials recognized that AGEOs have resulted in successful 

prosecutions and settlements with banking institutions, and further stated that 

allowing these illegal activities to occur generates leads and provides the DEA with 

necessary information to disrupt DTOs. However, AGEO case agents and DEA 

headquarters personnel stated that they did not always follow or seize the money 

 The DEA stated that 

this investigative discretion was important to build actionable cases. Therefore, the 

DEA, in coordination with the assigned AUSA for the case, would use investigative 

discretion to determine what 

. 

To document and track its undercover money laundering activities, the DEA 

recorded AGEO transactions into its DEA Analysis and Response Tracking 

System (DARTS). The DEA uses the information in DARTS not only to trace dollars 

, but also to

 

Throughout our review, we found instances where information in DARTS was not 

current, accurate, or complete. We determined that the DEA had not performed 

any specific reliability testing for the data in the money laundering module of 

DARTS. DEA officials further stated that the reliability of DARTS information was 

entirely dependent on what case agents entered into the system and OGF staff 

members making any corrections discovered by individuals involved in AGEO

activities.

We are concerned that the DEA does not have a formal process in place to 

identify deficiencies in its AGEO data. The lack of reliable data in DARTS could 

detrimentally impact the DEA’s process for deconflicting case information and 

identifying businesses that may be contributing to DTOs’ criminal activities, 

including money laundering enterprises. In fact, a DEA financial investigator told us

that the same entities have received funds through DEA undercover financial 

transactions for many years through multiple AGEOs, yet the DEA had not identified 

or taken action to determine if these entities were complicit in drug trafficking 

activities. AGEO case agents and DEA headquarters personnel also stated that the 

DEA does not always have the resources, wherewithal, or time to follow the path of 

the laundered money beyond documenting account information and determining 

who or what entity received the money that the DEA laundered. In particular, 

because of the high volume of outgoing money laundering transactions, there is a 

significant number of entities receiving funds through the DEA’s AGEO activities. 

Case agents told us that, as a result of this volume, generating leads on all of the

entities that receive laundered funds could result in substantial investigate and 

administrative burden. 
18

Although we found issues related to DARTS, it is the only repository for 

AGEO-transaction data that the DEA maintains. We therefore used DARTS to obtain 

and analyze information on entities that were involved in the DEA’s undercover 

movement of funds in four specific AGEOs.15 We found that according to DARTS, 

the DEA completed undercover money laundering transactions of approximately

into approximately entities through the four AGEOs we selected. 

We also found that fewer than 4 percent of these entities received approximately

31 percent of the total amount. Moreover, certain entities received undercover

DEA-laundered funds through more than one AGEO. 

We asked the DEA to provide documentation related to what, if any, 

enforcement or follow-up action was taken against a total of 15 specific entities.16 

The following figure provides a summary of our review of the DEA’s data and 

documentation related to these businesses.

15 We judgmentally selected these AGEOs based upon the timing of the operations, as well as 

the number and amount of transactions. Appendix 1 provides an overview of our audit objectives, 

scope, and methodology.

16 Each business entity had an associated bank account into which the DEA laundered funds. 

For our selection, we identified

. This selection equated to a total of 15 business entities that we reviewed.
19

Table 2

AGEO Account Investigative Activity

Business 

Accounts 

AGEOs 

Involved

Received 

Funds 

from 

multiple 

AGEOs 

Dollars 

Seized

DEA 

Synopsis of 

Law 

Enforcement 

Action Taken

DEA Provided 

Documentation

of Enforcement 

Action 

Account 1 AGEO 1 No $4,000,000 DEA pursued 

legal action

Yes

Account 2 AGEO 1 No 0 Foreign law 

enforcement 

action

Yes

Account 3 AGEO 1 No 0 Foreign law 

enforcement 

action

Insufficient 

Documentation

Account 4 AGEO 2 Yes 0 No Follow-up Action Identified

Account 5 AGEO 2 No 0 No Follow-up Action Identified

Account 6 AGEO 2 Yes 0 DEA seized 

aircraft

associated with 

laundered funds

Yes

Account 7 AGEO 3 No 0 No Follow-up Action Identified

Account 8 AGEO 3 No 912,126a DEA seized 

funds

Yes

Account 9 AGEO 3 No 370,000 DEA seized 

funds

Yes

Account 10 AGEO 4 No 0 No Follow-up Action Identified

Account 11 AGEO 4 Yes 0 DEA interviewed 

person of 

interest

Yes

Account 12 AGEO 4 Yes 0 DEA seized 

aircraft

associated with 

laundered funds

Yes

Account 13 AGEOs 2 & 4 Yes 0 DEA pursued 

legal action

Insufficient 

Documentation

Account 14 AGEOs 2 & 4 Yes 0 No Follow-up Action Identified

Account 15 AGEOs 2 & 4 Yes 0 No Follow-up Action Identified

a The DEA seized more money than laundered into this account because the account had additional 

funds already present when the investigation began.

Source: OIG Analysis of DARTS and DEA-Provided Documentation

As depicted above, the DEA relayed to us that follow-up actions, such as 

seizures of funds or foreign counterpart investigations were pursued for nine of the 

entities involved in DEA undercover money laundering activities. However, for two 

of these nine entities, the DEA could not provide historic documentation to support 

the follow-up action that purportedly occurred. In addition, for the remaining six

entities, the DEA could not provide any documentation or context for what, if any, 

follow-up investigative action was taken. Moreover, the DEA did not consistently 

follow-up on entities receiving the most significant amount of laundered funds in 

any of the AGEOs reviewed.
20

Based on our review, we believe that the DEA has not adequately assessed

and leveraged its AGEO data to ensure that it identifies and pursues businesses 

contributing to the illicit financing networks of DTOs. When we spoke to DEA 

officials about this concern, they told us that investigative follow-up on each 

account into which funds are laundered is not warranted in all cases. Specifically, 

DEA officials stated that not all entities or persons receiving laundered funds play

significant roles in the money laundering enterprises. While we acknowledge that 

certain entities receiving AGEO funds are not high-risk, we also believe that the 

DEA should be assessing entities or persons that receive a substantial amount of 

funds associated with DEA undercover activity to determine what role, if any, they 

have in the illicit operations of DTOs. 

Moreover, we believe the DEA should determine what, if any, action was 

taken on AGEO transactions that result in a DTO’s purchase of high-risk items, such 

as vehicles, real estate, and aircraft, that facilitate DTO illicit activities. We found 

that between FY 2011 and FY 2017 eight separate AGEOs 

associated with the DTOs’ subsequent

purchase of aircraft. Given the inherent risk of the DEA’s AGEO activity furthering 

illegal drug trafficking through monetary support and facilitating the DTOs’ 

purchase of aircraft, we evaluated two AGEOs involved in that activity. We found

that these two AGEOs . 

Accordingly, we requested that the DEA provide us with documentation of what, if 

any, action was taken to mitigate the risk of the DTO’s use of these aircraft to 

perpetuate their crimes.

According to the DEA, of these , the DEA seized 

and seized the funds associated with 

. During our review of the DEA’s support for these seizures, we found 

discrepancies in the adequacy of the documentation. In particular, although the 

DEA told us that a foreign partner conducted certain seizures, it did not have 

specific documentation to support the seizure, such as the verification that the 

aircraft had been seized and the date the seizure had occurred. In addition, upon 

reviewing information based upon the OIG inquiry, the DEA found another instance 

from 2016 of an . However, 

the DEA officials responsible for this AGEO at the time of our audit could not find 

any documentation that agents responsible at the time the funds had been 

laundered had conducted investigative matters related to the aircraft. Our inquiries 

renewed the DEA’s investigative interest in the aircraft. 

While the DEA needs investigative flexibility to follow leads and evaluate 

investigative information, it also has a duty to ensure that the ultimate outcomes of 

the investigations outweigh the risks of its activities that contribute to DTOs’ ability 

to traffic illegal drugs. In fact, AUSAs from the Southern District of New York 

(SDNY) told us that they had expressed concern to the DEA in 2015 that entities 

were not held accountable or investigated for their potential involvement in criminal 

money laundering schemes. According to these AUSAs, the DEA had not pursued 

this line of investigation because the DEA was focused on the results of individual 

AGEOs and not on identifying overlapping AGEO activity. These AUSAs told us that 

they approached the DEA to establish an initiative to identify the entities associated 
21

with accounts that received substantial amounts of money via DEA undercover 

financial transactions. 

In 2017, 2 years after the initial discussion, SDNY AUSAs partnered with the 

DEA’s SOD and other federal law enforcement components to pursue potential 

prosecutions of complicit businesses involved in DTO money laundering activities. 

However, according to the AUSAs involved in this initiative, they have found that 

the AGEO case files do not always contain sufficient evidence supporting the 

connection of these entities to the underlying illicit drug trafficking. When we spoke 

with DEA officials about whether the DEA has evaluated this initiative to determine 

if and how it can incorporate a focus on the entities receiving laundered funds, they 

stated that in FY 2019 one DEA office coordinated with OGF and initiated 

investigations into several businesses suspected to be complicit in money 

laundering.

Although these efforts indicate that the DEA is striving to improve, the 

inconsistencies in investigative follow-up actions and formalized documentation 

noted above are indicative of insufficient oversight and can undermine the success 

of the DEA’s AGEOs. We believe that the DEA should develop and execute a plan to 

strategically exploit its investigative information and evaluate connections between 

and among AGEOs to ascertain what businesses and entities were complicit in DTO 

money laundering activities in order to identify targets. To facilitate this, the DEA 

should improve its process for ensuring that its AGEO data is accurate, complete, 

and consistent in DARTS. In addition, the DEA should evaluate its current structure 

and determine its need for enhanced investigative resources and oversight of 

AGEOs to leverage DARTS information. Finally, the DEA should ensure that it

sufficiently documents the actions and outcomes of significant AGEO-related 

investigative actions, especially when they involve a law enforcement partner.

The DEA Needs to Mitigate Risks associated with the Potential Overreliance on 

Confidential Sources in AGEOs

Throughout our audit, the DEA told us that CS involvement in AGEOs was 

critical to establishing connections and discerning the targets and structure within 

MLOs and DTOs. We found that DEA documentation associated with AGEO 

proposals indicated that the information provided and money laundering activities

to the development of cases that result in the 

establishment of Full AGEOs. We also noted that case agents emphasized the

contribution of CS information in several AGEOs. For instance, a case agent 

explained that the initiation of one AGEO was the result of a CS 

. In 

another AGEO, the case agent informed us that the AGEO

 In a 

third AGEO, the case agent told us that the strategy for the investigation was to not

focus on a specific money laundering or drug trafficking target, but rather

 We also found that the DEA 

in order to further the operations and infiltrate the criminal 

enterprise.
22

Given the lack of consistent investigative follow-through on money 

laundering transactions and the risk that CSs may themselves be part of criminal 

conspiracies to launder drug proceeds, we believe that there is an enhanced 

potential that CSs may nefariously 

personally benefit the CSs. For instance, we found an example where 

the DEA relied upon a CS who was an integral part of illicit money laundering

networks. The SARC noted the following risks associated with using this CS: 

(1) the CS had previously committed multiple crimes, (2) the CS was under 

consideration for prosecution at the time the DEA used him as a CS, and 

without prior DEA 

approval. The DEA agents presented this information to the SARC but also told the 

SARC that they had admonished the CS for the unauthorized illegal activity and that 

they would obtain corroborating evidence to reduce the likelihood of the CS having 

to testify in any subsequent prosecution. As a result, the SARC ultimately approved 

the proposed sensitive activities.

While these are just a few examples, we believe that the DEA’s AGEO 

strategy may be overly reliant on CSs 

inherently risky investigations. Historically, to determine if CSs were suitable for 

AGEO work the DEA relied on its standard CS vetting process, which does not 

include a review of financial accounts. However, in its April 2018 AGEO Policy, the 

DEA incorporated a requirement for case agents to perform financial checks on CSs 

involved in AGEOs and provide the results of the query to OGF. According to OGF 

officials, OGF keeps lists of CSs involved in each AGEO and monitors the financial 

information during their involvement with the AGEO. In addition, beginning in 

2018, the DEA enhanced its annual AGEO compliance review process with a 

requirement for the overseers to interview CSs who worked on AGEOs to ensure 

that the AGEO is appropriately reporting CS involvement. We acknowledge the 

DEA’s efforts to improve internal controls in this area, and recommend that the DEA 

formalize its CS-related AGEO processes in policy.

The DEA Must Accurately Track and Report AGEO Achievements

As required by Public Law 102-395, the DEA must document and submit a 

report to the Attorney General and Congress annually that conveys the number of 

initiated, active, and closed AGEOs. As previously noted, the DEA did compile and 

submit to the Attorney General an annual report, entitled “Annual Report on 

AGEOs” that contained a list of open, active, and closed AGEOs and an outline of 

closed AGEO enforcement statistics. However, the DEA could not provide evidence 

of sending the annual reports to Congress. An official in the DEA’s Congressional 

Affairs Section stated that it was operating under the impression that the Office of 

the Deputy Attorney General (ODAG) had been submitting the DEA’s reports to 

Congress; however, the OIG found that ODAG had not submitted the reports. 

Moreover, in a DEA memorandum to ODAG regarding the 2016 AGEO activities, the 

DEA stated, “DEA will transmit this report to Congress in 30 days.” Based upon our 

audit finding of this reporting deficiency, in July 2018 the DEA submitted its 2017 

Annual Report on AGEOs to Congress.
23

We reviewed the 2017 Annual Report, as well as the 2015 and 2016 Annual 

Reports on AGEOs that the DEA submitted to the Attorney General. We found that 

each of the reports contained inaccurate information. We compared a judgmental 

sample of accomplishments conveyed within the 2015, 2016, and 2017 reports on 

AGEOs to DEA internal documentation to verify the enforcement statistics related to 

the amount of drugs seized by type, the amount of assets seized, and the number 

of arrests that the DEA attributed to the AGEO.17 We found that the DEA’s 

methodology for compiling AGEO enforcement statistics was inconsistent and 

imprecise because the DEA does not distinguish whether accomplishments resulted 

directly or indirectly from the AGEO. In compiling and reporting AGEO enforcement 

statistics, the DEA combined the results of the AGEO-specific activity with results 

that occurred in what DEA officials referred to as 

18

We discussed this with the DEA SARC Chair, who stated that seizures are 

meant to deprive criminals of illicit proceeds, and therefore any seizure of illicit 

proceeds connected to the AGEO should be counted in the enforcement 

achievements. While we agree with the DEA regarding the importance of depriving 

criminals of ill-gotten gains and the inclusion of results from AGEO leads, we 

disagree with the way the information was presented because it had the potential 

to give a false impression of direct DEA investigative achievements and AGEO 

benefits. 

In addition to the concerns identified above, we found specific instances of 

erroneous and duplicative AGEO achievement statistics reported in the annual 

report to the Attorney General between FY 2015 and FY 2017. The following 

examples highlight our concerns.

17 We selected a sample of six AGEOs to verify the accuracy of the information reported in the 

annual reports. Appendix 1 contains more details of our sample methodology.

18 
24

Double-Counting

We identified that the DEA reported the seizure of the same aircraft 

valued at $580,000 in two separate AGEOs. As described above, both 

AGEOs .

We established through discussions with case agents that the AGEOs had substantial interaction 

regarding the aircraft. When we reviewed seizure documentation, we found that this seizure was 

not a joint endeavor and was conducted within only one of these associated cases. Consequently, 

by double-counting this statistic, the DEA misrepresented enforcement actions of an AGEO. This 

duplicative statistic also demonstrates the investigative overlap between AGEOs and the need 

for greater coordination and review of reporting accomplishments. 

Foreign Seizures

For an AGEO that operated from August 2012 to November 2017, the 

DEA reported that it laundered over $10 million and seized almost 

$13 million. However, a foreign government seized approximately 

$7 million of that amount. For another AGEO that operated from May 2012 to August 2017, the 

DEA reported that it laundered over $19 million and seized more than $107 million worth of 

assets. However, of the $107 million, over $52 million was connected to a foreign government’s

seizure of real estate and high value antiquities. The DEA’s annual report regarding these 

achievements did not distinguish between direct DEA seizures and leads passed to other 

jurisdictions. As a result, these statistics could cause annual report readers to interpret the 

information as the DEA having seized more than the total amount of undercover transactions, 

whereas in reality the DEA seized only a portion of the funds laundered. 

Calculation Error

In an AGEO that operated from October 2010 to April 2016, the DEA 

reported that it had seized over 115,000 kilos of cocaine. Yet, when 

we attempted to verify this, the DEA acknowledged that it misreported

this figure by 100,000 kilos and attributed the mistake to a typographical error.

Significant Results

In an AGEO that operated from January 2011 to April 2017, the DEA 

reported 58 arrests. However, according to documentation we 

reviewed, several of those arrests were of designated, high-impact

targets and there was no differentiation to identify this significant investigative accomplishment.

Given that the overarching goal of AGEOs is to gather evidence for the 

prosecution of high-level money launderers and drug traffickers identified as AGEO 

targets, we believe that reporting not only arrests, but also indictments of targets is 

relevant for Department officials and Congress to evaluate the success of the 

operations. During discussions with several AUSAs, we found that while the DEA or 

another law enforcement entity 

. In particular, these AUSAs told us that when

, Special Agents and lead 

AUSAs for AGEOs

However, because arrests alone may only 

briefly interrupt an individual’s criminal activity, the action may do little to 

contribute to the AGEO’s overarching purpose of disrupting and dismantling the 

noted targets. Therefore, the inclusion of arrest statistics should be accompanied by 

information describing prosecutorial action to increase the reliability and usefulness 

of the information in annual reports.

To effectively monitor its undercover activities and measure and report on 

AGEO success, we recommend that the DEA enhance the requirements for 

reauthorization of ongoing AGEOs to include transparency in the identification of 
25

amounts laundered and specificity in the reporting of seizures and arrests. We 

believe that these requirements should include identifying the relationship between 

the funds laundered and the amounts seized (i.e., direct seizure, lead passed, 

foreign counterpart seizure). Moreover, with assistance from the USAOs, the DEA 

should begin tracking investigative and legal outcomes of the undercover activities 

performed during the authorized operation, including the results of prosecutorial 

referrals and . Finally, we recommend that the DEA 

institute a method to verify enforcement statistics that must be reported to the 

Attorney General and Congress.

AGEO Activities Require Additional Oversight

As noted, AGEO activity necessitates an enhanced level of oversight because 

of the substantial risks associated with conducting authorized undercover illegal 

activities. The DEA’s use of this authority is widespread and prolonged, especially 

in the Shelf and Border AGEOs. In fact, the DEA’s AGEO undercover money 

laundering activities transcend state, continental, and virtual borders, of which the 

DEA must ensure relevant authorities are aware. The DEA must obtain 

concurrences and approvals from various entities across the Department, federal 

government, for these activities. Yet, as discussed below, we 

found that the DEA did not ensure that these activities consistently received the 

necessary oversight and approvals. Moreover, the DEA did not develop an 

adequate framework to ensure that nuanced and emerging AGEO techniques 

involving virtual currency were implemented and managed appropriately.

The DEA and DOJ Need to Evaluate the DEA’s Approval Structure for Cases in Shelf 

and Border AGEOs

As previously detailed, the DEA maintains Shelf AGEOs to provide its field 

offices the ability to conduct undercover money laundering transactions for

investigations benefitting from this technique on a short-term basis. The DEA 

received Attorney General approval for its initial Shelf AGEO in 1996, and has used 

these documents as a template for the Shelf AGEOs active during our scope. As 

documented in the 1996 request, the DEA wanted a mechanism to, with approval at 

the Special Agent in Charge level, conduct a limited number of transactions within a

laundering cap. The DEA noted that this type of AGEO was necessary 

to appropriately respond to the sophistication and breadth of DTOs’ illegal money 

laundering activities, as well as the need for the DEA field offices to respond quickly 

to investigative opportunities. In 2006, the DEA requested and received approval 

from the Criminal Division to broaden the authority of Shelf AGEOs. This approval 

removed the limitation on the number of transactions and, with DEA headquarters 

approval, allowed field offices to exceed the laundering cap. According 

to the DEA, at approximately the same time, the DEA also initiated Border AGEOs 

to address bulk cash smuggling along the Southwest United States border. With 

approval from the SARC chair these AGEOs, which operate like Shelf AGEOs in that 

they can incorporate multiple cases, can use PGI to sustain the operations. 

As discussed in the section entitled The DEA Needs to Fully Comply with 

Statutory and Department Requirements, we reviewed the consistency of the DEA’s 
26

AGEO operations with Department requirements for undercover operations within

the AG FBI Undercover Guidelines. As such, we sought to determine whether the 

DEA’s policies covering its Shelf and Border AGEOs, and activities occurring within 

them, were in line with the AG FBI Undercover Guidelines. We found that the 

previously approved structure of these AGEOs does not fit within the construct of 

the AG FBI Undercover Guidelines. Specifically, the AG FBI Undercover Guidelines 

establish enhanced approval thresholds for certain financial and sensitive aspects of 

undercover operations that do not align with the structure of these AGEOs, which 

involve multiple investigations. For example, the AG FBI Undercover Guidelines 

requires that the undercover review committee (i.e., DEA’s SARC) approve each 

individual investigation that establishes, acquires, and utilizes a business entity; or 

conducts money laundering transactions involving an aggregate amount exceeding 

$1 million. In contrast, the DEA’s policies allow field offices to add investigations to 

the Shelf and Border AGEOs (which means those investigations would be utilizing 

banking institutions and business entities) with only internal DEA approval. The 

DEA policies also allow DEA headquarters to approve field offices to conduct up to 

in money laundering transactions for investigations included in Shelf 

AGEOs, and the DEA does not impose specific limits on investigations within Border 

AGEOs, as the monetary cap for Border AGEOs is shared among all of the 

investigations in the Border AGEO. 

In addition to this difference in approval requirements, the most recent 

Department approval for the Shelf and Border AGEO concepts specified that the 

SARC would conduct quarterly reviews of each of these AGEOs, which would include 

assessing the use of the accounts and the investigation inclusion requests. We 

found that the SARC Chair, a DEA employee, receives quarterly reports, but the 

DEA policy does not ensure that the full SARC (including Department 

representatives) reviews this information. In turn, the full SARC does conduct 

6-month extension reviews for Shelf and Border AGEOs. However, despite the 

varying structures and nuances of the various types of AGEOs, DEA’s policy for 

extensions does not differentiate Full AGEOs from Shelf or Border AGEOs. As a 

result, there is no policy that requires Shelf or Border AGEO extension requests to 

include information on the duration or transaction history specific to individual 

investigations.

The 2006 Shelf agreement with the Department stated that these AGEOs

“are intended to be used on a short-term basis in order to allow for the initial 

assessment and accommodation of targets of opportunity.” While DEA field offices 

generally used Shelf AGEOs for cases that required short-term financial-related 

undercover transactions, we also found instances of long-term and high-dollar 

investigations that were incorporated into both Shelf and Border AGEOs. The 

following table outlines these AGEOs, by type, that were active between FY 2015

and FY 2017 with high-dollar, long-lasting case activity.19

19 In performing this analysis we used the AG FBI Undercover Guidelines-designated 

thresholds of $1 million and 1 year because, when conducted by the FBI, those operations require 

greater oversight.
27

Table 3 

Shelf and Border AGEO Activity

DEA Field 

Division 

Operating 

the AGEO

FY

Initiated

Total 

Years 

Active 

as of 

09/2017

Cases incorporated in AGEO 

Between FYs 2015 and 2017

Active 

within 

AGEO

Transactions 

totaling over 

$1 million

Open 

more 

than

1 year

Unique 

Cases over 

Thresholdsa

Shelf AGEOs

1995 22 3 5 

2000 17 3 4

1997 20 1 4 

1997 20 3 4 

1999 18 1 2

1998 19 0 2 

2000 17 1 1 

2000 17 0 1

1999 18 1 1

2000 17 0 1 

Totals 13 25

Border AGEOs

2007 10 1 1 

2006 11 0 1 

Totals 1 2

a Some DEA cases met or exceeded both the dollar and time thresholds depicted. 

Source: OIG Analysis of DEA Border AGEO Data in DARTS

When we discussed the inconsistency between the AG FBI Undercover 

Guidelines and Shelf and Border AGEOs with the Acting DAAG in September 2018, 

this official indicated that case-specific information for AGEOs could provide the 

Department with useful insight into the effectiveness of these types of operations. 

Given the statement from the acting DAAG regarding the prudence of reviewing 

cases within Shelf and Border AGEOs, as well as the expansion of these AGEOs over 

the last 22 years, we believe that the Department must reevaluate whether the

mid-2000s exemptions should remain and coordinate with the DEA on the results.

The DEA and DOJ Should Establish a Formalized Process to Ensure USAO 

Coordination and Concurrence for Cross-Jurisdictional AGEO Activities

According to the DOJ Risk Mitigation Policy Memorandum, USAOs are 

required to have a process for coordinating with other prosecutorial offices when 

sensitive investigative activities are likely to span jurisdictional boundaries. In our 

discussions with lead AUSAs assigned to some of the DEA’s AGEOs, we were told 

that although these AUSAs were aware of cross-jurisdictional AGEO undercover 

activities, they generally did not coordinate with AUSAs in other USAOs. While the 

AUSAs may not have been doing the cross-jurisdictional coordination required by 

the DOJ Risk Mitigation Policy Memorandum, the DEA had a procedure in place to 
28

obtain agreements, referred to as no-objection letters, from USAOs that might be 

impacted by an AGEO but for which the USAO was not leading the investigation. 

To determine if the DEA obtained no-objection letters, we reviewed a 

judgmentally selected sample of 20 AGEOs where the DEA conducted undercover 

money laundering activities in —districts that did not have any 

Full AGEOs operating within the jurisdiction but for which DEA documentation 

illustrated there was operational activity connected to AGEOs originating in other 

locations. We found that for AGEOs with activity , only 38 percent of

the AGEOs had a documented no-objection letter from the USAO of the 

. Similarly, for AGEOs with activity in , only 8 percent had 

a documented no-objection letter from the USAO of the 

. We discussed this matter with AUSAs in both of these USAOs. These 

individuals stated that it was important for them to be aware of authorized 

undercover money laundering activity that was authorized to occur in their 

jurisdictions.

The DEA’s April 2018 AGEO Policy formally incorporates the requirement that 

the DEA obtain no-objection letters and include these agreements in the 

documentation packages given to the SARC for initial and extension AGEO requests. 

However, according to DEA officials responsible for overseeing the SARC process, 

the SARC does not require field offices to provide the no-objection letters during 

requests for 6-month reauthorizations. Further, DEA case agents told us that they 

had a difficult time obtaining no-objection letters from USAOs outside the assigned 

jurisdiction of the AGEO. Given the requirement in the Risk Mitigation Policy 

Memorandum, we recommend that the Department determine whether the USAOs 

have implemented a formal process for coordinating with other prosecutorial offices 

when sensitive investigative activities, such as DEA AGEOs, are likely to span

jurisdictional boundaries, as required by the Department Risk Mitigation Policy 

Memorandum.

The DEA Should Obtain Proper Written Concurrences for Transnational Activity

According to the DEA, DTO money laundering activities are inherently 

transnational. As such, with appropriate approval and coordination, the DEA may 

conduct undercover money laundering activities 

. According to the DEA Agents Manual, 

prior to conducting an undercover transaction

20 In fact, the DEA policy notes that any 

20 Although the DEA Agents Manual includes a process to initiate 

, DEA and DOJ officials told 

us that the Department
29

, which requires SARC approval and can be considered illegal 

activity . 

To verify that the DEA obtained appropriate concurrence, we selected a 

judgmental sample of 49 undercover money laundering transactions 

associated with AGEOs that were active between FY 2015 and 

FY 2017.21 We found that the DEA did not ensure that its case agents maintained 

written concurrences in any of the AGEO files we reviewed as required and, 

therefore, did not have the concurrences readily available to review. When the DEA 

provided us with documentation, we found that for only one of these transactions,

the DEA obtained written concurrence from the 

, which provided sufficient evidence that the DEA notified and received 

necessary approvals to conduct . However, for 

the remaining 48 transactions, we found that the DEA relied on internal 

correspondence from DEA personnel to the DEA AGEO case agents 

attesting to 

 When we discussed the requirement for written 

concurrence with a Criminal Division official who assists the Department 

, we were informed that the Criminal Division 

considers the written approval requirement so important that it insisted on the 

inclusion of template language to obtain such concurrence in all AGEO proposals. 

According to this official, the decision of whether to approve an AGEO initiation or 

extension is, in part, based upon the Criminal Division’s reliance on the DEA’s 

attestation that it has obtained and documented all subsequent and necessary

 

When we asked DEA officials about the suitability of the documentation we 

reviewed and the verification of concurrence, these officials stated that the internal 

correspondence from DEA personnel were sufficient to comply 

with the requirements within the DEA Agents Manual. Yet, according to a Criminal 

Division official, sufficient documentation of these approvals should entail a formal 

record of conversation or memorandum that the DEA would maintain in the AGEO 

file. We believe the risks involved in conducting undercover illegal activity

, including potential , demand that DEA 

personnel attempt to obtain direct evidence of concurrence and authorization to 

conduct such undercover activities, or develop and maintain thorough

documentation memorializing the approvals. 

Indeed, the DEA Inspections Division found several instances where DEA field 

offices had failed to obtain

undercover money laundering transactions. DEA 

Inspections Division officials told us that they have identified inadequate 

21 We selected a judgmental sample of 22 percent of the 

. Appendix 1 contains more details of 

our sample selection methodology.
30

documentation for as a pervasive issue and conveyed to field 

offices the expectation for appropriate documentation.

We believe that the DEA should incorporate a formal process to account for 

approval from when conducting undercover 

money laundering transactions . DEA officials stated that it can be 

difficult to obtain written documentation from

. For this reason, it is the DEA’s practice to accept and document verbal 

approval in the case file. While we understand that there are practical difficulties to 

overcome, the absence of formal written approval puts DEA special agents at

substantial risk of being subject to 

. The DEA may also unknowingly compromise 

. Therefore, we recommend that 

the DEA enhance its process for transnational activity to ensure it maintains 

adequate documentation of required approvals and, thereby, protects DEA assets 

when conducting 

. 

Virtual Currency-Related Activities Need More Structured Procedures and Increased 

Oversight

Historically, the DEA’s AGEO techniques have centered on traditional money 

laundering schemes involving bulk cash delivery and mainstream banking transfers. 

More recently, the DEA has identified that laundering of virtual currency is an 

emerging threat in the drug trafficking arena. According to a DEA official, in the 

past few years the DEA has seen an exponential increase in cases that involve 

virtual currency. To combat this emerging threat, 

virtual currency transactions in these cases. In FY 2017, the 

DEA expanded these investigations into Dark Web 

operations. During our review of virtual currency activity in AGEOs, we found that 

the DEA’s management of virtual currency-related activies was insufficient due to 

inadequate headquarters management, lack of policies, inadequate internal control 

procedures, insufficient supervisory oversight, and lack of training. This deficiency 

occurred more than 2 years after a former DEA Special Agent was convicted of 

stealing $700,000 in virtual currency during a joint task force investigation of the 

Dark Web marketplace Silk Road. While this investigation was not an AGEO, we are 

concerned that following this incident the DEA did not implement additional internal 

controls specifically related to investigations involving virtual currency.22

We evaluated the full SARC review of the AGEO 

proposals. Prior to approval, the DAAG received a briefing on cases involving 

virtual currency. According to documentation from the review of one proposal, the 

DAAG required the DEA to provide assurance on the specific Dark Web activities 

. The DAAG expressed concern that through an AGEO, 

the DEA could conduct investigative activity involving virtual currency for 

22 DOJ press release, “Former Secret Service Agent Sentenced to 71 Months in Scheme 

Related to Silk Road Investigation,” posted December 7, 2015.
31

individuals who were not involved in the drug trade. The DEA acknowledged that 

there was no way to confirm that an individual 

through the DEA AGEO was a drug trafficker or money broker. The DEA noted that 

if they determined at any point that an individual was not an appropriate “target,” 

then the DEA would cease investigative activity and alert other appropriate law 

enforcement, if necessary. In response, the DAAG required the DEA to update an 

approved AGEO’s operational plans to ensure that the authority provided under the 

Full AGEO involving virtual currency did not expand beyond the approved 

investigative activity. When we discussed this with the case agents, they stated 

that they remained cognizant of this requirement throughout their transactions.

We found the DEA devoted only two DEA headquarters employees within OGF 

to the DEA’s Virtual Currency Initiative, which monitors and guides all cases and 

AGEOs that interact with virtual currency. According to Special Agents responsible 

for performing these transactions, there was no formal guidance to follow when 

. As a result, they relied upon peers with 

previous experience for insight. In addition, Special Agents at one site told us that 

their DEA supervisor did not have access to to monitor 

. 

Moreover, despite the unique challenges of virtual currency laundering 

schemes, such as unknown fees and spontaneous currency fluctuations that are not 

present in traditional money laundering, the DEA did not create new processes and 

forms to conduct and document these undercover activities. Instead, the AGEO 

case agents used DEA forms designed for traditional money laundering transactions

to document undercover and evidence. 

Because such as 

, there was significant potential for 

inconsistent handling. As a result, when we attempted to verify undercover 

, we could not reconcile this information 

because the AGEO case agents had not documented in sufficient detail all of the 

activities and transactions that had occurred. Additionally, we found that the DEA 

had not updated its DARTS module to accommodate the type of critical information 

. When we spoke with the DEA about these issues, OGF 

indicated that the DEA was working internally to add these fields to DARTS in order 

to enhance . While the additional fields would 

be an improvement to the DEA’s oversight of this activity, we still believe that 

without proper controls substantially increases the risk 

of fraud, waste, and abuse and detrimentally impacts DEA’s investigative efforts. 

In February 2018, the DEA promulgated a Virtual Currency Investigative 

Guide, which provides an overview of virtual currency and the Dark Web 

marketplaces, investigative techniques, and certain best practices to implement on 

internal controls. However, according to the DEA’s Virtual Currency Staff 

Coordinator, this Guide is not meant to be policy, but rather guidance that can be 

swiftly updated to account for the volatile environment of Dark Web activity. We 

found that this Guide does not contain relevant and necessary information for how 

nuances , translate to the 
32

historic, standardized OGF forms. We recommend that the DEA evaluate the 

resources devoted to administrative oversight of investigations involving virtual 

currency and establish policies setting firm internal controls, risk mitigation and 

deconfliction techniques, and appropriate record keeping practices. 

AGEO Financial Activities

Because of the potential for fraud, waste, and abuse, the DEA’s actions to 

conduct undercover money laundering transactions and acquire, collect, and use 

proceeds from these undercover activities require strong internal controls, such as 

complete financial records and an auditable trail of money movement. AGEO case 

agents told us that they believed some AGEO administrative requirements were 

overly burdensome, duplicative, and without obvious value. These requirements 

included quarterly activity reports, PGI acquisition and expenditures tracking and 

documentation, physical inventory procedures, and measures. These 

requirements are necessary to the internal control process; however, without 

sufficient resources and appropriately designed procedures to perform and manage 

this work, the administrative demands may impact the effectiveness of operational 

aspects of the investigation. For instance, case agents expressed concern that 

balancing both administrative requirements and investigative work was challenging. 

Consequently, we believe that this may elevate the risk that agents are not 

pursuing leads or developing additional investigative strategies that contribute to 

the success of the AGEO. Through use of AGEOs, the DEA’s records indicate that it 

generated over $8 million in PGI and expended $8.7 million between FYs 2015 and 

2017. In general, we found that the DEA expended PGI we reviewed prudently, but 

the DEA’s financial structure and controls were not adequate to deter and detect 

mismanagement of PGI. In addition, we found that the DEA conducted financial 

reviews of AGEO activities, but did not submit the audit results to the Attorney 

General or Congress as required by statute.

The DEA Should Implement Better Controls over AGEO Financial Activities

The DEA relied on an independent contractor to perform reconciliations of all 

AGEO-related financial activities and to compile monthly accounting records for 

each AGEO. This process was the cornerstone of the DEA’s AGEO financial 

management and oversight processes, and the independent contractor has 

performed this accounting activity for more than 20 years. The DEA places great 

value on the work of the independent contractor. We found that the contractor had 

successfully accounted for the banking activity of all of the AGEOs that we 

reviewed, and we found no instances of unaccounted funds. 

However, we also found that the independent contractor did not always 

receive complete details about the financial transactions that occurred. This 

resulted in inconsistent record keeping, improper accounting entries, and an 

inadequate audit trail within the financial records. Therefore, we could not always 

reconcile the independent contractor’s financial records with the specific transaction 

information within the AGEO files.
33

In addition to the internal controls achieved through the use of independent 

bookkeeping, the DEA employed other controls and processes to oversee the 

financial activities of the AGEOs. However, the DEA’s implementation of these 

controls and requirements were not completely effective in deterring and identifying 

the misuse of funds and inappropriate recordkeeping, as identified below.

Use of PGI

The DEA’s ability to use PGI for reasonable and necessary expenses 

enhances the DEA’s ability to support complex, transnational cases. By using funds 

for expenses such as undercover travel, sources of information, and equipment, 

AGEO case agents are able to further their investigations. We reviewed a 

judgmental sample of 12 AGEOs that were active during our review period and 

found that PGI expenditures were generally associated with the aforementioned 

categories of investigative costs. However, we identified a broader issue related to 

the DEA’s management of PGI because we found instances where the DEA did not 

comply with the statutory and DOJ requirement to spend PGI only for operational 

expenses associated with the case that earned the PGI. Examples of this 

noncompliance are detailed below.

Transfer: We found that the DEA transferred more than $221,000 in PGI 

from a closing AGEO to a new Full AGEO. According to the Special Agents 

responsible for this case, the new AGEO was related to the closing AGEO and 

they believed that it was appropriate to transfer the unused PGI. Further, 

information about the plan to transfer the PGI was included in the SARC 

proposal for the new AGEO, which was approved by the SARC and the DAAG.

However, the transfer still did not comply with the authorizing statute and 

the Department’s Risk Mitigation Policy Memorandum.

Misappropriations: We found two examples where field offices mistakenly 

spent PGI acquired from one AGEO on expenses associated with a different 

AGEO. In the first example, we found that a field office used PGI from one 

AGEO to pay expenses for two different Full AGEOs. In the other example, 

we found that a field office used PGI from a Full AGEO to pay expenses 

associated with a different Full AGEO and a case included in the Shelf AGEO.

Commingling: For Border AGEOs, the DEA did not always distinguish PGI 

earned in each case that was operating within the account. As a result, we 

found two examples where a field office continued to use PGI earned from 

cases that had already closed. For one Border AGEO, we identified a single 

bank account that contained more than $66,000 in PGI at the end of 

FY 2017, yet the account included only one active case at the time and the 

DEA’s records indicated it had earned approximately $8,000. Therefore, the 

$58,000 difference was associated with PGI earned in previous investigations 

and should have been forfeited. For another Border AGEO, we found that the 

field office deposited PGI earned from four different cases into a single bank 

account and did not distinguish the case that earned the PGI from the case 

that used the PGI.
34

Unauthorized Use: Once the DEA deems AGEO activity no longer necessary 

for the investigation, the field office also must no longer maintain PGI in an 

undercover bank account or use PGI for operational expenses. In turn, the 

DEA is required to forfeit these funds. We reviewed all AGEOs closed during 

our audit review period and found that 10 AGEOs maintained PGI in 

undercover bank accounts and expended a total of approximately $200,000 

in PGI after AGEO authorization ended.

We believe that the prohibition for the shared use of PGI among AGEOs is 

clear within the authorizing statute and the Department’s Risk Mitigation Policy 

Memorandum. The DEA’s Office of Chief Counsel also reiterated this policy in a 

February 2013 memorandum, which stated, “Expenses may be paid with the 

proceeds of the exempted operation if they are ‘necessary and reasonable’ and are 

incurred during the course of that AGEO...”

Because the aforementioned instances of PGI misuse occurred after the 

DEA’s Chief Counsel disseminated this guidance and occurred in AGEOs operating 

throughout various field offices, we believe the DEA’s internal controls to detect 

PGI-related noncompliance with laws and Department requirements are inadequate. 

Although the authorizing statute allows the DEA to use this income, Congress and 

the Department established restrictions to ensure that AGEOs were not conducting

authorized undercover illegal activity solely to generate income.

In the April 2018 AGEO policy, the DEA recognized and corrected certain 

deficiencies and incorporated stronger requirements to prohibit the commingling of 

PGI within cases, enforce the establishment of separate PGI accounts, and specify 

that case agents can only use PGI under the specific case file that generated the 

PGI. Additionally, DEA officials told us that they were aware of the issues 

surrounding the expenditure of PGI after the expiration of AGEO authority and have

been working with the SARC to obtain limited, authorized AGEO extensions in order 

to ensure its compliance with the authorizing statute. Indeed, if the DEA updates 

its practices to ensure that authorization is extended throughout the close-out 

period of the AGEO, this practice will comply with the law. Therefore, the DEA 

should update its AGEO oversight procedures to review PGI activity and confirm 

that PGI is not commingled, transferred, or misappropriated. In addition, the DEA 

should implement an internal control to ensure the use of PGI ceases when AGEO

authorization expires. 

Accountability for PGI Expenses

According to DEA financial information, between FYs 2015 and 2017 the DEA 

spent approximately $8.3 million of PGI earned in Full and Border AGEOs. Of that 

amount, the DEA spent approximately

expenses. In general, we found that DEA headquarters identified 

and corrected inappropriate travel payments during its Annual Review process, and 

found that PGI expenses for the remaining categories were generally allowable. 
35

However, we did find issues in the recordkeeping for both confidential source (CS)

payments and equipment.

CS Payments: DEA utilizes its Confidential Source System Concorde (CSSC) 

to manage and record payments to CSs. When the DEA used PGI to pay

CSs, these transactions required manual entry into the CSSC and we found 

this method to be insufficient to account for these payments. We reviewed 

all CS payment activity during our audit review period for a judgmentally 

selected sample of AGEOs; this activity amounted to 337 transactions

totaling more than $930,000. Almost 50 percent of the $930,000 we 

reviewed were either not recorded or inaccurate in CSSC. This deficiency

affects the DEA’s ability to track annual ($100,000) and lifetime ($200,000) 

payment caps for its CSs. We believe that this is significant given that CS 

payments represent a high expense category in AGEOs and the OIG’s 

previous findings associated with deficiencies in the DEA’s tracking and

oversight of payments to CSs.23

Equipment: DEA and Department policy require that field offices maintain an 

inventory of property purchased with PGI for each AGEO. We found that 

there was not adequate control over items purchased. For example, DEA 

personnel informed us that one closed Full AGEO remained open from 

December 2015 to November 2017 because the DEA could not properly 

account for the almost 200 items purchased for the AGEO, which affected the 

DEA’s requirement to forfeit these items. Additionally, we found that three 

AGEOs’ inventory lists were incorrect or incomplete because they did not 

contain purchase of equipment that should have been recorded. We also

found inventory items that were outdated and unused, yet had not been 

forfeited. Specifically, we found a Border AGEO that kept surplus equipment 

and property purchased with PGI from a previously closed investigation in a 

filing cabinet. We also found a Full AGEO that maintained 19 cell phones, but 

we were unable to verify the serial numbers because the phones were not 

activated. Without appropriate controls over inventory, the DEA heightens 

its risk of lost, stolen, or unnecessary purchases.

We believe these discrepancies resulted, in part, from the DEA inadequately 

implementing several internal controls that ensure its Special Agents understand 

and are complying with AGEO requirements. For example, although both the 

AG FBI Undercover Guidelines and the DEA Agents Manual require AGEO proposals 

to the SARC to include a detailed budget of how PGI will be expended, the SARC 

proposals we reviewed did not contain this information. As a result, the SARC did 

not have the opportunity to understand how the field office planned to use PGI to 

support the investigation. We also found that the DEA often did not conduct the 

DOJ-required review and training of financial administrative policies within the first 

90 days after the SARC and the DAAG approve a Full AGEO. We reviewed the 

DEA’s documentation of eight 90-day reviews and found that they occurred 

23 DOJ OIG, Audit of the DEA’s Confidential Source Policies and Oversight of Higher-Risk 

Confidential Sources, Audit Division 15-28 (July 2015) and Audit of the DEA’s Management and 

Oversight of its Confidential Source Program, Audit Division 16-33 (September 2016).
36

between 118 and 232 days after the Full AGEO was approved. In addition, the DEA

did not have a formal requirement for conducting 90-day reviews for cases within 

the Border AGEOs. Finally, although the Department Risk Mitigation Policy 

Memorandum specifically requires DOJ components to have headquarters units 

conduct a quarterly review of AGEO expenses, the DEA did not comply with this 

requirement. Instead, DEA headquarters reviewed AGEO financial activity on an 

annual basis and field supervisors performed a monthly review of expenses. 

We believe that the DEA must improve its processes for reviewing AGEO 

activity and training personnel on PGI requirements, in particular tracking PGI used 

to pay CSs and appropriately managing AGEO inventory. Without adequate internal 

control procedures to account for PGI purchases and expenditures, the DEA is 

susceptible to fraud, waste, and abuse. According to the DEA, it has updated its 

annual review process to incorporate additional controls over the use of PGI. While 

we acknowledge this improvement, we recommend that the DEA implement the 

preventative and detective internal controls over PGI (developing PGI spend plans, 

timely 90-day reviews, and quarterly headquarters examination of financial activity) 

as prescribed by the Department’s Risk Mitigation Policy Memorandum, the AG FBI 

Undercover Guidelines, and the DEA’s Agents Manual.

The DEA Needs to Improve Compliance with Requirements for Safeguarding 

Undercover Information

In undercover operations, the DEA 

 This law 

enforcement technique is called

 We found that the DEA did not always take 

adequate measures to . 

We examined the establishment, maintenance, and oversight of 

of selected AGEOs to determine if the 

DEA appropriately complied with requirements and safeguards to 

. Through our review of this information and our review of expenditures, 

we found four AGEOs where

 These payments were 

reimbursements for expenses, primarily travel-related, incurred 

during the course of AGEO activity. 

. Similarly, we found one AGEO where a 

Supervisory Special Agent used to complete an application for an 

. By using 
37

Finally, in one Border AGEO, we identified an for 

which there was

 After we alerted the DEA of this 

deficiency, the Supervisory Special Agent took appropriate steps to

are safeguarded against loss and misuse. 

In addition to the issues we identified, we found that annual DEA inspections 

of AGEOs have identified non-compliance issues associated with

. To correct this issue, 

the DEA’s April 2018 AGEO policy includes enhanced controls for 

, including requiring a specific headquarters unit to manage these 

matters. We believe that the updated policies and procedures are an improvement 

to the DEA’s administration of its for AGEOs. 
38

CONCLUSION AND RECOMMENDATIONS

According to DOJ and the DEA, money is the lifeblood of DTOs, and 

adequately disrupting and dismantling these organizations often requires targeting 

and infiltrating DTOs’ financial infrastructures through AGEOs. According to the 

Department, these AGEOs have resulted in some of the most successful 

drug-related seizures, arrests, and prosecutions. Despite these reported successes, 

it is important to recognize that the DEA’s active involvement in authorized

undercover illegal activity to assist DTOs in laundering drug trafficking proceeds can

contribute to DTOs’ basic ability to operate. While the ultimate goals of prosecuting 

drug traffickers and dismantling DTOs support the DEA’s mission, the collateral 

consequence of assisting the basic operation of DTOs does not. The DEA estimates 

that the drug trafficking industry in the United States accounts for $64 billion in 

annual activity and in the last 3 years, 

. While this amount is a small percentage of overall activity, 

any contribution to these DTOs connects the DEA to potentially violent and corrupt

transnational entities that further the flow of drugs into the U.S. Although AGEOs 

can be an effective law enforcement tool, the DEA and DOJ must improve guidance, 

oversight, and management of AGEOs to ensure that the benefits outweigh the risk 

of the DEA engaging in authorized illegal activities.

We found that the DEA did not appropriately mitigate risks associated with its 

AGEO activities because it did not consistently comply with statutory and 

Department requirements to implement effective controls, safeguards, and 

oversight. Although the DEA attests to having a robust risk assessment process 

related to its AGEOs, we found that the DEA did not appropriately document its 

assessment of the substantial risks of laundering activity with DTOs and did not 

consistently employ important risk mitigation techniques. In fact, various 

Department and DEA officials conveyed the idea of letting money “walk” is not as 

inherently risky as letting drugs or guns “walk.” Consequently, we identified risks 

associated with limited investigative and prosecutorial follow-up on the investigative 

information obtained through AGEOs to identify, monitor, and investigate entities 

involved in illicit money laundering schemes.

Moreover, we found that the DEA lacked appropriate approval methods for 

AGEO operations, which limited the Department’s ability to perform adequate 

oversight of AGEO activity to ensure that the DEA was not overextending its 

authority or placing its personnel, assets, or the Department in a perilous situation 

unnecessarily. For instance, the DEA’s process for identifying and reviewing

substantial changes in the scope of AGEO activity that would necessitate 

Department evaluation and support was inconsistent with existing Department 

policy for undercover operations. Additionally, although the DEA did report 

enforcement statistics to the Attorney General, we found that the DEA implemented 

a flawed process for tracking and compiling enforcement statistics, which affected 

the accuracy and legitimacy of these statistics, and did not send its reports to 

Congress, as required by public law. We also identified that the DEA’s controls and 

processes for ensuring that its activities receive necessary concurrence from USAOs 

, when appropriate, were not effective. As a result, the 
39

DEA may have unnecessarily compromised the safety of its personnel, the 

effectiveness of the operations, . 

Further, while the AGEO authorizing statute grants the DEA the ability to use 

the income generated from authorized undercover activity to support the operations 

in the AGEO in which the income was earned, we found that the DEA 

inappropriately allocated PGI to cases and operations that did not generate the 

income, which the statute prohibits. We also noted that the DEA did not prudently 

maintain records for PGI expenditures.

The totality of these deficiencies highlight significant concerns related to the 

adequacy of the practices and oversight associated with the DEA’s AGEOs. We 

believe that that the DEA should review its AGEOs as a program to effectively and 

consistently manage these sensitive investigative operations. The DEA needs to 

enhance oversight and management of AGEOs to ensure that the investigations are 

properly targeted, undercover activities are appropriately safeguarded, and 

financial requirements are adequately implemented. Throughout the course of our 

audit work, we informed DEA officials about our findings and concerns, and make 

the following recommendations for the DEA to improve its oversight and 

management of its AGEOs.

We recommend that the DEA:

1. Formalize a procedure to develop, verify, and disseminate all required AGEO 

financial and performance reports to Congress and the Attorney General, as 

outlined in the authorizing statute, to bring it in compliance with the law. In 

addition, these reports should provide appropriate context for the statistics 

associated with AGEOs so that direct and indirect accomplishments are 

clearly identified and can be assessed separately.

2. Implement a process through which field offices establish specific, actionable, 

and measurable goals for each AGEO that are clearly presented to the SARC. 

3. Implement a process through which the SARC documents its robust 

examination of each AGEO’s duration, any significant periods without 

undercover activity, and accomplishment of goals. 

4. Ensure that AGEO 6-month reauthorization requests are submitted to the 

DAAG for review and approval, as required by the Department. 

5. Develop a process for field offices to submit formal requests for SARC 

evaluation and DAAG approval for any change in either the direction or 

objectives of an approved undercover operation, including the addition or 

removal of high-level AGEO targets. 

6. Evaluate DARTS to ensure that AGEO data is accurate, complete, and 

consistent and determine the need for enhanced investigative resources and 

oversight of AGEOs to leverage DARTS information. 
40

7. Develop and execute a plan to strategically exploit investigative information 

and evaluate connections between and among AGEOs to identify additional 

investigative targets (i.e., businesses and entities complicit in DTO money 

laundering activities).

8. Ensure that DEA personnel sufficiently document the actions and outcomes of 

significant AGEO-related investigative actions, especially when these actions

involve a law enforcement partner.

9. Formalize in policy additional vetting procedures and oversight processes of 

CSs used in AGEOs.

10. Enhance the requirements for reauthorization requests of ongoing AGEOs to 

include transparency in the identification of amounts laundered and 

specificity in the reporting of seizures, including the relationship between the 

funds laundered and the amounts identified as seized (i.e., direct seizure, 

lead passed, foreign counterpart seizure).

11. Begin tracking investigative and legal outcomes of the undercover activities 

performed during the authorized operation, including the results of 

prosecution referrals resulting from investigative leads.

12. Enhance the process related to transnational activity to ensure it maintains 

adequate documentation of required approvals.

13. Evaluate the resources devoted to administrative oversight of investigations 

involving virtual currency and establish policies setting firm internal controls, 

risk mitigation and deconfliction techniques, and appropriate record keeping 

practices.

14. Update AGEO oversight procedures to review PGI activity and confirm that 

PGI is not commingled, transferred, or misappropriated. In addition, the DEA 

should implement an internal control to ensure the use of PGI ceases when 

AGEO authorization expires.

15. Implement the preventative and detective internal controls over PGI 

(developing PGI spend plans, timely 90-day reviews, and quarterly 

headquarters examination of financial activity) as prescribed by the 

Department’s Risk Mitigation Policy Memorandum, the AG FBI Undercover 

Guidelines, and the Agents Manual.

We recommend that the Department:

16. Formally determine whether the policies within the AG FBI Undercover 

Guidelines apply, in their entirety or in specific instances, to all DOJ law 

enforcement components; or if the Department must issue new guidance to 

govern undercover operations that are initiated by DOJ law enforcement 

components outside of the FBI.
41

17. Ensure that the DEA’s policies reflect necessary measures and controls 

stipulated in applicable Department undercover guidance.

18. Evaluate and determine whether the 2006 DAAG exemptions for Shelf and 

Border AGEOs, given requirements in Department-wide guidance on 

undercover operations, should remain and coordinate with the DEA on the 

results.

19. Determine whether the USAOs have implemented a process for coordinating 

with other prosecutorial offices when sensitive investigative activities, such 

as DEA’s AGEOs, are likely to span jurisdictional boundaries, as required by 

the Department Risk Mitigation Policy Memorandum.
42

STATEMENT ON INTERNAL CONTROLS

As required by Government Auditing Standards, we tested, as appropriate, 

internal controls significant within the context of our audit objectives. A deficiency 

in an internal control exists when the design or operation of a control does not 

allow management or employees, in the normal course of performing their assigned 

functions, to timely prevent or detect: (1) impairments to the effectiveness and 

efficiency of operations, (2) misstatements in financial or performance information, 

or (3) violations of laws and regulations. Our evaluation of the DEA’s internal 

controls was not made for the purpose of providing assurance on its internal control 

structure as a whole. DEA management is responsible for the establishment and 

maintenance of internal controls.

Throughout our audit, we identified deficiencies in the DEA’s internal controls 

that are significant within the context of the audit objectives. Based upon the audit 

work performed, we believe the deficiencies identified adversely affect the DEA’s 

ability to ensure that AGEOs are appropriately and adequately managed. These 

matters are discussed in detail in the Audit Results section of this report.

Because we are not expressing an opinion on the DEA’s internal control 

structure as a whole, this statement is intended solely for the information and use 

of the DEA. This restriction is not intended to limit the distribution of this report, 

which is a matter of public record. However, we are limiting the distribution of this 

report because it contains sensitive information that must be appropriately 

controlled.24

24 A redacted copy of this report with sensitive information removed will be made available 

publicly.
43

STATEMENT ON COMPLIANCE

WITH LAWS AND REGULATIONS

As required by the Government Auditing Standards we tested, as appropriate 

given our audit scope and objectives, selected transactions, records, procedures, 

and practices, to obtain reasonable assurance that the DEA’s management complied 

with federal laws and regulations for which noncompliance, in our judgment, could

have a material effect on the results of our audit. DEA’s management is 

responsible for ensuring compliance with applicable federal laws and regulations. 

In planning our audit, we identified the following laws, regulations, and Department 

policies that concerned the operations of the DEA that were significant within the 

context of the audit objectives:

• Public Law 102-395

• Attorney General Guidelines on the FBI’s Undercover Operations

• Baseline Risk Assessment and Mitigation Policies for Law Enforcement 

Operations in Criminal Matter

Our audit included examining, on a test basis, DEA’s compliance with the 

aforementioned laws, regulations, and Department policies that could have a 

material effect on DEA’s operations. We did so by examining DEA’s policies and 

procedures and comparing DEA’s practices to the laws and regulations. We also 

interviewed DEA and DOJ personnel, assessed internal control procedures and 

management practices, and reviewed AGEO files at DEA headquarters and on-site 

at eight field offices.

As noted in the Audit Results section of this report, we found that the DEA 

did not comply with all the requirements in the authorizing Public Law nor the 

Department’s policies. We outline the specific requirements that DEA did not 

adhere to in Appendix 2.

 
44

APPENDIX 1 

OBJECTIVES, SCOPE, AND METHODOLOGY

Our objectives were to evaluate the management and oversight of the Drug 

Enforcement Administration’s (DEA) Attorney General Exempt Operations (AGEO), 

to include the initiation and classification of these operations, the controls over and 

use of funds during operations, and the disposal of proceeds at the conclusion of 

these operations. To accomplish these objectives, we conducted over 80 interviews 

with Department of Justice (Department or DOJ) and DEA personnel, including task 

force officers. We also interviewed 13 Assistant United States Attorneys who have 

participated or collaborated with the DEA on various AGEOs.

We conducted this performance audit in accordance with generally accepted 

government auditing standards. Those standards require that we plan and perform 

the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives.

We identified and reviewed the AGEOs that were active between fiscal 

years (FY) 2015 and 2017; we reviewed activity throughout the life of these AGEOs. 

We conducted an assessment to perform detailed audit tests on AGEOs we 

considered high-risk based on several factors, including:

• the materiality of money laundered,

• the project generated income (PGI) identified by DEA, 

• the type of AGEO (Shelf, Full, or Border),

• whether the AGEO was reported closed to the Attorney General,

• findings identified during reviews performed by the DEA Inspections Division, 

and

• the prevalence of high-risk or sensitive activities, such as the use of 

confidential sources. 

Our selection resulted in our review of AGEOs and performance of audit 

fieldwork in the

 We performed 

evaluations of legal and regulatory compliance and functionality of AGEO processes, 

specifically over the proper initiation of AGEOs, the required performance and 

financial reporting, the approval and recordkeeping of undercover money 

laundering activity, the use of PGI, and the activities to close out the operations. 

We provided the DEA with information associated with specific AGEOs we reviewed, 

but did not include these details in the report due to the sensitivity of these 

operations.
45

To determine whether the DEA appropriately developed and used its AGEO 

authority, we evaluated the DEA’s establishment of the types of AGEOs in 

comparison to the requirements in the legal statute. We also reviewed the 

activities of the Sensitive Activities Review Committee (SARC) for all AGEOs 

presented before the SARC between FY 2015 and 2017. Further, we selected a 

judgmental selection of seven AGEOs to review the proposal submitted to the SARC 

to gain an understanding of the goals and objectives of these AGEOs.

To evaluate the required performance and financial reports, we reviewed 

reported quarterly and semi-annual information for accuracy and appropriateness 

to ensure those charged with oversight had adequate insight into the operations. 

Additionally, we reviewed the DEA’s Annual Reports submitted to the Attorney 

General for Calendar Year (CY) 2015 through 2017 to assess the methods the DEA 

implemented to compile and report AGEO success.

In order to ensure that undercover money laundering activity obtained the 

appropriate approval, we reviewed information in the DEA’s Analysis and Response 

Tracking System (DARTS), which tracks qualitative and quantitative data associated 

with the DEA’s undercover money laundering transactions. Specifically, we 

reviewed information regarding case activity and origin of money laundering 

transactions for AGEOs operating within our review period. We evaluated certain 

individual cases included in Shelf and Border AGEOs to ensure that those cases 

were approved at an appropriate level. We also reviewed specific money 

laundering activity of those AGEOs operating across jurisdictional boundaries. We 

also selected two prosecutorial districts to evaluate the DEA’s documented 

coordination with the United States Attorneys’ Offices. Additionally, we selected a 

judgmental sample of 22 percent of the 

during our review period to ensure that the 

DEA documented approval internally from the DEA, 

. 

We also performed a review of the DEA’s financial AGEO information. We 

conducted a cursory examination of DEA AGEO financial information related to our 

scope. We selected transactions within certain AGEOs to evaluate the adequacy of 

financial statements, the traceability of transactions, PGI expenditures, and 

whether offices used appropriate . 

Specifically, we reviewed total PGI expenses for certain AGEOs for FY 2015 to 

FY 2017 to determine whether the PGI expenses were reasonable and necessary to 

the case and whether the information was accurately recorded and tracked. 

However, we did not design our sample using a statistical method that would have 

allowed a projection of the test results to the universe of AGEOs. Therefore, we 

reported our results from specific instances of occurrence only.

Throughout our audit, we obtained information from DARTS. We assessed 

the reliability of data contained within the money laundering module of DARTS by: 

(1) performing electronic testing of required data elements, (2) reviewing existing 

information about the data and the system that produced them, and 

(3) interviewing auditee officials knowledgeable about the data. We selected a 

judgmental sample of almost five percent of the authorized undercover money 
46

laundering transactions in our review period to test the reliability of the data. The 

results of our testing showed that the data elements key to our review contained a 

moderate percentage of errors. Therefore, we determined that the data was not 

sufficiently reliable for the purposes of determining the characterization of DEA’s 

exact authorized undercover money laundering activity, the PGI earned, or the 

amount seized. As a result, whenever we used data in DARTS, we sought 

corroborating audit evidence prior to making conclusions.

Finally, we evaluated the AGEO close-out process to ensure that the DEA 

appropriately disposed of assets to the Assets Forfeiture Fund and closed out 

financial and legal entities associated with the AGEO.
47

APPENDIX 2

Consolidated Listing of DEA Non-Compliance or Inconsistency 

with Statutory and Department Requirements

Source Requirement Issue Page 

Number

PL 102-395, 

Section 102(b)3

“As soon as the proceeds from an undercover 

operation with respect to which an action is 

authorized and carried out...are no longer 

necessary for the conduct of such an 

operation, such proceeds or the balance of 

such proceeds remaining at the time shall be 

deposited in the Treasury of the United States 

as miscellaneous receipts.”

Instances of noncompliance33

PL 102-395, 

Section 

102(b)(5)(A)

The DEA “shall conduct a detailed financial 

audit of each undercover investigative 

operation which is closed...[and] (i) submit 

the results of such audit in writing to the 

Attorney General, and (ii) not later than 

180 days after such undercover operation is 

closed, submit a report to the Congress 

concerning such audit.”

Not reported to 

the Attorney 

General or 

Congress

11

PL 102-395, 

Section 

102(b)(5)(B)

The DEA shall “also submit a report annually 

to the Congress specifying as to [its] 

undercover investigative operations –

 (i) the number, by programs, of undercover 

investigative operations pending as of the end 

of the one-year period preceding the period 

for which such report is submitted,

 (ii) the number, by programs, of 

undercover investigative operations 

commenced in the one-year period preceding 

the period for which such report is submitted, 

and

 (iii) the number, by programs, of 

undercover investigative operations closed in 

the one-year period preceding the period for 

which such report is submitted and, with 

respect to each such closed undercover 

operation, the results obtained.”25

Not reported to 

Congress

11

Department Risk 

Mitigation Policy 

Memorandum

Any extension shall be “for no more than 6 

months at a time, and must be approved by 

the Attorney General, or his/her designee. 

The extension review and approval process 

should evaluate those additional objectives to 

be accomplished through the extension.”

DAAG approval 

not consistently 

sought

12

25 “With respect to each such closed undercover operation which involves any of the sensitive 

circumstances specified in the [AG FBI Undercover Guidelines], such report shall contain a detailed 

description of the operation and related matters, including information pertaining to (I) the results, 

(II) any civil claims, and (III) identification of such sensitive circumstances involved that arose at any 

time during the course of such undercover operation.” PL 102-395, Sec. 102(b)(5)(B).
48

Department Risk 

Mitigation Policy 

Memorandum

“A requirement that agency headquarters 

conduct a review of an investigation involving 

PGI within 90 days after income was first 

generated.”

Not conducted 

within required 

time frame

35

Department Risk 

Mitigation Policy 

Memorandum

“A requirement that agency headquarters 

review PGI financial reports on a quarterly 

basis, to include documentation supporting all 

PGI proceeds and approved expenditures.”

Not conducted 

within required 

timeframe

36

Department Risk 

Mitigation Policy 

Memorandum

“A training requirement for all personnel 

participating in investigations involving PGI -

personnel at both headquarters and the field 

operations level - that covers the agency's 

PGI policies and guidelines.”

Not required for 

all Special Agents 

conducting AGEOs

35

AG FBI 

Undercover 

Guidelines

Submit to the “Attorney General, the Deputy 

Attorney General, and the Assistant Attorney 

General in charge of the Criminal Division a

written report annually summarizing: (a) the 

types of undercover operations approved and 

disapproved together with the reasons for 

disapproval; (b) the major issues addressed 

by the Committee in reviewing applications 

and how they were resolved; and (c) any 

significant modifications to the operations 

recommended by the Committee.”

Not reported to 

the Attorney 

General or 

Congress

11

AG FBI 

Undercover 

Guidelines

Inclusion of a statement in the application to 

Headquarters of the “period of time for which 

the operation would be maintained.”

Not included 13

AG FBI 

Undercover 

Guidelines

Review by the Undercover Review Committee 

if there is significant change in either the 

direction or objectives of an undercover 

operation previously approved to determine 

whether a new authorization is necessary.

Not documented 15

AG FBI 

Undercover 

Guidelines

Undercover Review Committee must approve 

each individual investigation that establishes, 

acquires, and utilizes a business entity; or 

conducts money laundering transactions 

involving an aggregate amount exceeding 

$1 million. 

Not conducted for 

Shelf and Border 

AGEOs

11
49

APPENDIX 3

THE DRUG ENFORCEMENT ADMINISTRATION’S 

RESPONSE TO THE DRAFT REPORT
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51
52
53
54
55
56

APPENDIX 4

OFFICE OF THE DEPUTY ATTORNEY GENERAL’S 

RESPONSE TO THE DRAFT REPORT
57
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APPENDIX 5

OFFICE OF THE INSPECTOR GENERAL ANALYSIS AND SUMMARY 

OF ACTIONS NECESSARY TO CLOSE THE REPORT

The Office of the Inspector General (OIG) provided a draft of this audit to the 

Drug Enforcement Administration (DEA) and to the Department of Justice Office of 

the Deputy Attorney General (ODAG). The DEA’s response is incorporated in 

Appendix 3 of this final report, while ODAG’s response is incorporated in 

Appendix 4. In response to our audit report, the DEA and the Department 

concurred with our recommendations and discussed the actions these entities will 

implement in response to our findings. In its response, the DEA noted various 

updates to its policy and oversight procedures for AGEOs that occurred subsequent 

to our review period of Attorney General Exempt Operations (AGEO) active between 

fiscal years (FY) 2015 and 2017. However, as we stated in the introduction of this 

report, we considered whether and to what extent the DEA’s April 2018 policy 

addressed findings associated with our audit. In addition, as reflected throughout 

the DEA’s response, the more recent updates and initiatives it has taken to improve 

its oversight of AGEOs occurred in late 2019, following the OIG’s identification of 

findings associated with AGEOs during this audit. Moreover, following the issuance 

of our draft report, the DEA stated that it issued an updated AGEO policy in 

April 2020 to address the OIG’s recommendations. We acknowledge the DEA’s 

recent initiative to enhance its processes, improve reporting, and utilize data more 

efficiently for its AGEOs. The following provides the OIG’s analysis of the responses 

and a summary of actions necessary to close the report.

Recommendations for the DEA:

1. Formalize a procedure to develop, verify, and disseminate all 

required AGEO financial and performance reports to Congress and 

the Attorney General, as outlined in the authorizing statute, to bring 

it in compliance with the law. In addition, these reports should 

provide appropriate context for the statistics associated with AGEOs 

so that direct and indirect accomplishments are clearly identified and 

can be assessed separately.

Resolved. The DEA concurred with this recommendation. In its response, 

the DEA stated that it has assigned the Deputy Chief of Operations, Office of 

Domestic Operations responsibility for ensuring that all required reports are 

submitted to Congress and the Attorney General in accordance with the 

AGEO statute. According to the DEA, the AGEO policy directs the DEA’s 

Sensitive Activity Review Section (ODN) and Financial Investigations Division 

(historically OGF, now ODF) to collaborate and submit these reports to the 

Deputy Chief of Operations for review, approval, and submission to both 

Congress and the Attorney General. The DEA noted that ODF will be 

responsible for reviewing all submissions and drawing all statistical data 

needed to aid in preparing the report to Congress and the Attorney General. 
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We believe that the DEA’s updated policy incorporates a process to ensure 

that required reports are submitted to Congress and the Attorney General. 

However, the DEA must also ensure that this process incorporates a 

mechanism to verify the accuracy of the information, as well as the 

appropriate context for AGEO statistics to ensure that direct and indirect 

accomplishments are appropriately delineated. 

This recommendation can be closed when the DEA provides evidence that a 

formal procedure has been established to ensure that all required AGEO 

financial and performance reports are developed, verified, and disseminated 

to the Attorney General and Congress, as required by statute. Additionally, 

the DEA must provide evidence that these reports provide appropriate 

context for the statistics associated with AGEOs so that direct and indirect 

accomplishments are clearly identified and can be assessed separately. 

2. Implement a process through which field offices establish specific, 

actionable, and measurable goals for each AGEO that are clearly 

presented to the Sensitive Activities Review Committee (SARC). 

Resolved. The DEA concurred with this recommendation. In its response, 

the DEA stated that AGEO proposals will now require additional information, 

including specific, actionable, and measurable goals. In addition to these 

updates, the DEA stated that it will coordinate with the Department to 

determine whether any additional protocols should be added regarding the 

establishment of the parameters of proposed AGEO operations. 

This recommendation can be closed when the DEA provides evidence that it 

has implemented its updated process through which field offices establish 

specific, actionable, and measurable goals for each AGEO that are clearly 

presented to the SARC. 

3. Implement a process through which the SARC documents its robust 

examination of each AGEO’s duration, any significant periods without 

undercover activity, and accomplishment of goals.

Resolved. The DEA concurred with this recommendation. The DEA stated 

that the SARC conducts bi-annual reviews of all AGEOs, which include a 

review by the DEA’s Office of Inspections, Office of Chief Counsel, and 

Financial Investigations Section. If the SARC raises any concerns, the DEA 

stated that the responsible field office will address them directly and, when 

appropriate, update the reauthorization request. Additionally, the DEA will 

consult with the Department to determine if any additional protocols should 

be added that enhance oversight regarding documenting progress towards 

the specific goals of the investigations. 

This recommendation can be closed when we receive evidence that the DEA 

has implemented a process through which the SARC documents its robust 
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examination of each AGEO’s duration, any significant periods without 

undercover activity, and accomplishment of goals.

4. Ensure that AGEO 6-month reauthorization requests are submitted to 

the DAAG for review and approval, as required by the Department.

Resolved. The DEA concurred with this recommendation. In its response, 

the DEA stated that it is working with the Deputy Assistant Attorney General 

(DAAG), who is also coordinating with ODAG and Department representatives 

who sit on the SARC, to develop internal guidance for the review of AGEO 

bi-annual (6-month) reauthorization requests. Once that guidance is 

developed and provided to the DEA, the DEA will implement it and provide 

the OIG with documentation of the revised process. 

This recommendation can be closed when the DEA provides evidence that it 

has ensured that AGEO 6-month reauthorization requests are submitted to 

the DAAG for review and approval, as required by the Department.

5. Develop a process for field offices to submit formal requests for SARC 

evaluation and DAAG approval for any change in either the direction 

or objectives of an approved undercover operation, including the 

addition or removal of high-level AGEO targets.

Resolved. The DEA concurred with this recommendation. The DEA stated 

that it is coordinating with the DAAG and members of the SARC, who are 

coordinating with ODAG, to assess procedures for evaluating changes in the 

direction or objectives of approved undercover operations, including the 

addition or removal of high-level AGEO targets. Following the outcome of 

this coordination, the DEA stated that it will implement any new guidance 

developed and provide the OIG with documentation of the assessment or 

revised process. 

This recommendation can be closed when the DEA provides evidence that it 

has developed a process for field offices to submit formal requests for SARC 

evaluation and DAAG approval for any change in either the direction or 

objectives of an approved undercover operation, including the addition or 

removal of high-level AGEO targets. If, upon further assessment it is 

determined that no changes are necessary, then the DEA must provide 

documentation formalizing the DEA and Department’s determination. 

6. Evaluate DEA Analysis and Response Tracking System (DARTS) to 

ensure that AGEO data is accurate, complete, and consistent and 

determine the need for enhanced investigative resources and 

oversight of AGEOs to leverage DARTS information.

Resolved. The DEA concurred with this recommendation. The DEA stated 

that since September 2019, its Financial Investigations Section coordinated 

with its Office of Information Systems and requested necessary 
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improvements, immediate fixes, and long-term solutions to DARTS. 

According to the DEA, these ongoing and requested changes will help 

minimize inaccuracies and ensure that the Financial Investigations Section 

has complete and accurate information in order to provide improved 

oversight in undercover investigations. In addition, DEA acknowledged the 

need for enhanced investigative resources and increased leverage of DARTS 

information.

This recommendation can be closed when the DEA provides evidence of its 

evaluation of DARTS to ensure that AGEO data is accurate, complete, and 

consistent, as well as documentation associated with changes of the DARTS 

portal. In addition, the DEA should provide information regarding action 

taken in response to the need for increased resources to leverage DARTS 

information so that investigations and oversight of AGEOs could be 

enhanced. 

7. Develop and execute a plan to strategically exploit investigative 

information and evaluate connections between and among AGEOs to 

identify additional investigative targets (i.e., businesses and entities 

complicit in Drug Trafficking Organization (DTO) money laundering 

activities). 

Resolved. The DEA concurred with this recommendation. The DEA stated 

that in October 2019 the Financial Investigations Section organized a 

meeting between DEA personnel and other members of the DOJ law 

enforcement community to discuss and implement strategic enforcement 

initiatives based on our recommendations. The DEA stated that it will 

provide the OIG with a list of initiatives implemented as a result of this 

collaboration.

This recommendation can be closed when we receive evidence of the

development and execution of a plan to strategically exploit investigative 

information and evaluate connections between and among AGEOs to identify 

additional investigative targets (i.e., businesses and entities complicit in DTO 

money laundering activities).

8. Ensure that DEA personnel sufficiently document the actions and 

outcomes of significant AGEO-related investigative actions, especially 

when these actions involve a law enforcement partner.

Resolved. The DEA concurred with this recommendation. The DEA stated 

that it has developed a new module that delineates seizures stemming from 

various enforcement activities, which will be included in all bi-annual 

reauthorization applications and reports. The DEA expects this module to 

help standardize statistical reporting across the program. Additionally, the 

DEA stated that beginning in 2020, it will hold two annual AGEO 

Administrative Conferences to disseminate to field offices guidance on 

documenting enforcement actions involving a law enforcement partner.
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This recommendation can be closed when we have evidence that the new 

module is operational and that its use ensures that DEA personnel are 

sufficiently documenting the actions and outcomes of significant 

AGEO-related investigative actions, including those actions involving a law 

enforcement partner. 

9. Formalize in policy additional vetting procedures and oversight 

processes of Confidential Sources (CSs) used in AGEOs.

Resolved. The DEA concurred with this recommendation. The DEA stated 

that the April 2018 AGEO policy requires all CSs utilized under AGEOs to 

undergo quarterly financial checks that will be verified by the Office of 

Inspections. Although we noted that the DEA has included quarterly financial 

checks in its April 2018 AGEO policy, there is no requirement for the Office of 

Inspections to ensure compliance. The DEA’s response also stated that it will 

continue to review the process and will apprise the OIG of any additional 

policy changes made to further formalize the CS vetting and oversight 

process.

This recommendation can be closed when we receive evidence that the DEA 

has formalized, in policy, the additional oversight processes for CSs used in 

AGEOs. 

10. Enhance the requirements for reauthorization requests of ongoing 

AGEOs to include transparency in the identification of amounts 

laundered and specificity in the reporting of seizures, including the 

relationship between the funds laundered and the amounts identified

as seized (i.e., direct seizure, lead passed, foreign counterpart 

seizure). 

Resolved. The DEA concurred with this recommendation. The DEA stated 

that it has started including into its AGEO reauthorization requests and 

quarterly reports statistical summaries that break down seizures by the 

investigating group and other distinguishing criteria. 

This recommendation can be closed when we have evidence that the DEA has 

implemented the updated 6-month AGEO reauthorization requests to include 

transparency in the identification of amounts laundered and specificity in the 

reporting of seizures, including the relationship between the funds laundered 

and the amounts identified as seized (i.e., direct seizure, lead passed, foreign 

counterpart seizure).
63

11. Begin tracking investigative and legal outcomes of the undercover 

activities performed during the authorized operation, including the 

results of prosecution referrals from investigative leads. 

Resolved. The DEA concurred with this recommendation. In its response, 

the DEA stated that the new AGEO module, referenced in Recommendation 

Numbers 8 and 10, will require reporting of prosecutorial outcomes. The 

DEA stated that it will disseminate to the field detailed guidance on this 

matter during the two AGEO Administrative Conferences it intends to hold

during 2020.

This recommendation can be closed when we receive evidence that through 

the new AGEO module, the DEA has begun tracking investigative and legal 

outcomes of the undercover activities performed during the authorized 

operation, including the results of prosecution referrals from investigative 

leads.

12. Enhance the process related to transnational activity to ensure it 

maintains adequate documentation of required approvals.

Resolved. The DEA concurred with this recommendation. The DEA stated 

that it has updated the AGEO policy and mandated that written 

documentation of all required approvals be obtained prior to the 

authorization of all operations. The DEA will maintain these approvals in the 

transaction file for the approved operation and the Office of Inspections will 

verify the documents during its periodic reviews. Additionally, the DEA 

stated that it disseminated the updated policy directly to all office heads and

will address the new policy changes during the two AGEO Administrative 

Conferences that are supposed to occur in 2020. 

This recommendation can be closed when the DEA provides evidence that its 

updated AGEO policy, training, and reviews have enhanced its process to 

ensure it maintains adequate documentation of required approvals.

13. Evaluate the resources devoted to administrative oversight of 

investigations involving virtual currency and establish policies 

setting firm internal controls, risk mitigation and deconfliction 

techniques, and appropriate record keeping practices.

Resolved. The DEA concurred with this recommendation. The DEA stated 

that in 2018 the DEA conducted a review of its cyber investigative needs, to 

include virtual currency investigations, and established a cyber-section in 

January 2019. The DEA also stated that this section has received staffing 

authority to meet its needs to coordinate across all cyber-enabled 

components within headquarters and in the field. Moreover, the DEA stated 

that it has developed appropriate methods to control and audit undercover 

transactions as they relate to virtual currency. The DEA has also maintained 

a virtual currently-related standard operating procedure that was most 
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recently updated in October 2019. The DEA noted that an overarching policy 

is currently being developed and will ultimately be incorporated into the DEA 

AGEO policy.

This recommendation can be closed when the DEA provides evidence that it 

has evaluated resources for investigations involving virtual currency, and 

that it has formalized and disseminated policies setting firm internal controls, 

risk mitigation and deconfliction techniques, and appropriate record keeping 

practices. 

14. Update AGEO oversight procedures to review PGI activity and 

confirm that PGI is not commingled, transferred, or misappropriated. 

In addition, the DEA should implement an internal control to ensure 

the use of PGI ceases when AGEO authorization expires. 

Resolved. The DEA concurred with this recommendation. The DEA stated 

that the April 2018 AGEO policy addresses presumptively reasonable and 

necessary expenses and prohibits commingling of AGEO PGI among cases or 

operations. The DEA also stated that its April 2020 AGEO policy now requires

the Inspections Division to review AGEOs with a final audit to rectify any PGI 

expenditure prior to the operation being closed. 

This recommendation can be closed when the DEA provides evidence that the 

updated AGEO policy contains oversight and internal control procedures to 

review PGI activity and confirm that PGI is not commingled, transferred, 

misappropriated, or used after AGEO authorization expires.

15. Implement the preventative and detective internal controls over PGI 

(developing PGI spend plans, timely 90-day reviews, and quarterly 

headquarters examination of financial activity) as prescribed by the 

Department’s Risk Mitigation Policy Memorandum, the AG FBI 

Undercover Guidelines, and the Agents Manual. 

Resolved. The DEA concurred with this recommendation. The DEA stated 

that the April 2020 AGEO policy includes a process for the Financial 

Investigations Section to receive and review quarterly consolidations of the 

monthly expense reports for all AGEOs to verify that all expenditures were 

reasonable and necessary to the operation. The DEA stated that signed 

copies of these reviews will be maintained internally and reviewed by the 

Inspections Division to verify all financial activity during the 90-day reviews 

and annual inspections. However, the DEA’s response does not address the 

requirement for developing PGI spend plans. 

This recommendation can be closed when the DEA provides the updated 

AGEO policy that incorporates preventative and detective internal controls 

over PGI (developing PGI spend plans, timely 90-day reviews, and quarterly 

headquarters examination of financial activity) as prescribed by the 

Department’s Risk Mitigation Policy Memorandum, the AG FBI Undercover 
65

Guidelines, and the Agents Manual. The DEA should also provide evidence 

that these requirements have been implemented. 

Recommendations for the Department

16. Formally determine whether the policies within the AG FBI 

Undercover Guidelines apply, in their entirety or in specific instances, 

to all DOJ law enforcement components; or if the Department must 

issue new guidance to govern undercover operations that are 

initiated by DOJ law enforcement components outside of the FBI. 

Resolved. The Department concurred with this recommendation. The 

Department stated that it has initiated meetings with the DEA to address the 

applicability of the AG FBI Undercover Guidelines to the DEA, and more 

generally, will assess the application of these Guidelines to DOJ law 

enforcement components.

This recommendation can be closed when we receive evidence that the 

Department formally determined whether the policies within the AG FBI 

Undercover Guidelines apply, in their entirety or in specific instances, to all 

DOJ law enforcement components; or if the Department must issue new 

guidance to govern undercover operations that are initiated by DOJ law 

enforcement components outside of the FBI.

17. Ensure that the DEA’s policies reflect necessary measures and 

controls stipulated in applicable Department undercover guidance.

Resolved. The Department concurred with this recommendation. The 

Department reiterated that it is determining the applicability of the AG FBI 

Undercover Guidelines to the DEA. The Department stated that it will ensure 

that DEA policies are in compliance and noted that the DEA has undertaken 

significant steps to ensure risks associated with AGEOs are appropriately 

managed.

This recommendation can be closed when ODAG provides evidence that it 

has ensured that the DEA’s policies reflect necessary measures and controls 

stipulated in applicable Department undercover guidance. 

18. Evaluate and determine whether the 2006 DAAG exemptions for 

Shelf and Border AGEOs, given requirements in Department-wide 

guidance on undercover operations, should remain and coordinate 

with the DEA on the results.

Resolved. The Department concurred with this recommendation. The 

Department stated it will confer internally and with the DEA to determine 

whether the 2006 DAAG exemptions for Shelf AGEOs should remain. 
66

This recommendation can be closed when we receive evidence that the 

Department has evaluated and determined whether the 2006 DAAG 

exemptions for Shelf and Border AGEOs, given requirements in Departmentwide guidance on undercover operations, should remain and coordinate with 

the DEA on the results.

19. Determine whether the USAOs have implemented a process for 

coordinating with other prosecutorial offices when sensitive 

investigative activities, such as the DEA’s AGEOs, are likely to span 

jurisdictional boundaries, as required by the Department Risk 

Mitigation Policy Memorandum.

Resolved. The Department concurred with this recommendation. The 

Department stated that the Criminal Division participants on the SARC, 

including the DAAG, have reviewed the process to obtain “no objection” 

letters for AGEOs that span jurisdictional boundaries, and are formulating a 

new and more efficient process for coordinating these AGEOs. 

This recommendation can be closed when the Department provides evidence 

that, as a result of the Criminal Division’s review and updates, the USAOs 

have implemented a process for coordinating with other prosecutorial offices 

when sensitive investigative activities, such as DEA’s AGEOs, are likely to 

span jurisdictional boundaries, as required by the Department Risk Mitigation 

Policy Memorandum.
U.S. DEPARTMENT OF JUSTICE OFFICE OF THE INSPECTOR GENERAL

950 Pennsylvania Avenue, NW

Washington, DC 20530-0001 

Also at Oversight.gov

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statutorily created independent entity whose mission is to detect and deter 

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