INTERNATIONAL 

REMITTANCES 

Money Laundering 

Risks and Views on 

Enhanced Customer 

Verification and 

Recordkeeping 

Requirements

Report to Congressional Requesters

January 2016

GAO-16-65

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-16-65, a report to 

congressional requesters

INTERNATIONAL REMITTANCES

Money Laundering Risks and Views on Enhanced 

Customer Verification and Recordkeeping 

Requirements

Why GAO Did This Study

The World Bank has estimated 

remittance outflows will reach $586

billion in 2015. However, some reports 

have indicated that remittance 

providers may be vulnerable to money 

laundering. Remittance providers are 

generally subject to both federal and 

state oversight. 

GAO was asked to examine the 

potential illicit uses of remittances and 

assess whether requiring remittance 

senders to provide certain types of 

identification at a threshold below the 

current $3,000 level would be useful 

for U.S. AML efforts. This report 

examines (1) BSA remittance

requirements that exist for remittance 

providers and related challenges that 

remittance providers face in complying 

with these requirements; (2) money 

laundering risks that remittances pose;

and (3) stakeholders’ views on the 

extent to which requiring remittance 

providers to verify identification and 

collect information at a lower dollar 

transaction amount than is currently 

required, or adding a requirement to 

verify legal immigration status, would 

assist federal agencies’ AML efforts. 

GAO reviewed laws and regulations, 

analyzed compliance data, and 

interviewed stakeholders (Financial 

Crimes Enforcement Network, 

regulators, remittance providers, law 

enforcement, and industry and other 

associations). GAO also interviewed a 

nongeneralizable selection of five 

money transmitters and four depository 

institutions based on factors such as 

remittance volume. 

GAO is not making recommendations 

in this report. Agencies provided 

technical comments, which we 

incorporated as appropriate.

What GAO Found

Financial institutions, such as money transmitters and depository institutions that 

provide remittance transfers—funds sent from individuals in one country to a 

recipient in another country—are subject to anti-money laundering (AML) 

requirements under the Bank Secrecy Act (BSA). For example, these remittance 

providers must report suspicious and other transactions, and obtain and record 

information for each funds transfer of $3,000 or more. Remittance providers GAO 

spoke with identified challenges related to BSA compliance—including 

monitoring large amounts of remittance data to identify and prevent illicit activity, 

and keeping up to date with the changing behavior of criminals. Further, some

banks have ended account relationships with money transmitters—which need 

bank accounts to conduct business. Money transmitters going out of business 

could lead remittance senders to use informal methods that are less detectable. 

Remittances can pose money laundering risks, as funds related to illicit activity 

may go undetected due to the large volume of transactions or remittance 

providers’ inadequate oversight of the various entities involved. Stakeholders 

identified money laundering risks associated with customers, geographic 

location, products, and agents (entities authorized to provide remittances) that 

may fail to follow BSA requirements. Remittances can be used to launder 

proceeds from different types of criminal activities, including drug trafficking and 

human smuggling, through methods such as structuring. For example, as the 

figure shows, a sender may structure remittances by breaking up a transaction

into multiple transactions to avoid the $3,000 funds transfer threshold. 

Example of Structuring to Launder Illicit Funds

Many stakeholders said that a lower dollar threshold would benefit agencies’

AML efforts, but verifying remitters’ legal immigration status might not benefit 

such efforts. Law enforcement officials GAO spoke with said that a centralized 

database of remittances—one potential result of a proposed rule that would 

require remittance providers to report certain remittances data at a low dollar 

threshold—would be useful in assisting AML efforts. Larger remittance providers

generally did not object to lowering the funds transfer threshold because they

had already self-imposed lower thresholds. But bank regulators and some

stakeholders said that a lower threshold could create additional recordkeeping 

requirements and costs for smaller providers and for customers. Stakeholders 

generally expressed concern that a requirement to check the legal status of a 

remittance sender might not assist AML efforts because it could lead senders to 

use less detectable forms of transmitting money. 

View GAO-16-65. For more information, 

contact Lawrance L. Evans, Jr. at (202) 512-

8678 or evansl@gao.gov. 

January 2016
Page i GAO-16-65 Remittance Providers

Letter 1

Background 5

Bank Secrecy Act Requirements and Compliance-Related 

Challenges 16

Remittance Transfers Pose Money Laundering Risks 31

Many Stakeholders Supported Lowering the Funds Transfer 

Threshold, but Cited Concerns with Verifying Remitters’ Legal 

Immigration Status 40

Agency Comments and Our Evaluation 45

Appendix I Objectives, Scope, and Methodology 47

Appendix II IRS Bank Secrecy Act Examinations of Money Transmitters 51

Appendix III Comments from the National Credit Union Administration 52

Appendix IV Comments from the United States Postal Service 53

Appendix V GAO Contact and Staff Acknowledgments 54

Table

Table 1: Summary of IRS Bank Secrecy Act Examinations of 

Money Transmitters, Fiscal Years 2013-2014 51

Figures

Figure 1: Example of a Money Transmitter Cash-to-Cash 

Remittance Transfer 7

Figure 2: Example of a Bank-to-Bank Remittance Transfer 8

Figure 3: Three Stages of Money Laundering 11

Figure 4: Example of Structuring to Launder Illicit Funds 35

Contents
Page ii GAO-16-65 Remittance Providers

Abbreviations

ACH automated clearing house 

AML 

BSA

CFPB

DHS

DOJ

FDIC

anti-money laundering 

Bank Secrecy Act 

Consumer Financial Protection Bureau

Department of Homeland Security

Department of Justice

Federal Deposit Insurance Corporation

Federal Reserve Board of Governors of the Federal Reserve 

FFIEC Federal Financial Institutions Examination 

Council 

FinCEN Financial Crimes Enforcement Network 

FTC Federal Trade Commission

IRS Internal Revenue Service

NCUA National Credit Union Administration

OCC Office of the Comptroller of the Currency

Treasury Department of the Treasury 

USPS United States Postal Service

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Page 1 GAO-16-65 Remittance Providers

441 G St. N.W.

Washington, DC 20548

January 15, 2016

The Honorable David Vitter

United States Senate

The Honorable Tom Price

Chairman

Committee on the Budget

House of Representatives

The World Bank has estimated global remittances for 2015 to be $586 

billion with expected growth of 4.1 percent in 2016.1 These remittance 

transfers—funds sent from individuals in one country to a recipient in 

another country—have gained attention over the years, largely because 

they are an important source of funds for some countries.2 For many of 

the receiving countries, remittances are the largest source of foreign 

currency, often amounting to more than official foreign assistance from 

governmental international aid organizations and developed countries 

such as the United States. These transfers are generally considered a 

stable source of funds for receiving countries. Both nondepository and 

depository financial institutions provide money transfer services. 

Nondepository institutions providing such services are generally known as 

money transmitters. Depository financial institutions—such as banks and 

credit unions—also provide remittance transfer services. However, some 

international and U.S. agency reports have indicated that remittance 

providers may be vulnerable to money laundering and other illicit 

activities. For example, the Financial Action Task Force—an 

intergovernmental body developing and promoting policies to combat 

money laundering and terrorist financing—has identified instances in 

which entities providing remittance services, like other financial 

1

World Bank Group, “Remittances growth to slow sharply in 2015, as Europe and Russia 

stay weak; pick up expected next year,” (Apr. 13, 2015). We have ongoing work underway 

that will be reporting on the reliability of remittance estimates in a separate report that we 

plan to issue in fiscal year 2016. 

2

Definitions of remittances vary based on the transfer method, purpose, and provider—that 

is, the entity transferring the funds for the sender. For purposes of this report, we define 

remittances as the transfer of funds from consumers in the United States to persons or 

businesses in a foreign country. 

Letter
Page 2 GAO-16-65 Remittance Providers

institutions, may have unintentionally or intentionally participated in 

money laundering.3

The United States has taken steps to regulate remittance providers and 

prevent money laundering. The Bank Secrecy Act (BSA) is an important 

tool in federal law enforcement efforts to detect and deter the use of 

financial institutions (including those that send remittances) for criminal 

activity, including money laundering and terrorist financing.4 The Financial 

Crimes Enforcement Network (FinCEN), a bureau within the Department 

of the Treasury (Treasury), is responsible for administering the BSA. The 

BSA and implementing regulations generally require depository and other 

financial institutions—including money transmitters—to collect and retain 

various records of customer transactions, verify customers’ identities in 

certain situations, maintain anti-money laundering (AML) programs, and 

report suspicious and other transactions. For example, financial 

institutions that provide money transfer services must obtain and retain 

specific information, such as name and address of the sender, for each 

transfer of $3,000 or more.5 For purposes of this report, we refer to the 

funding level at which requirements are imposed for obtaining 

identification and other information on remittances as the funds transfer 

threshold. FinCEN has published an advance notice of proposed 

rulemaking and a proposed rule related to the funds transfer threshold 

amount and related identification requirements.6 Legislation has also 

been proposed that, if enacted, could affect identification requirements by 

 

3

Financial Action Task Force, Money Laundering through Money Remittance and 

Currency Exchange Providers (June 2010), 7. 

4

Bank Secrecy Act, titles I and II of Pub. L. No. 91-508, 84 Stat. 1114 (1970) (codified as 

amended at 12 U.S.C. §§ 1829b, 1951-1959, and 31 U.S.C. § 5311 et seq.). 

5

31 C.F.R. § 1020.410(a) (recordkeeping requirements for banks); 31 C.F.R. § 

1010.410(e) (recordkeeping requirements for nondepository financial institutions). For 

simplification purposes we use the term “funds transfer” for both depository and 

nondepository institutions in this report. Under the BSA, the term ‘‘funds transfer” is used 

in the context of depository institutions, and the term ‘‘transmittal of funds’’—which 

includes funds transfers—is used in the context of nondepository financial institutions. See

31 C.F.R. §§ 1010.100(w), (ddd), 1010.410(e), 1020.410(a). 

6

See Threshold for the Requirement to Collect, Retain, and Transmit Information on Funds 

Transfers and Transmittals of Funds, Advance Notice of Proposed Rulemaking, 71 Fed. 

Reg. 35,564 (June 21, 2006). The 2006 advance notice of proposed rulemaking was 

published jointly with the Board of Governors of the Federal Reserve System (Federal 

Reserve). See also Cross-Border Electronic Transmittals of Funds, Notice of Proposed 

Rulemaking, 75 Fed. Reg. 60,377 (Sept. 30, 2010). 
Page 3 GAO-16-65 Remittance Providers

requiring financial institutions that provide remittance services to request 

certain identification for remittance transfers at nearly any dollar amount. 

For example, the Remittance Status Verification Act would require 

remittance transfer providers to verify the legal status under the U.S. 

immigration laws of remittance senders and impose a fine on those who 

are unable to provide proof of their immigration status.7

You asked us to examine potential illicit uses of remittance transfers and 

determine, to the extent possible, whether information that would be 

collected under the proposed Remittance Status Verification Act would 

assist federal agencies’ AML efforts. This report examines (1) BSA 

remittance requirements that exist for remittance providers and related 

challenges that remittance providers face in complying with these 

requirements; (2) the money laundering risks that remittance transfer 

methods pose; (3) stakeholders’ views on the extent to which requiring 

money transmitters and depository institutions to verify identification and 

collect information at a lower dollar transaction amount than is currently 

required, or adding a requirement to verify legal immigration status, would 

assist federal agencies’ AML efforts.8

 

7

Remittance Status Verification Act of 2015, S. 79, 114th Cong. (2015). The Remittance 

Status Verification Act would amend the Electronic Fund Transfer Act, which provides a 

consumer protection framework for remittance transfers made by senders in the United 

States to recipients in a foreign country. The Electronic Fund Transfer Act defines a 

“remittance transfer provider” as “any person or financial institution that provides 

remittance transfers for a consumer in the normal course of its business, whether or not 

the consumer holds an account with such person or financial institution.” 15 U.S.C. § 

1693o-1(g)(3). The Electronic Fund Transfer Act defines a “remittance transfer” as the 

“electronic transfer of funds requested by a sender located in any state to a designated 

recipient that is initiated by a remittance transfer provider, whether or not the sender holds 

an account with the remittance transfer provider,” but does not include small value 

transactions in the amount of $15 or less. 15 U.S.C. § 1693o-1(g)(2); 12 C.F.R. § 

1005.30(e). 

8

We obtained stakeholder views on both (1) lowering or eliminating the reporting dollar 

threshold for collecting and retaining information on funds transfers and (2) imposing a 

requirement that individuals document immigration status for funds transfers beginning at 

a near-zero threshold. Because imposing these requirements beginning at a low dollar 

threshold may result in similar challenges and benefits for law enforcement, stakeholders’ 

views on a lower dollar threshold for required BSA recordkeeping may inform our 

discussion of the potential effects of the immigrant status documentation requirement. We 

will be considering the potential effects of imposing a fine on remittance senders unable to 

show proof of legal immigration status in greater depth in a separate report. 
Page 4 GAO-16-65 Remittance Providers

To examine BSA remittance requirements that exist for remittance 

providers, we reviewed relevant laws and regulations. We obtained 

information from providers on their efforts to comply with BSA remittance 

requirements and the challenges they faced in doing so. We also 

obtained and analyzed available data on money transmitters’ compliance 

with BSA-related requirements. We assessed the reliability of data by 

reviewing related documentation of the database from which the data 

come and also through interviews with agency officials, and found the 

data to be reliable for purposes of this report. To examine the money 

laundering risks posed by remittance transfers, we reviewed and 

summarized reports and documents that federal law enforcement, 

regulatory agencies, international organizations, and remittance providers 

maintain on money laundering through remittance transfers. To examine 

stakeholders’ views on the extent to which lowering the funds transfer 

threshold for complying with recordkeeping requirements or adding a 

legal immigration status verification requirement would assist agencies’ 

AML efforts, we reviewed an advance notice of proposed rulemaking, a 

proposed rule, and proposed legislation related to remittance transfers—

including public comment letters available on the advance notice. For all 

objectives, we interviewed officials from FinCEN, federal law enforcement 

entities, federal and state regulators, industry associations, money 

transmitters, depository institutions, and policy and consumer advocacy 

groups. We judgmentally selected a cross-section of money transmitters 

and depository institutions that included five nondepository money 

transmitters and four depository institutions based on a number of factors, 

including the volume of remittances and diversity of countries serviced. 

Appendix I describes our objectives, scope, and methodology in greater 

detail.

We conducted this performance audit from October 2014 to December

2015 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.
Page 5 GAO-16-65 Remittance Providers

Remittance transfers include many types of international transfers

including cash-to-cash money transfers, international wire transfers, some 

prepaid card transfers, and automated clearing house (ACH) 

transactions.9 According to a Treasury report on money laundering risks, 

90 percent of households in the United States have an account with a 

depository institution such as a bank, thrift, or credit union.10 Regardless, 

many people, particularly immigrants, use money services businesses to 

send money abroad because of convenience, cost, familiarity, or tradition. 

Money services businesses, which do not include depository institutions, 

are persons doing business in one or more of the following capacities, 

subject to exceptions:11

• Dealer in foreign exchange

• Check casher

• Issuer or seller of traveler’s checks or money orders

• Provider or seller of prepaid access

• Money transmitter12

• United States Postal Service (USPS)13

 

9

The ACH is a system that clears and settles batched electronic transfers for participating 

depository institutions. International ACH makes up a small but growing portion of 

remittance transfers. 

10Department of the Treasury, 2015 National Money Laundering Risk Assessment

(Washington, D.C.). 

1131 C.F.R. § 1010.100(ff). 

12FinCEN regulations define a money transmitter as a person that provides money 

transmission services, which means the acceptance of currency, funds, or other value that 

substitutes for currency from one person and the transmission of currency, funds, or other 

value that substitutes for currency to another person or location by any means. The 

definition of money transmitter also includes any other person engaged in the transfer of 

funds. 31 C.F.R. § 1010.100(ff)(5). For purposes of this report, we focus on the money 

transmitter subset of money services businesses, and thus use the term “money 

transmitter” rather than “money services business” throughout the report. Money 

transmitters generally provide funds transfers, including international remittances, which 

are the focus of this report. 

13Although USPS is treated as a separate subset of money services businesses from 

money transmitters under FinCEN regulations, we use the term “money transmitter” as 

including traditional money transmitters as well as USPS for the purposes of this report 

because USPS provides some comparable services to those money transmitters provide. 

Background

Remittance Transfer 

Methods
Page 6 GAO-16-65 Remittance Providers

There were about 29,000 registered money services businesses in the 

United States as of September 2015.14 They typically work through 

agents—separate business entities generally authorized to, among other 

things, send and receive money transfers.15 According to FinCEN 2011 

survey data, the most frequent activity agents conducted was money 

transmitter services—transferring funds from one person to another 

person or location.

Remittances can be sent through, among others, money transmitters and 

depository institutions. Historically, consumers have primarily chosen to 

send remittances through money transmitters. Most remittance transfers 

are initiated in person at retail outlets that offer these services. Money 

transmitters generally operate through their own retail store fronts, or 

through grocery stores, financial services outlets, convenience stores, 

and other retailers that serve as agents. Depository institutions generally 

conduct remittances through their local branches. In one type of common 

money transmitter transaction—known as a cash-to-cash transfer (see 

fig. 1)—a sender can walk into a money transmitter agent location and 

provide cash to cover the transfer amounts and fees, and senders 

generally must provide basic information about themselves and the 

recipient (typically a name, address, and phone number) at the time of the 

transfer request. The agent processes the transaction, and the money 

transmitter’s headquarters screens it for BSA compliance. The money can 

then be transferred to a recipient, usually through a distributor agent in 

the destination country. The money can be wired through the money 

transmitter’s bank to the distributor agent’s bank, or transferred by other 

means to a specified agent in the recipient’s country. The distributor 

 

14Each money services business is generally required to register with FinCEN, and include 

in its registration, among other things, a list of its agents. See 31 C.F.R. § 1022.380(a). 

15A money services business enters into a service agreement with the agent. Many of the 

terms of the agreement are generally stipulated by the state requirements where the 

money services business is located. Among other features, the agreement typically 

identifies the rights and obligations of both parties, as well as responsibilities for complying 

with all state and federal laws. In this report, the term “agent” does not denote a particular 

legal relationship. It includes legal agents, authorized delegates, or affiliates that act on 

behalf of a money transmitter in some capacity. Financial Crimes Enforcement Network 

and Internal Revenue Service, Bank Secrecy Act/Anti-Money Laundering Examination 

Manual for Money Services Businesses (December 2008).
Page 7 GAO-16-65 Remittance Providers

agent pays out cash to the recipient in either U.S. dollars or local 

currency.16

Figure 1: Example of a Money Transmitter Cash-to-Cash Remittance Transfer

Note: Money transmitters often instruct agents to pay out funds to recipients before the funds are sent 

to the foreign location.

Figure 2 shows a bank-to-bank remittance transfer. The sender requests 

that money be removed from a bank account and transferred directly to 

the recipient’s bank account. Figure 2 is an example of a simple funds 

transfer between two customers with only the remittance sender’s and 

remittance recipient’s banks involved. As the number of institutions 

involved increases, the transfer scenarios get more complicated. These 

more complicated scenarios are more common in the context of 

remittances, particularly if an originator’s institution does not have a 

branch in the recipient’s foreign location. In this case, one financial 

institution may rely upon established business relationships with 

 

16Money transmitters often instruct agents to pay out funds before the funds are sent to the 

foreign location. Money may be disbursed to the recipient in U.S. dollars or local currency 

depending on the destination, the money transmitter’s service offering, and the preference 

of either the sender or the recipient.
Page 8 GAO-16-65 Remittance Providers

additional financial institutions to complete the transaction—known as a 

correspondent banking relationship.17

Figure 2: Example of a Bank-to-Bank Remittance Transfer

Note: This is an example of a simple funds transfer. More complicated transfers may involve more 

entities, such as correspondent banks.

According to a 2011 report on remittance transfers from the Consumer 

Financial Protection Bureau (CFPB), industry participants and 

researchers report that cash-to-cash transfers made through money 

transmitters continue to account for the majority of personal transfers, 

rather than transfers through debits from or direct deposits to accounts 

held at depository institutions or credit unions.18 Using state licensing 

data, CFPB estimated that money transmitters sent from the United 

States about 150 million international money transfers in 2012, with an 

 

17The financial industry commonly uses many terms to describe these additional financial 

institutions. These terms include “intermediary” financial institution, “instructing” financial 

institution, “sender’s correspondent,” and “receiver’s correspondent.” For purposes of this 

study, we use the term “correspondent” to describe these additional financial institutions. 

Financial Crimes Enforcement Network, Feasibility of a Cross-Border Electronic Funds 

Transfer Reporting System under the Bank Secrecy Act (October 2006). 

18Consumer Financial Protection Bureau, Report on Remittance Transfers (July 20, 2011). 
Page 9 GAO-16-65 Remittance Providers

estimated $49 billion total market value.19 In contrast, according to 

reported depository institution data, depository institutions sent about 13 

million international money transfers in calendar year 2014.20 Although 

CFPB estimates show that money transmitters are responsible for 

sending the great majority of the remittance transfers, CFPB believes that 

the typical size of transfers sent by depository institutions is generally 

larger than the typical size of transfers sent by a money transmitter. A 

typical transfer sent by a depository institution may be in the thousands of 

dollars, while CFPB estimates that the typical size of remittance transfers 

sent by money transmitters is in the hundreds of dollars.21 CFPB 

estimates from 2012 state supervisory data showed that the average 

transaction size for money transmitter remittances originating in the 

United States was about $300.22

As consumers and money transmitters become more technologically 

sophisticated, money transmitters have started offering an increasing 

range of other transfer methods. For example, according to the 2011 

CFPB report on remittance transfers, several money transmitters have 

begun to permit consumers to transfer or receive money through 

accounts tied to e-mail addresses or mobile phone numbers (often called 

Internet or mobile phone “wallets”). According to a 2015 World Bank news 

release, despite its potential to lower costs, the use of mobile technology 

in cross-border transactions remains limited.23

Remittance senders use a variety of other methods and products to send 

funds, such as prepaid cards sent by USPS; or the physical movement of 

money outside of the United States—such as using courier services that 

 

19See 79 Fed. Reg. 5302, 5306-07 n.37 (Jan. 31, 2014). 

20Data for depository institution international money transfers were derived from calendar 

year 2014 call-report data reported by banks and credit unions on the number of 

remittance transfers originated. 

21See 79 Fed. Reg. 55,970, 55,972 (Sept. 18, 2014). 

22See 79 Fed. Reg. 5302, 5314 n.85 (Jan. 31, 2014). 

23World Bank Group, “Remittances growth to slow sharply in 2015, as Europe and Russia 

stay weak; pick up expected next year,” (Apr. 13, 2015). 

Other Methods of 

Remittance Transfers
Page 10 GAO-16-65 Remittance Providers

carry funds across the border.24 One other method includes international 

money orders sent through USPS. Remittance senders can mail 

international money orders to about 30 countries through USPS’s 

international mail services. Recipients can then cash these money orders 

either at local post offices or banks in destination countries.

Other methods for facilitating remittances include informal value transfer 

systems. Informal value transfer systems are often used in places where 

formal financial transactions are unavailable, expensive, or unreliable. A 

common type of informal value transfer is a hawala. The components of 

hawala that distinguish it from other remittance systems are trust and the 

extensive use of connections such as family relationships or regional 

affiliations.25 Under the hawala system, a customer hands cash to a 

person known as a “hawaladar” and requests that an equivalent amount 

be delivered in local currency to a recipient in a different country. The 

hawaladar then contacts a hawaladar in the receiving country and asks 

that the funds be disbursed to the recipient. In most cases, fees are 

factored into the exchange rate or the amount that is disbursed.

Money laundering—the process of making illegally gained proceeds 

appear legal—occurs in three distinct phases, as illustrated in figure 3. 

According to Treasury, placement occurs when illicitly obtained funds are 

introduced into the financial system. The funds are then separated from 

their criminal origins as they pass through several financial transactions in 

a process called layering. The next phase, integration, occurs when the 

funds are mixed with legitimately obtained money or used to acquire 

assets.

 

24Each person (including a bank) who physically transports, mails, or ships currency or 

monetary instruments in excess of $10,000 at one time out of or into the United States 

(and each person who causes the transfer) must file a Report of International 

Transportation of Currency or Monetary Instruments (FinCEN Form 105). See 31 U.S.C. § 

5316. 

25Financial Crimes Enforcement Network in cooperation with INTERPOL/FOPAC, The 

Hawala Alternative Remittance System and its Role in Money Laundering (January 2000). 

Money Laundering
Page 11 GAO-16-65 Remittance Providers

Figure 3: Three Stages of Money Laundering
Page 12 GAO-16-65 Remittance Providers

Money transmitters and depository institutions are both generally subject 

to federal and state oversight. In general, money transmitters must 

register with FinCEN and provide information on structure and 

ownership.26 Money transmitters also may be required to obtain licenses 

from states in which they are incorporated or conducting business. 

Depository institutions are regulated by state and federal banking 

regulators according to how they are chartered, and they provide related 

information when obtaining their charter.27

FinCEN often works in conjunction with federal and state regulators to 

support the examinations of both money transmitters and depository 

institutions. FinCEN issues regulations under the BSA and supports the 

examination functions performed by other federal regulators, including the 

federal banking regulators, the Internal Revenue Service (IRS), the 

Securities and Exchange Commission (SEC), and the Commodity 

Futures Trading Commission (CFTC).28 FinCEN also collaborates with 

federal and state banking regulators and has issued joint guidance and 

rules with federal regulators. FinCEN relies on the federal banking 

regulators to examine depository institutions within their respective 

jurisdictions for BSA compliance. The federal banking regulators require 

institutions under their supervision to establish and maintain a BSA 

 

2631 U.S.C. § 5330; 31 C.F.R. § 1022.380. 

27As part of the process for obtaining a charter from a federal or state chartering authority, 

a depository institution typically provides information about its structure and ownership, as 

well as financial and managerial information and plans for compliance with applicable 

laws, including the BSA. 

28For the purposes of this report, we use “federal banking regulators” to refer collectively to 

the regulators of depository institutions (federally insured banks, thrifts, and credit unions). 

Federal banking regulators include the Office of the Comptroller of the Currency (OCC), 

Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and National Credit 

Union Administration (NCUA). Although CFPB has supervisory and enforcement authority 

over federal consumer financial law for certain entities, including large banks and certain 

nondepository institutions, we did not include CFPB in our definition of federal banking 

regulators because CFPB does not examine for compliance with or enforce BSA. See 12 

U.S.C. §§ 5514, 5515. 

Federal and State 

Oversight of Financial 

Institutions
Page 13 GAO-16-65 Remittance Providers

compliance program.29 SEC has the authority to examine brokers and 

dealers in securities mutual funds for BSA compliance, while the CFTC 

has such authority with respect to futures commission merchants, 

introducing brokers in commodities.

30 The IRS has the authority to 

examine for BSA compliance financial institutions, such as money 

transmitters, that are subject to the BSA but are not currently examined 

by federal banking regulators for safety and soundness.31

To ensure consistency in the application of the BSA requirements, in 

2008 FinCEN issued a BSA examination manual for use in reviewing 

money transmitters, including for IRS and state regulators. Similarly, in 

2005 the federal banking regulators collaborated with FinCEN on a BSA 

examination manual that was issued by the Federal Financial Institutions 

Examination Council (FFIEC).32 The manual is intended for federal bank 

examiners conducting BSA examinations of depository institutions. It was 

updated most recently in 2014 to further clarify supervisory expectations 

and regulatory changes.33

29The appropriate federal prudential regulators are required to prescribe regulations

requiring the insured depository institutions under their supervision to establish and 

maintain procedures that are reasonably designed to assure and monitor the compliance 

of such institutions with the BSA. 12 U.S.C. §§ 1786(q), 1818(s). Regulations requiring the 

establishment of BSA compliance programs are codified at 12 C.F.R. § 21.21 (OCC); 12

C.F.R. § 208.63 (Federal Reserve); 12 C.F.R. §§ 326.8, 390.354 (FDIC); 12 C.F.R. § 

748.2 (NCUA). 

30See 31 C.F.R. § 1010.810(b)(6),(9). 

31Certain entities are specifically excluded from IRS’s examination authority, including 

brokers or dealers in securities, mutual funds, futures commission merchants, introducing 

brokers in commodities, and commodity trading advisors. 31 C.F.R. § 1010.810(b)(8). As 

noted above, those entities are subject to examination by SEC and CFTC. 

32FFIEC is a formal interagency body empowered to prescribe uniform principles, 

standards, and report forms for the federal examination of financial institutions by its 

member agencies and to make recommendations to promote uniformity in the supervision 

of financial institutions. The constituent agencies are the Federal Reserve, Federal 

Deposit Insurance Corporation, National Credit Union Administration, Office of the 

Comptroller of the Currency, Bureau of Consumer Financial Protection, and State Liaison 

Committee, which consists of five representatives from state regulatory agencies that 

supervise financial institutions. 

33Federal Financial Institutions Examination Council, Bank Secrecy Act/ Anti-Money 

Laundering Examination Manual (2014). 
Page 14 GAO-16-65 Remittance Providers

Depository institutions and money transmitters—in some states—are 

subject to safety and soundness examinations.34 These on-site 

examinations are done periodically and assess an institution’s adherence 

to laws and regulations such as the BSA, among other things. Federal 

banking regulators take a risk-based approach to BSA examinations—

that is, they target key areas of risk or specific problems. In our prior 

work, we found that the risk-based approach allowed regulators to apply 

the appropriate scrutiny and devote resources to business lines or areas 

within institutions that pose the greatest risk for BSA noncompliance.35

FinCEN has overall authority for enforcement and compliance under the 

BSA, and may impose civil penalties and issue injunctions to compel 

compliance with BSA.36 In addition, each of the federal banking regulators 

has the authority to initiate enforcement actions against supervised 

institutions for violations of law.37 Federal banking regulators can also 

impose civil money penalties for BSA violations.38 Under the BSA, IRS 

has certain authority that is delegated by FinCEN, and also has authority 

 

34Federal and state banking regulators conduct safety and soundness examinations of 

depository institutions. State regulators may examine depository institutions chartered 

within their jurisdiction. State regulators may also conduct safety and soundness 

examinations of nondepository financial institutions, such as money transmitters. The 

authority of states to regulate money transmitters varies from state to state. 

35GAO, Bank Secrecy Act: Opportunities Exist for FinCEN and the Banking Regulators to 

Further Strengthen the Framework for Consistent BSA Oversight, GAO-06-386 

(Washington, D.C.: Apr. 28, 2006), 5. 

3631 U.S.C. §§ 5320, 5321; 31 C.F.R. § 1010.810(a),(d). See 31 U.S.C. § 310; 67 

Treasury Order 180-01, Fed. Reg. 64,697 (Sept. 26, 2002) for the source of FinCEN’s 

overall enforcement and compliance authority.

37See 12 U.S.C. §§ 1786(b), (q) (federally insured credit unions), 1818(b), (c), (s) 

(depository institutions other than credit unions). 

38See 12 U.S.C. §§ 1786(k)(2) (federally insured credit unions), 1818(i) (depository 

institutions other than credit unions). 
Page 15 GAO-16-65 Remittance Providers

for investigating criminal violations.39 The Department of Justice (DOJ) 

prosecutes violations of federal criminal money laundering statutes and 

violations of the BSA, and several law enforcement agencies can conduct 

BSA-related criminal investigations.

We did not identify any current federal requirement to verify the legal 

immigration status of a remittance sender. Federal legislation has been 

proposed that would require such verification. For example, the 

Remittance Status Verification Act of 2015, if enacted, would require each 

remittance transfer provider to request from each remittance transfer 

sender proof of the sender’s legal status under U.S. immigration laws, 

and impose a fine on the sender—7 percent of the transfer amount—if the 

sender is unable to provide proof of legal immigration status.40 One state 

has passed and others have proposed legislation related to verifying the 

legal immigration status of a sender. In July 2009, Oklahoma enacted a 

law requiring that a fee be imposed on all remittances that originate in 

Oklahoma, and customers are entitled to an income tax credit equal to 

the amount they paid when filing an individual income tax return in 

Oklahoma with either a valid Social Security or taxpayer identification 

number.41 We also identified legislation that has been proposed—but not 

enacted—in several states between 2005 and October 2015 that would 

 

3931 C.F.R. § 1010.810(b)(8), (c)(2), (g). The authority to enforce certain provisions has 

been delegated from FinCEN to the Commissioner of Internal Revenue by means of a 

Memorandum Agreement between FinCEN and IRS, which provides that IRS has the 

authority to, among other things, assess and collect civil penalties under 31 U.S.C. § 5321 

and 31 C.F.R. § 1010.810; investigate possible civil violations of these provisions; and 

issue administrative rulings under 31 C.F.R. pt. 1010, subpt. G. See 31 C.F.R. § 

1010.810(g). IRS’s Small Business/Self-Employed Division conducts BSA compliance 

examinations of money transmitters, and can refer cases to IRS Criminal Investigations if 

the examiners believe that a willful criminal violation may be involved. IRS Criminal 

Investigations investigate, among other types of criminal violations, BSA criminal 

violations. 

40Remittance Status Verification Act of 2015, S. 79, 114th Cong. § 2 (2015). 

41Okla. Stat. Ann. tit. 63, § 2-503.1j (West). Although this law does not require providers to 

verify legal immigration status of remitters, as noted, it imposes a fee on all remittances, 

regardless of remitters’ legal status, and only those remitters who file income tax returns 

with the state may claim a credit for the fee paid. Since individuals who do not have proof 

of legal status are unlikely to have a valid Social Security number or tax identification 

number, they are unlikely to file income tax returns, and therefore unlikely to obtain a 

credit for the remittance fee paid. Legislation has been proposed in several other states 

that would impose a tax or fee on remittances with a later opportunity for a tax credit or 

refund—none of which have been enacted. 
Page 16 GAO-16-65 Remittance Providers

impose a fee on customers sending remittances who are unable to prove 

legal immigration status. For example, a bill that was introduced in Texas 

in March 2015 would require providers to charge a fee equal to 10 

percent of a money transmission made by individuals unable to show 

proof of legal immigration status.42

Money transmitters and depository institutions are subject to similar 

requirements under the BSA. They are generally required to design and 

implement a written AML program, report certain transactions to 

Treasury, and meet recordkeeping and identity documentation 

requirements for funds transfers of $3,000 or more. In our interviews, 

money transmitters and depository institutions indicated that they took 

steps to comply with these requirements, but identified some compliancerelated challenges. These challenges included the cost of compliance, 

and derisking—the practice of depository institutions ending their 

relationships with money transmitters (who need bank accounts to 

conduct business) to avoid perceived regulatory concerns about 

facilitating money laundering.

All financial institutions subject to the BSA—including money transmitters 

and depository institutions— are required to establish a written AML

program.43 At a minimum, each AML program must

• establish written AML compliance policies, procedures, and internal 

controls;

• designate an individual to coordinate and monitor day-to-day 

compliance;

 

42H.B. 4120, 84th Leg., Reg. Sess. (Tex. 2015).The bill was left pending in committee as 

of April 2015. 

4331 U.S.C. § 5318(h)(1). For specific AML program requirements for money services 

businesses, including money transmitters, see 31 C.F.R. § 1022.210; for banks, see 31 

C.F.R. § 1020.210. 

Bank Secrecy Act 

Requirements and 

Compliance-Related 

Challenges

Money Transmitters and 

Depository Institutions Are 

Subject to Similar BSA 

Requirements

AML Program Requirements
Page 17 GAO-16-65 Remittance Providers

• provide training for appropriate personnel; and

• provide for an independent audit function to test for compliance.44

FinCEN reported and the five money transmitters and four depository 

institutions we spoke with said that money transmitters and depository 

institutions had developed complex AML programs to meet FinCEN’s 

requirements. Among the tools used were detailed software systems to 

help identify and monitor high-risk customers, and agent oversight and 

training.

• Money transmitters, depository institutions, and their respective 

industry associations told us they—or their members—used software 

systems that aided in their AML compliance, including what they 

described as robust monitoring programs that routinely evaluate highrisk customers. For example, one representative of a money 

transmitter we interviewed stated that the transmitter created a 

comprehensive member profile for each customer that identified their 

typical transactions. This system also automatically prevents the 

processing of transactions that seem abnormal based on a customer’s 

profile. This representative indicated that they are developing a 

program that will provide a “risk score” for all customers as part of its 

efforts to conduct due diligence and monitor for suspicious activity.

• FinCEN has found that money transmitters have placed significant 

emphasis on AML program requirements including agent oversight, 

and consider compliance with BSA regulations part of their business 

models.45 According to FinCEN, money transmitters try to mitigate 

agent risk by conducting due diligence on potential agents, making 

on-site visits to existing agents, reviewing and monitoring 

transactions, and engaging in mystery shopping—that is, 

unannounced testing of agents for money transmitters. A 

 

44Financial Crimes Enforcement Network’s guidance, Frequently Asked Questions: 

Conducting Independent Reviews of Money Services Business Anti-Money Laundering 

Programs, FIN-2006-G012, September 22, 2006, clarifies that, for a money transmitter, an 

independent review is not a formal audit by a certified public accountant or third-party 

consultant. Accordingly, a money services business does not necessarily need to hire an 

outside auditor or consultant. The review may be conducted by an officer, employee, or 

group of employees, so long as the reviewer is not the designated compliance officer and 

does not report directly to the compliance officer. 

45Financial Crimes Enforcement Network, Financial Institutions Outreach Initiative: Report 

on Outreach to Money Services Businesses (July 2010). 
Page 18 GAO-16-65 Remittance Providers

representative from a money transmitter industry association with 

whom we spoke said that money transmitters placed significant 

emphasis on agent training as a part of the steps they took to comply 

with AML program requirements.

IRS BSA examination data for fiscal years 2013 and 2014 showed that 

failure to comply with AML program requirements was the most frequently 

cited violation of money transmitters. See appendix II for more 

information.

Depository institutions and money transmitters also must comply with 

certain reporting requirements. Money transmitters generally must file a 

suspicious activity report when a transaction involves or aggregates funds 

or other assets of at least $2,000 and they know, suspect, or have reason 

to suspect that the transaction is suspicious for one of several reasons.46

Depository institutions are required to file a suspicious activity report 

when a transaction conducted by, at, or through the institution involves or 

aggregates at least $5,000 in funds or other assets and the institution 

knows, suspects, or has reason to suspect that the transaction is 

suspicious.47

 

46Specifically, a suspicious transaction is one that involves funds derived from illegal 

activity or is intended or conducted in order to hide or disguise funds or assets derived 

from illegal activity as part of a plan to evade any federal law or regulation, or any 

transaction reporting requirement under federal law or regulation. A suspicious transaction 

is also one that is designed, whether through structuring or other means, to evade any 

BSA requirements; one that serves no business or apparent lawful purpose and for which 

the reporting money transmitter knows of no reasonable explanation after examining the 

available facts; or one that involves use of the money transmitter to facilitate criminal 

activity. 31 C.F.R. § 1022.320(a)(2). 

47A transaction is suspicious and requires reporting if it may involve potential money 

laundering or other illegal activity, is designed to evade the BSA or its implementing 

regulations, has no business or apparent lawful purpose or is not the type of transaction 

that the particular customer would normally be expected to engage in, and the institution 

knows of no reasonable explanation for the transaction after examining the available facts, 

including the background and possible purpose of the transaction. 31 C.F.R. § 

1020.320(a)(2). Depository institutions are also required to file suspicious activity reports 

for criminal violations involving insider abuse of any amount, as well as violations 

aggregating $5,000 or more when a suspect can be identified and $25,000 or more even 

without a potential suspect. See 12 C.F.R. §§ 21.11(c)(1)-(3), 163.180(d)(3)(i)-(iii) (OCC); 

12 C.F.R. § 208.62(c)(1)-(3) (Federal Reserve); 12 C.F.R. § 353.3(a)(1)-(3) (FDIC); 12 

C.F.R. § 748.1(c)(1)(i)-(iii) (NCUA).

Reporting Requirements
Page 19 GAO-16-65 Remittance Providers

According to a 2015 FinCEN report, suspicious activity reports play an 

integral role in law enforcement investigations and financial regulatory 

compliance at both the federal and state levels.48 To ensure compliance, 

some money transmitters and depository institutions that we interviewed 

indicated that they filed suspicious activity reports on all suspicious 

transactions, regardless of size, and had designed programs to identify 

suspicious activity. A representative from another money transmitter told 

us that the institution did not file suspicious activity reports if it 

investigated a situation and found that there was a reasonable 

explanation for the transaction. However, the representative stated that 

the organization would file a suspicious activity report for a transaction of 

as little as $200 dollars if it suspected illicit activity. According to FinCEN, 

money transmitters have reportedly used social networking sites to verify 

identity during a suspicious activity report investigation, developed 

proprietary systems to identify suspicious activity, and placed accounts on 

hold after filing a suspicious activity report in order to ensure that they do 

not conduct further business with that customer.

A representative from another money transmitter described a series of 

software programs that it had developed and said that 95 percent of the 

overall suspicious activity that they identified was identified with the 

software. According to the representative, these systems check 

transactions monthly and look for illicit activity under the reporting 

threshold. The systems also aggregate different types of transactions to 

see if the same individual is transferring an amount of money above the 

reporting threshold through different products. Further, one industry group 

we interviewed that represents depository institutions indicated that 

institutions filed suspicious activity reports if they saw a series of 

transactions to high-risk corridors, such as Ukraine or the Middle East. 

According to IRS BSA examination data for fiscal years 2013 and 2014, 

failure to file suspicious activity reports was the second most frequently 

cited violation during examinations of money transmitters. See appendix II 

for more information.

Under the BSA, money transmitters and depository institutions are 

required to obtain and retain specified information, including the name 

and address of the sender, for all transfers in the amount of $3,000 or 

 

48Financial Crimes Enforcement Network, SAR Stats Technical Bulletin (October 2015).

Recordkeeping and Identity 

Verification
Page 20 GAO-16-65 Remittance Providers

more, regardless of whether the sender is an established customer of the 

financial institution.49 Recordkeeping and other BSA-related requirements 

for money transmitters and depository institutions include

• verifying customer identification (ID) when a transaction is conducted 

in person and the sender is not an established customer,

• recording certain specified customer and transaction information,

• providing certain information to the receiving money transmitter or 

other receiving financial institution,50 and

• maintaining the record for 5 years from the date of transaction.

For transfers in the amount of $3,000 or more made by senders other 

than established customers, in person or not, money transmitters and 

depository institutions are required to obtain and retain a record of the 

name and address of the person placing the payment order, as well as 

the person’s taxpayer identification number (Social Security number or 

employer identification number, for example).51 If the person does not 

have a taxpayer identification number, the records must include an alien 

number, passport number and country of issuance, or notation in the 

record of the lack thereof.52 For transfers made in person, money 

transmitters and depository institutions must, in addition to the items listed 

previously, also verify the identity of the person placing the order and 

obtain and retain a record of the type of identification reviewed as well as 

the number of the identification document. In verifying a sender’s identity, 

institutions are required to examine a document—preferably with the 

person’s name, address, and photograph—that is normally acceptable as 

a means of identification when cashing checks for persons other than 

established customers.

 

4931 C.F.R. § 1020.410(a) (recordkeeping requirements for banks); 31 C.F.R. § 

1010.410(e) (recordkeeping requirements for nonbank financial institutions). 

5031 C.F.R. § 1010.410(f). 

5131 C.F.R. §§ 1010.410(e)(2), 1020.410(a)(2). 

52An alien number is issued to noncitizens by U.S. Citizenship and Immigration Services. 

The alien identification number can be found on the permanent residence card, which 

gives the holder a way of proving his or her legal status to live and work permanently 

within the United States. 
Page 21 GAO-16-65 Remittance Providers

Depository institutions have some additional identification and verification 

requirements. As part of their BSA program requirements, depository 

institutions are required to implement a customer identification program 

appropriate for their size and type of business which, among other things, 

must include risk-based procedures for verifying the identity of each 

customer to the extent reasonable and practicable.53 The customer 

identification program must contain procedures for opening an account 

that specify the identifying information that will be obtained from each 

customer, which shall include, at a minimum, name, date of birth, 

address, and identification number. The program must also include 

procedures for making and maintaining a record of a description of the 

methods used and the results of any measures undertaken to verify the 

identity of the customer, including a description of the resolution of any 

substantive discrepancy discovered when verifying the identifying 

information obtained.54

Some money transmitters and depository institutions that we spoke with 

said that they took steps beyond the minimum requirements to comply 

with the recordkeeping and identity verification requirements. All four 

depository institutions that we interviewed said that they imposed stricter 

requirements than minimally required to comply with the recordkeeping 

and identity verification requirements. Generally, these institutions limit 

remittance transfers to their customers only. Depository institutions must 

verify and record identification upon forming a customer relationship due 

to customer identification program requirements. Thus these depository 

institutions said that they generally verified identification for all remittance 

transfers when they established the customer relationship. One 

representative from a depository institution detailed the depository 

institution’s policy for the collection of two levels of identification—primary 

and secondary identification. The official noted that the primary 

 

5331 C.F.R. § 1020.220(a)(2). 

54The preamble to the customer identification program final rule provides that the term 

“account” was limited to formal banking and business relationships established to provide 

“ongoing” services, dealings, or other financial transactions to make clear that this term is 

not intended to cover infrequent transactions such as the occasional purchase of a money 

order or a wire transfer. 68 Fed. Reg. 25,092, 25,092 (May 9, 2003). As a result, not all 

bank remittances transactions fall within the requirements of the customer identification 

program rule. According to OCC, most banks only permit “customers” with “accounts” to 

engage in remittance transfers; however, some do not and the customer identification 

program may not apply to these situations when a non-customer is permitted to engage in 

remittance transfers.
Page 22 GAO-16-65 Remittance Providers

identification is aimed at complying with AML and customer identification 

program requirements, while the secondary identification is used for fraud 

prevention and can be as simple as a student identification card.

According to FinCEN, some money transmitters are reportedly 

implementing company standards that go beyond BSA requirements.55

One representative from a money transmitter stated that the organization 

implemented a lower threshold of $750 for verifying identification. A 

representative from a money transmitter industry group explained it was 

common for money transmitters to impose thresholds lower than $3,000 

for identity verification.

According to IRS BSA examination data for fiscal years 2013 and 2014, 

inadequate recordkeeping was the third most frequently cited BSA 

violation during examinations of money transmitters. See appendix II for 

more information.

Depository institutions open and maintain accounts for money 

transmitters. FinCEN and the federal banking regulators have provided 

interagency guidance for depository institutions that provide banking 

services to money transmitters, which outlines the following minimum due 

diligence expectations based on BSA requirements:

• applying the depository institution’s customer identification program;

• confirming FinCEN registration, if required;

• confirming compliance with state or local licensing requirements, if 

applicable;

• confirming agent status, if applicable;56 and

 

55Financial Crimes Enforcement Network, Financial Institutions Outreach Initiative: Report 

on Outreach to Money Services Businesses (July 2010). 

56A person who is a money transmitter solely because that person serves as an agent of 

another money services business (such as a money transmitter) is generally not required 

to register with FinCEN. 31 C.F.R. § 1022.380(a)(3). However, these agents are required 

to establish AML programs and comply with other recordkeeping and reporting 

requirements. See 31 C.F.R. § 1022.210(d)(1)(iii). 

Expectations for Depository 

Institutions That Have Money 

Transmitters as Customers
Page 23 GAO-16-65 Remittance Providers

• conducting a basic BSA risk assessment to determine the level of risk 

associated with the account and whether further due diligence is 

necessary.57

A representative from a depository institution whom we interviewed stated 

that the institution conducted due diligence on money transmitter 

customers that included an on-site visit and a review of their financial 

statements. This representative also explained that the institution 

inspected the AML program that the money transmitter had in place. 

According to the interagency guidance for depository institutions that 

provide banking services to money transmitters, regulators expect the 

depository institution to conduct a risk assessment of the account and 

confirm the money transmitter’s compliance with applicable licensing and 

registration requirements. The guidance notes that regulators do not 

expect depository institutions to uniformly review the AML program of all 

money transmitters that are customers, but that a depository institution’s 

level of review of a money transmitters’ AML program should be based on 

the assessed risks of the particular relationship.

Money transmitters, depository institutions, and industry associations we 

interviewed identified some challenges in complying with BSA 

requirements, including suspicious activity report confidentiality 

requirements, derisking, monitoring and examining remittance data, and 

costs. 

Officials we spoke with from a money transmitter and an industry 

association representing depository institutions stated that suspicious 

activity report confidentiality requirements hindered global money 

transmitters and depository institutions from meeting their AML risk 

 

57In determining how much, if any, further due diligence is required for a money transmitter 

customer, depository institutions should consider the types of products and services the 

money transmitter offers, the location(s) and the market(s) it serves, anticipated account 

activity, and the purpose of the account. Financial Crimes Enforcement Network, Board of 

Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, 

National Credit Union Administration, Office of the Comptroller of the Currency, Office of 

Thrift Supervision, Interagency Interpretive Guidance on Providing Banking Services to 

Money Services Businesses Operating in the United States (April 2005). The Office of 

Thrift Supervision was abolished in 2010 by the Dodd-Frank Act. Pub. L. No. 111-203, § 

313, 124 Stat. 1376, 1523 (codified at 12 U.S.C. § 5413).

Money Transmitters and 

Depository Institutions 

Identified Challenges 

Related to BSA 

Compliance

Suspicious Activity Report 

Confidentiality Requirements
Page 24 GAO-16-65 Remittance Providers

management and monitoring requirements. The BSA prohibits financial 

institutions that file a suspicious activity report from notifying any person 

involved in the transaction that the transaction has been reported.58

FinCEN has explained that unauthorized disclosure of suspicious activity 

reports could undermine investigations by tipping off suspects, deterring 

financial institutions from filing suspicious activity reports, and threatening 

the safety and security of institutions and individuals filing such reports. 

FinCEN warns that the disclosure of suspicious activity reports

compromises the essential role they play in protecting the financial 

system and in preventing and detecting financial crimes and terrorist 

financing. 

According to FinCEN and the federal banking regulatory guidance, BSA’s 

confidentiality provision generally prohibits a depository institution from 

disclosing or revealing a suspicious activity report.59 FinCEN and the 

federal banking regulators have amended suspicious activity report 

confidentiality rules and provided guidance to clarify the confidentiality 

requirements for depository institutions. The 2006 guidance states that a 

U.S. branch or agency of a foreign depository institution may share a 

suspicious activity report with its head office outside the United States. In 

addition, it states that a U.S. depository institution may disclose a 

suspicious activity report to its controlling company, no matter where it is 

located. The depository institution must have written confidentiality 

agreements or arrangements in place specifying that the head office or 

controlling company must protect the confidentiality of suspicious activity 

reports through appropriate internal controls. In 2010, FinCEN issued 

further guidance stating that a depository institution may share a 

suspicious activity report or any information that would reveal the 

existence of such a report with domestic affiliates subject to a suspicious 

activity report regulation, but cannot share suspicious activity reports with 

 

5831 U.S.C. § 5318(g)(2). 

59There is an exception for when the disclosure is requested by FinCEN, bank supervisory 

agencies, or appropriate law enforcement agencies. Financial Crimes Enforcement 

Network, Board of Governors of the Federal Reserve System, Federal Deposit Insurance 

Corporation, National Credit Union Administration, Office of the Comptroller of the 

Currency, Office of Thrift Supervision, Interagency Interpretive Guidance on Sharing 

Suspicious Activity Reports with Head Offices and Controlling Companies (Jan. 20, 2006). 

The Office of Thrift Supervision was abolished in 2010 by the Dodd-Frank Act. Pub. L. No. 

111-203, § 313, 124 Stat. 1376, 1523 (codified at 12 U.S.C. § 5413).See also 31 C.F.R. 

§§ 1020.320(e), 1022.320(d). 
Page 25 GAO-16-65 Remittance Providers

foreign branches of U.S. banks.60 In December 2010, FinCEN amended 

its BSA regulations on the confidentiality of suspicious activity reports to 

state that the confidentiality requirements do not prohibit the disclosure of 

the underlying facts, transactions, and documents upon which a 

suspicious activity report is based.61 The preamble to the final rule 

clarifies that confidentiality rules do not apply to information shared with 

entities in the ordinary course of business that identify suspicious content 

but do not indicate whether the information was filed in a suspicious 

activity report.62 One industry association requested further guidance—in 

addition to the language in FinCEN’s 2010 final rule clarifying 

confidentiality rules—on what information could be shared when 

depository institutions provided information to foreign banks, but could not 

reveal the existence of a suspicious activity report.

With respect to money transmitters, derisking—the practice of depository 

institutions limiting certain services or ending their relationships with 

entities to, among other things, avoid perceived regulatory concerns 

about facilitating money laundering—poses challenges for depository 

institutions and money transmitters.63 Depository institutions face 

compliance challenges in managing risk appropriately while avoiding 

indiscriminately terminating or refusing to open accounts for money 

transmitters. Money transmitters need bank accounts to conduct 

 

60Financial Crimes Enforcement Network, Guidance on Sharing Suspicious Activity 

Reports by Depository Institutions with Certain U.S. Affiliates (Nov. 23, 2010). For 

purposes of this guidance, ‘‘affiliate’’ of a depository institution means any company under 

common control with, or controlled by, that depository institution. ‘‘Under common control’’

means that another company (1) directly or indirectly or acting through one or more other 

persons owns, controls, or has the power to vote 25 percent or more of any class of the 

voting securities of the company and the depository institution; or (2) controls in any 

manner the election of a majority of the directors or trustees of the company and the 

depository institution. ‘‘Controlled by’’ means that the depository institution (1) directly or 

indirectly has the power to vote 25 percent or more of any class of the voting securities of 

the company; or (2) controls in any manner the election of a majority of the directors or 

trustees of the company. See, e.g., 12 U.S.C. § 1841(a)(2). 

6175 Fed. Reg. 75,593 (Dec. 3, 2010). 

6275 Fed. Reg. at 75,595.

63Derisking can be the result of various drivers, such as concerns about profitability, 

prudential requirements, anxiety after a global financial crisis, and reputational risk. 

Financial Action Task Force, FATF clarifies risk-based approach: case-by-case, not 

wholesale de-risking, accessed November 2, 2015, http://www.fatfgafi.org/documents/documents/rba-and-de-risking.html. 

Derisking
Page 26 GAO-16-65 Remittance Providers

business, including settling accounts among agents and other financial 

institutions. In 2014, FinCEN reported that some money transmitters are 

losing access to banking services with depository institutions due to 

derisking.64 Additionally, three representatives from money transmitters 

and affiliated industry groups we spoke with described difficulties in 

maintaining and forming relationships with depository institutions. A 

representative from a money transmitter industry group told us that 

depository institutions should be able to rely on the fact that money 

transmitters are subject to BSA requirements and examinations by state 

and federal regulators.

According to the FFIEC BSA/AML Examination Manual, however, a 

number of characteristics of money transmitters could expose depository 

institutions to risk.65 For example, the manual specifies that, among other 

things, money transmitters lack ongoing customer relationships and 

require minimal or no identification from customers, engage in frequent 

currency transactions, and are subject to varying levels of regulatory 

requirements and oversight. Nearly all representatives from depository 

institutions and affiliated industry groups whom we interviewed said that 

they had difficulty doing business with money transmitters because of the 

increased regulatory risk. For example, representatives from all three 

depository institutions’ industry associations added that it was sometimes 

easier to sever relationships with money transmitters than face the 

possibility of compliance failure.

Some federal banking regulators have acknowledged that some 

depository institutions have limited certain types of banking services 

because of concerns that money transmitter customers might not comply 

with the BSA. However, federal banking regulators and FinCEN 

encourage depository institutions to practice a risk-based approach when 

 

64Financial Crimes Enforcement Network, Statement on Providing Banking Services to 

Money Services Businesses (Nov. 10, 2014). For example, in September 2013, a global 

bank announced that it ended accounts with some of their money transmitter accounts—

including those sending remittances to Somalia—due to the concerns regarding the 

regulatory risk of financial crimes, including terrorist financing occurring through these 

accounts. Barclays, Barclays statement on Money Services Businesses, accessed 

September 15, 2015, 

http://www.newsroom.barclays.com/r/2728/barclays_statement_on_money_service_

busine. 

65Federal Financial Institutions Examination Council, Bank Secrecy Act/Anti-Money 

Laundering Examination Manual (2014). 
Page 27 GAO-16-65 Remittance Providers

evaluating individual customers. According to FinCEN’s public statement 

issued in 2014, money transmitters play an important role in the financial 

services sector.66 Derisking related to money transmitters could reduce 

BSA reporting in the financial system if the transmitters went out of 

business and more remittance transfers were sent via informal methods, 

which are often outside the reporting system. FinCEN’s 2014 public 

statement discouraged derisking and emphasized that institutions were 

expected to properly manage and mitigate any risks that money 

transmitters presented on a case-by-case basis. FDIC has provided 

similar guidance, and the Comptroller of the Currency has publicly 

echoed it by explaining that high-risk customers should be managed with 

strong risk management and controls rather than with a strategy of total 

avoidance.67 According to a Treasury official, bank regulators have taken 

very few public enforcement actions against depository institutions for 

deficiencies related to the money transmitters who have accounts with 

them. 

In a 2015 global Anti-Money Laundering Survey of AML specialists, the 

Association of Certified Anti-Money Laundering Specialists found that 

more than one-third of respondents reported that the institutions they 

worked for had exited lines or segments of business in the past 12 

months due to perceived regulatory risk.68 While this information was not 

specific to derisking and money transmitters, it speaks to the idea of 

depository institutions managing regulatory risk by exiting business lines 

that they perceive to be too risky. Furthermore, two World Bank surveys 

conducted in 2015, and the corresponding reports, found that some 

depository institutions are reducing access to financial services for

 

66Financial Crimes Enforcement Network, Statement on Providing Banking Services to 

Money Services Businesses (Nov. 10, 2014). 

67Federal Deposit Insurance Corporation, Statement on Providing Banking Services, FIL5-2015 (Jan. 28, 2015). Remarks by Thomas J. Curry, Comptroller of the Currency, 

Before the Association of Certified Anti-money Laundering Specialists (Mar. 17, 2014). 

68Survey respondents included, among others, representatives from both depository 

institutions and money transmitters. 
Page 28 GAO-16-65 Remittance Providers

remittance providers in some countries and regions.69 One of these 

reports was on a survey of derisking, for which they use the Financial 

Action Task Force definition of the term—the phenomenon of financial 

institutions terminating or restricting business relationships with clients or 

categories of clients to avoid, rather than manage, risk. According to the 

report, the survey indicates that derisking exists in some countries. The 

main drivers cited for account closures of money transmitters mainly 

included: profitability, pressure from other entities involved—such as 

correspondent banks, fear of regulatory scrutiny, lack of confidence in 

money transmitters’ procedures, and reputational risk. The reports make 

recommendations, including for governments to monitor correspondent 

banking and money transmitters’ access to financial services, and to have 

legal and regulatory AML frameworks in place and ensure that financial 

institutions are being effectively supervised for compliance with these 

standards—including ensuring and communicating risk-based supervision 

and enforcement. The recommendations also suggest that money 

transmitters should improve their AML controls to reduce their risk profile, 

and national authorities and financial institutions need to improve and 

communicate their overall understanding of risk. 

Money transmitters and depository institutions that we interviewed 

indicated that they faced challenges in monitoring and examining data 

from remittance transactions. Representatives from three of the four 

depository institutions we spoke with described difficulties they faced in 

identifying and preventing illicit activity, including the need to constantly 

monitor and examine transactions and identify structuring activity. 

FinCEN similarly recently reported that one of the key challenges banks 

faced was adequately adapting their controls on a timely basis to 

eliminate vulnerabilities that criminals were exploiting. One money 

transmitter industry group representative told us that keeping money 

transmitters’ monitoring systems up to date with the changing behavior of 

criminals was a challenge. This representative said that law enforcement 

and FinCEN are helpful in providing them with guidance and information 

on new patterns of activity. For example, FinCEN issued a notice in 2014 

 

69World Bank, Fact Finding Summary from De-risking Surveys: Withdrawal from 

Correspondent Banking: Where, Why, and What to Do about It and Report on the G20 

Survey on De-risking Activities in the Remittance Market (Washington D.C.: November 

2015). The G20 Survey on De-risking Activities in the Remittance Market noted that there 

was a low response rate from banks and money transmitters, but considered the data to 

be reflective of the market since they had responses from money transmitters that covered 

a substantial portion of market share of the remittance market. 

Challenges in Monitoring and 

Examining Remittance Data
Page 29 GAO-16-65 Remittance Providers

to be aware of illicit movement of money from the Los Angeles garment 

district to Mexico and Colombia on behalf of prominent drug trafficking 

organizations. In the 2015 Association of Certified Anti-Money Laundering 

Specialists survey, 38 percent of respondents cited insufficient/outdated 

technology as a compliance challenge that could serve as a possible 

barrier to the monitoring of remittance transactions.

Both money transmitters and depository institutions that we spoke with 

said that the costs of complying with BSA requirements and potential new 

rules presented a challenge. One money transmitter industry group 

representative told us that compliance cost is a challenge that is quite 

substantial for money transmitters. For example, one large money 

transmitter told us that they are implementing a system to better monitor 

their customers that is costing them millions of dollars. A representative 

from another money transmitter told us that there are costs associated 

with compliance, including additional expenses for training employees 

and integrating a system that helps the transmitter identify suspicious 

activity and prevent illicit transactions. Officials from a credit union we 

spoke with said that compliance cost is a challenge for smaller credit 

unions because establishing effective BSA and AML programs is 

expensive and smaller institutions have fewer resources to absorb such 

expenses. One industry association representing community banks 

added that it is especially difficult for smaller institutions that do not have 

the resources to spend time and money to monitor and examine riskier 

customers that require enhanced due diligence. Furthermore, a 

representative from a large depository institution said that it was 

becoming increasingly expensive to keep up with compliance costs as the 

regulatory environment seems to be getting stricter with a recent number 

of consent orders and fines.

Money transmitters and depository institutions that we spoke with 

identified concerns about the personal liability of compliance officers. In 

January 2014, FinCEN’s director acknowledged that there had been calls 

for more accountability in compliance failures, in particular for a focus on 

individuals as well as institutions.70 The director stressed the importance 

of holding accountable those who violated BSA requirements. In 2014, 

FinCEN assessed a $1 million civil money penalty against the Chief 

 

70Remarks of Jennifer Shasky Calvery, Director, FinCEN, Securities Industry and Financial 

Markets Association, Anti-money Laundering and Financial Crimes Conference (Jan. 30, 

2014). 

Compliance Costs

Personal Liability of 

Compliance Officers
Page 30 GAO-16-65 Remittance Providers

Compliance Officer of a large money transmitter concluding that he 

willfully violated the BSA requirements to implement and maintain an 

effective AML program and to report suspicious activity.71 FinCEN found 

that as a result of the Chief Compliance Officer’s AML failures, agents 

and outlets—that the money transmitter’s personnel knew or suspected 

were involved in fraud and money laundering—were allowed to continue 

to use the money transmitter’s money transfer system.

Officials we spoke with from six institutions representing money 

transmitters and depository institutions expressed concern about the 

liability of compliance officers under the BSA, but one official representing 

a credit union thought personal responsibility was long overdue. One 

money transmitter said that holding compliance officers personally 

accountable was inappropriate. An industry association representative 

said that it was counterproductive if a compliance officer was negligent 

and not complicit in illegal activity and stated that hiring and retaining 

compliance officers was becoming a challenge. Another industry 

association representing depository institutions told us that if there is a 

trend of holding compliance officers responsible for AML failures, it may 

become increasingly difficult to hire qualified people for the position. 

Officials from one credit union and two industry associations stated that 

the personal liability of compliance officers could cause compliance 

officers to be more risk averse—potentially resulting in the decisions of 

depository institutions to derisk money transmitter accounts in order to 

avoid personal liability and scrutiny. However, an official from a credit 

union said that the shift toward compliance officer personal responsibility 

was probably long overdue. FinCEN and OCC issued statements and 

advisories promoting the culture of compliance and stating that an 

important aspect of a culture of compliance is leadership’s responsibility 

for the performance, including the institution’s compliance with BSA 

requirements.

72 DOJ has also issued a memo that stresses the 

importance of individual accountability to combat corporate fraud and 

 

71In the Matter of Thomas E. Haider, FinCEN Matter No. 2014-08 (Dec. 18, 2014). 

72Financial Crimes Enforcement Network, Advisory to U.S. Financial Institutions on 

Promoting a Culture of Compliance, (Aug. 11, 2014), Remarks by Thomas J. Curry 

Comptroller of the Currency Before the Association of Certified Anti-Money Laundering 

Specialists (Mar. 17, 2014). 
Page 31 GAO-16-65 Remittance Providers

other misconduct, and provides DOJ’s policy for investigations of 

corporate misconduct that focuses on individual liability.73

Remittance transfers are vulnerable to money laundering due to factors 

such as the large volume of transactions and the global reach of large 

remittance transfer companies. Stakeholders have identified money 

laundering risks of remittance transfers including risks involving agents, 

customers, geographic location, and products. Remittance transfers can 

be used to launder proceeds from different types of criminal activities, 

including drug trafficking, human smuggling, and consumer fraud.

Agency officials, industry stakeholders (including money transmitters and 

depository institutions), and international organizations have identified 

several types of money laundering risks associated with remittance 

transfers, including risks involving agents, customers, geographic 

location, and products. Remittance transfers are vulnerable to money 

laundering due to factors such as the large volume of transactions, which 

can make it difficult to detect laundered funds, and the global reach of 

large remittance transfer companies, which can allow customers to move 

funds easily around the world. Furthermore, Treasury reported that 

deficient compliance with BSA requirements could leave money 

transmitters and depository institutions vulnerable to money laundering.74

Additionally, FinCEN, law enforcement, and international organizations 

said that certain remittance transfer methods, such as unregistered 

informal value transfer systems discussed earlier, pose risks that are 

difficult to manage because law enforcement has limited visibility of these 

transactions. However, they cautioned that a single risk may not indicate 

money laundering, but risks should be considered in the aggregate.

73Department of Justice, Deputy Attorney General, Individual Accountability for Corporate 

Wrongdoing, Memorandum for the Assistant Attorney General, Antitrust Division; 

Assistant Attorney General, Civil Division; Assistant Attorney General, Criminal Division; 

Assistant Attorney General, Environment and Natural Resources Division; Assistant 

Attorney General, National Security Division; Assistant Attorney General, Tax Division; 

Director, Federal Bureau of Investigation; Director, Executive Office for United States 

Trustees; All United States Attorneys (Washington D.C.: Sept. 9, 2015). 

74Department of the Treasury, 2015 National Money Laundering Risk Assessment 

(Washington, D.C.). 

Remittance Transfers 

Pose Money 

Laundering Risks

Agents, Customers, 

Geographic Location, and 

Products Can Pose Money 

Laundering Risks
Page 32 GAO-16-65 Remittance Providers

Money transmitters often work with a number of agents, and maintaining 

adequate oversight can be challenging, given the decentralized nature of 

the agent system. In a 2011 survey that FinCEN conducted, 170 money 

services businesses—often working in the capacity of a money 

transmitter—reported that they had over 230,000 agents—with 3 of these 

money services businesses reporting that they had over 20,000 agents 

each.75 These agents present money laundering risks if they knowingly or 

unknowingly fail to follow BSA requirements or the policies and programs 

established by the money transmitter. For example, an agent may not 

follow the recordkeeping requirements for transfers above the regulatory 

funds transfer threshold or above lower thresholds that a remittance 

provider has self imposed.

Customers are another source of risk, because in certain instances they 

may be able to launder money while remaining anonymous. For example, 

money launderers may use false identities or straw men (individuals hired 

to conduct transfers on behalf of others) in order to keep from being 

identified as the original source of the funds. Money launderers may also 

keep transactions below the regulatory recordkeeping and reporting 

requirements or the money transmitter’s self-imposed recordkeeping 

requirements in order to remain anonymous. The FFIEC BSA/AML

Examination Manual provides examples of suspicious customer activity 

that may indicate money laundering. These examples include 

identification documents that cannot be easily verified; the use of different 

taxpayer identification numbers with variations of the same name; 

frequent or large transactions with no record of past or present 

employment; and reluctance to provide identification for transactions 

subject to identification requirements. Law enforcement officials added 

other indicators, such as receiving multiple transfers from different 

geographic locations (both domestic and international), and using 

variations of names and addresses that are inconsistent with the 

identification provided.

Agency officials, industry stakeholders, and international organizations 

generally agreed that certain geographic locations may be more 

vulnerable to money laundering via remittances. For example, FinCEN 

has noted the importance of factoring in geographic risk for both 

75Department of the Treasury, 2015 National Money Laundering Risk Assessment 

(Washington, D.C.). 

Agent Risk

Customer Risk

Geographic Location Risk
Page 33 GAO-16-65 Remittance Providers

depository institutions and money transmitters. In addition, one regulator 

said that international transfers were at a high risk for money laundering 

because, depending on the destination country, transparency could be 

lost if the country receiving the remittance did not have the same AML 

standards as the United States. The FFIEC BSA/AML Examination 

Manual states that financial institutions with foreign offices or branches 

should comply with local requirements and be consistent with the U.S. 

bank’s standards; however, foreign offices’ or branches’ standards may 

need to be tailored for local laws and regulations. The FFIEC BSA/AML

Examination Manual also states that depository institutions should factor 

geographic location into their BSA risk assessments. While geographic 

location alone does not determine a customer’s or transaction’s money 

laundering risk level, according to the FFIEC BSA examination manual, 

certain characteristics can contribute to a location’s designation as high 

risk.76 A number of sources exist for money transmitters and depository 

institutions to identify high-risk geographic locations. Some of these 

include countries subject to Office of Foreign Assets Control sanctions, 

jurisdictions determined to be of “primary money laundering concern” by 

Treasury, High Intensity Financial Crime Areas, and those identified by 

the Financial Action Task Force as having deficient AML and counterterrorist financial measures.77

The U.S. financial system provides a wide range of products and services 

that help create a complex environment in which, according to Treasury, 

both legitimate and unlawful activity can take place. According to the 

FFIEC BSA/AML Examination Manual, certain products and services, 

such as funds transfers, may pose a higher risk of money laundering 

because of the degree of anonymity they can offer. For example, 

76These include the presence of offshore financial centers, a previous high-risk 

designation based on experience, and known money laundering risks as identified in the 

Department of State’s annual International Narcotics Control Strategy Report. U.S. 

Department of State, 2015 International Narcotics Control Strategy Report, Volume II: 

Money Laundering and Financial Crimes (March 2015). 

77The Office of Foreign Assets Control within Treasury administers and enforces sanctions 

such as blocking assets or restricting trade against countries and groups of individuals, 

such as terrorists and narcotics traffickers. Beginning in 2000, Treasury and Justice 

designated certain areas as High Intensity Financial Crime Areas: Chicago, Illinois; Los 

Angeles, California; San Francisco, California; Miami, Florida; San Juan, Puerto Rico; the 

southwest border (Texas and Arizona); and New York and New Jersey. High Intensity 

Financial Crime Area designations were designed to allow law enforcement to concentrate 

resources in areas where money laundering or related financial crimes were occurring at a 

higher-than-average rate. 

Products/Services Risk
Page 34 GAO-16-65 Remittance Providers

emerging technologies can offer a degree of anonymity and new 

providers entering the market may not be compliant with existing 

regulations. The Financial Action Task Force identified money laundering 

and terrorist financing risks associated with mobile payments because 

these services can sometimes allow for anonymous transactions

depending on the level of AML measures the mobile payments provider 

has in place. The Financial Action Task Force also reported that virtual 

currency—digital representations of value that are not governmentissued, such as Bitcoin—could facilitate international remittances as 

virtual currency-based products and services are developed. FinCEN 

recognizes money laundering vulnerabilities in virtual currencies. In 2013 

FinCEN issued guidance clarifying that administrators and exchangers of 

virtual currency were considered money transmitters and thus were 

subject to the same BSA requirements.78

The FFIEC BSA/AML Examination Manual listed correspondent account 

relationships as services, in particular, for which depository institutions 

should manage risk. As discussed earlier, multiple depository institutions 

may be involved in remittance transfers—known as correspondent 

banking relationships—and assessing the risk of each of them can be 

difficult. According to FinCEN, approximately 300 banks in the United 

States provide correspondent banking services to foreign financial 

institutions. U.S. banks may receive funds or instructions for a funds 

transfer from a foreign correspondent bank. While U.S. banks may have a 

relationship with the foreign bank, they probably do not have a 

relationship with the originator of the funds transfer. For this reason, the 

FFIEC BSA/AML Examination Manual and FinCEN stress the importance 

of conducting appropriate due diligence with foreign banks as part of risk 

management programs.

Federal agencies and international organizations have identified 

instances where remittances have been used to launder proceeds from 

illicit activities such as drug trafficking, human smuggling and trafficking, 

and consumer fraud. To transmit illicit funds, money launderers use 

underground providers such as couriers, hawaladars, and straw men 

(persons hired to conduct transfers for others), or transfers made by 

78Financial Crimes Enforcement Network, Application of FinCEN’s Regulations to Persons 

Administering, Exchanging, or Using Virtual Currencies Guidance, FIN-2013-G001 (Mar. 

13, 2013). 

Remittances Have Been 

Used to Launder Proceeds 

from Criminal Activity
Page 35 GAO-16-65 Remittance Providers

several people to the same beneficiary. They may also provide false 

information during the identification process for a remittance. Structuring 

is another means of disguising large proceeds from illicit activities. It 

generally involves dividing a large transaction into several smaller 

transactions to evade BSA reporting requirements.79 As shown in figure 4, 

an individual could remit $1,000 to the same beneficiary in three separate 

transactions. Since each of the individual remittances is below the $3,000 

reporting threshold, this activity avoids recordkeeping and reporting 

requirements. Structuring is considered both a criminal activity in itself 

and a potential method for hiding the proceeds of other suspicious 

activity.80

Figure 4: Example of Structuring to Launder Illicit Funds

In its 2015 National Money Laundering Risk Assessment, Treasury 

identified structuring as a common money laundering method used in the 

United States, and a money laundering vulnerability for money 

transmitters.81 FinCEN data on suspicious activity report filings related to 

79Specifically, under BSA regulations, a person structures a transaction if that person, 

acting alone, or in conjunction with, on behalf of, other persons, conducts or attempts to 

conduct one or more transactions in currency, in any amount at one or more financial 

institutions, on one or more days, in any manner, for the purpose of evading specified 

reporting requirements. 31 C.F.R. § 1010.100(xx). 

80See 31 U.S.C. § 5324, which prohibits structuring and imposes a criminal penalty. 

81Department of the Treasury, 2015 National Money Laundering Risk Assessment 

(Washington, D.C.). 
Page 36 GAO-16-65 Remittance Providers

international remittances by money services businesses, including money

transmitters, showed that structuring—after fraud—was the second most 

frequently cited suspicious activity category in 2014.82 Treasury has 

identified instances in which structuring was used to hide and transmit 

illicit funds, such as the following:

• In 2007, a task force made up of federal, state, and local law

enforcement in New York and New Jersey conducted a sting

operation in which 27 money transmitters were prosecuted for

facilitating money laundering. The money transmitters allegedly

agreed to transfer drug proceeds to Colombia and structured the

transactions in order to avoid federal recordkeeping and reporting

requirements.83

• In 2008, in California, four family members were indicted for running a

small human smuggling ring that had allegedly been bringing illegal

immigrants into the United States from Mexico since 1996, earning

approximately $50,000 a year.84 According to the indictment, the

defendants instructed the sponsors of the illegal immigrants to pay the

smuggling fee, which ranged from $1,000 and $3,000 per person, via

nonbank wire transfer and to structure the payment across multiple

wires.

• In a 2011 case, seven people were sentenced for money laundering

and drug trafficking involving the transfer of drugs from the Virgin

Islands to Alaska. Hundreds of thousands of dollars in payment for the

drugs were sent using a large money transmitter to send wire

transfers in amounts averaging less than $2,000 per wire.85

Transactions made using cash generated from drug trafficking can be 

structured to remain below the recordkeeping and reporting thresholds. In 

82Data on suspicious activity report filings related to international remittances have some 

limitations. See appendix I for more information. 

83United States Attorney’s Office, Eastern District of New York, Twenty-Seven Individuals 

Charged in Continuing Probe of Drug Money Laundering in Money Remitter Industry, 

news release, February 7, 2007. 

84Department of the Treasury, 2015 National Money Laundering Risk Assessment 

(Washington D.C.).

85Department of the Treasury, 2015 National Money Laundering Risk Assessment 

(Washington, D.C.). 

Drug trafficking
Page 37 GAO-16-65 Remittance Providers

2010 a Florida bank was charged with willfully failing to establish an 

adequate AML program. The charge followed a criminal investigation into 

$13 million of wire transfers initiated by Mexican casas de cambio 

(exchange houses) from correspondent accounts at the bank to pay for 

aircraft subsequently used to transport illegal drugs to the United States.86

In addition, officials at the Department of Homeland Security (DHS) told 

us that employees of a money transmitter helped launder over $1 million 

in drug proceeds to the Dominican Republic.

Human smuggling involves bringing or attempting to bring undocumented 

immigrants into the United States.

87 Human trafficking involves the use of 

force, fraud or coercion to recruit, harbor, transport, provide, or obtain 

persons for purposes including forced labor and sexual exploitation.88

There are a number of stages involved in human smuggling and in human 

trafficking during which smugglers and traffickers may need to interact 

with remittance providers. For example, to avoid detection, smugglers 

may make multiple remittance payments below the recordkeeping and 

reporting thresholds to people who are paid to move undocumented 

immigrants to the United States. In 2010 a large money transmitter 

entered into a $94 million settlement with the state of Arizona after it was 

accused of processing over $500 million in payments to human 

smugglers annually between 2003 and 2007.89

One money transmitter we spoke with provided internal guidance that it 

relies on to help identify possible human smuggling payments. This 

guidance included the following examples:

86USA v. Wachovia Bank N.A., Deferred Prosecution Agreement, 10-20165-CR-Lenard, 

March 16, 2010; See also OCC, In the Matter of Wachovia Bank, National Association, 

Consent Order for a Civil Money Penalty, #2010-036, March 10, 2010. OCC found that 

Wachovia N.A. “failed to implement adequate policies, procedures, or monitoring controls 

governing the repatriation of nearly $14 billion of USD bulk cash for high risk casa de 

cambio and other foreign correspondent customers.” 

87See 8 U.S.C. § 1324.

88See Financial Crimes Enforcement Network, Guidance on Recognizing Activity that May 

be Associated with Human Smuggling and Human Trafficking – Financial Red Flags, FIN2014-A008 (Sept. 11, 2014) (citing 18 U.S.C. §§ 1581, 1584, 1589, 1590, 1591, 2421, 

2422, 2423, 2425; The Victims of Trafficking and Violence Protection Act of 2000, Pub. L. 

No. 106-386 (2000)).

89Department of the Treasury, 2015 National Money Laundering Risk Assessment

(Washington, D.C.).

Human smuggling and human 

trafficking
Page 38 GAO-16-65 Remittance Providers

• A customer picks up money transfers in agent locations along the

U.S. border from multiple senders in various parts of the United

States. All of the transactions are for similar dollar amounts.

• A customer picks up a money transfer at an agent location along the

U.S. border and is accompanied by another person. The other person

appears to be telling the customer what to do. After the transaction is

completed, the customer gives the money to the other person.

FinCEN has issued guidance to financial institutions listing red flags that 

could indicate human smuggling or trafficking.90 The guidance 

encourages financial institutions to file a suspicious activity report if they 

suspect a transaction has no legitimate business purposes and could be 

related to human smuggling or trafficking.

This FinCEN guidance also states that no single transaction by itself is a 

clear indicator of human smuggling or human trafficking but that several 

warning signs can indicate this type of behavior. These include multiple 

wire transfers below the $3,000 threshold sent to a common beneficiary 

from various locations, wire transfers from countries with high migrant 

populations, and the existence of a potential funnel account.91 The 

amounts wired may be kept below the reporting threshold and occur in 

locations where the customer does not reside. According to Treasury, 

efforts by state and federal law enforcement to curb the use of money 

transmitters to pay human smugglers along the southwest border has 

resulted in a shift to funnel accounts, using the banking system rather 

than money transmitter networks.

However, law enforcement officials from the southwest border High 

Intensity Financial Crime Area told us that, in their experience, a large 

percentage of human smuggling fees were sent using money transmitters 

because these providers offered a quick and reliable method of transfer 

with some degree of perceived anonymity for the smugglers and their 

90Financial Crimes Enforcement Network, Guidance on Recognizing Activity that May be 

Associated with Human Smuggling and Human Trafficking – Financial Red Flags, 

Advisory FIN-2014-A008 (Sept. 11, 2014). 

91According to FinCEN, a funnel account is a bank account located in one geographic area 

that receives multiple deposits, often in amounts below the cash reporting threshold. 

Funds are often withdrawn from someone in a different geographic location with little time 

elapsing between deposits and withdrawals. See FinCEN (May 2014) Advisory FIN-2014-

A005 for a detailed description of funnel accounts. 
Page 39 GAO-16-65 Remittance Providers

couriers. These officials said that over $12 million in suspected illicit 

human smuggling proceeds were sent to Texas border cities through 

money transmitters in the 4-month period between January and April 

2015.

Money transmitters and depository institutions have been used to 

facilitate consumer fraud, such as lottery scams or scams involving a 

relative’s stolen identity, as identified in a recent enforcement action, 

Federal Trade Commission (FTC) consumer complaint data, and by the 

Internet Crime Complaint Center—the federal cybercrime complaint 

organization. The Internet Crime Complaint Center describes various 

schemes that defraud consumers into wiring funds directly to fraudsters, 

resulting in virtually unrecoverable losses to the victim and with little 

recourse. One federal banking regulatory official explained that fraudsters 

request victims to use wire transfer services to send funds because the 

money moves fast and they can take the money before the victim 

discovers the scam.

In 2012, DOJ found that a large money transmitter’s agents knowingly 

participated in a scheme in which U.S. customers wired funds to Canada 

in response to fraudulent claims that they were required to pay a fee or 

tax before receiving a lottery winning that they were falsely told was due 

them.92 The large money transmitter agreed with DOJ to address the 

problems in its AML program that facilitated fraud. According to recent 

FTC consumer compliant data, the highest reported payment method 

used in cross-border fraud complaints in 2014 was a wire transfer.93 This 

consumer complaint data showed that 55 percent of the complaints from 

U.S. consumers who paid companies located in Canada reported wire 

transfer as the payment method, and 78 percent of the complaints from 

U.S. consumers who paid other foreign companies reported that wire 

transfers were the payment methods. Treasury reported that, along with 

drug trafficking, fraud generates a large amount of illicit proceeds in the 

United States each year.94 According to FinCEN data on suspicious 

activity report filings related to international remittances by money 

92Moneygram Deferred Prosecution Agreement, Statement of Facts, November 9, 2012. 

93Federal Trade Commission, International Consumer Complaints, January – December 

2014 (June 2015). 

94Department of the Treasury, 2015 National Money Laundering Risk Assessment 

(Washington, D.C.). 

Consumer fraud
Page 40 GAO-16-65 Remittance Providers

services businesses, including money transmitters, fraud was the most 

frequently cited suspicious activity in 2014.95

Many stakeholders, including law enforcement officials, four of the five 

money transmitters we spoke with, and all four depository institutions, told 

us they generally supported or were already using a funds transfer 

threshold lower than the existing $3,000 for obtaining identification and 

other information on remittances. For example, law enforcement officials 

said that a centralized database of remittance transfers—one result of a 

proposed rule that would require remittance providers to report certain 

remittance data at low dollar thresholds—would help identify illicit activity 

and be useful in assisting AML efforts. Most larger money transmitters 

and larger depository institutions we spoke with were already using 

thresholds below $3,000. However, some stakeholders said that a lower 

threshold could negatively affect small providers. For example, federal 

and state banking regulators said that a lower threshold would likely 

create additional recordkeeping requirements and costs for some 

providers and customers. But, stakeholders generally said that a 

requirement to check the legal immigration status of remittance senders 

would not significantly benefit AML efforts, noting that the requirement 

could lead senders to use less detectable forms of transmitting money.

Law enforcement officials generally stated that a funds transfer threshold 

lower than the existing $3,000 threshold would benefit agencies’ AML 

efforts. Several law enforcement agencies, including DHS, DOJ, and IRS, 

indicated in 2006 that additional information collected as a result of 

lowering or eliminating the threshold would prove beneficial to 

investigations including money laundering.96 The law enforcement 

officials added at that time that lowering or eliminating the threshold could 

disrupt illicit transfers and make them more expensive for perpetrators. 

For example, DOJ law enforcement officials stated that a lower threshold 

 

95Data on suspicious activity report filings related to international remittances have some 

limitations. See appendix I for more information.

96Financial Crimes Enforcement Network, Federal Reserve, Threshold for the 

Requirement to Collect, Retain, and Transmit Information on Funds Transfers and 

Transmittals of Funds, Joint Advance Notice of Proposed Rulemaking, 71 Fed. Reg. 

35,564 (June 21, 2006). Several law enforcement agencies commented on this advance 

notice of proposed rulemaking. 

Many Stakeholders 

Supported Lowering 

the Funds Transfer 

Threshold, but Cited 

Concerns with 

Verifying Remitters’ 

Legal Immigration 

Status

Many Stakeholders 

Supported a Lower 

Threshold, but Some Were 

Concerned about 

Additional Recordkeeping 

Requirements and Costs
Page 41 GAO-16-65 Remittance Providers

would increase the cost of laundering money, because more transfers 

would have to be structured to stay below the threshold. DHS officials we 

spoke with recommended a $500 funds transfer threshold, which they 

said would be low enough to limit structuring capabilities but would not 

impede legitimate transactions. DOJ officials, while noting the benefits of 

a lower threshold, also identified some concerns. For example, DOJ’s 

letter commenting on the 2006 advance notice of proposed rulemaking 

(2006 advance notice) stated that there were no specific data showing 

that a lower threshold would benefit law enforcement, as transactions 

structured at smaller values could approach the range of legitimate 

transactions and thus become more difficult to detect.97

Many law enforcement officials supported a requirement for reporting 

information on remittances. BSA requirements generally focus on 

recording funds transfers rather than reporting them, unless they 

constitute certain types of transactions such as suspicious transactions. 

Several law enforcement agencies supported and noted the benefits of 

adding such a reporting requirement in a 2006 FinCEN study.98

Furthermore, DHS and DOJ officials we spoke with for this report said 

that information on remittance senders that could be collected in a 

centralized database could be analyzed to help identify illicit activity and 

would be useful in AML efforts. DHS officials noted that they used a 

comprehensive database to track remittances from 10 of the largest 

money transmitters that report remittance data along the southwest 

border to identify human smuggling networks. These officials said that 

having these type of data at the federal level would be useful. One DOJ 

official stated that the option most favorable to law enforcement in 

investigating illicit transfers would be FinCEN’s 2010 proposed rule, 

Cross-Border Electronic Transmittals of Funds (2010 proposed rule), 

which would require depository institutions and money transmitters to 

report cross-border electronic transmittals at a zero dollar threshold and 

$1,000 threshold, respectively—lower dollar thresholds than providers are 

currently required to use.99 The reporting requirement would provide a 

 

97A DOJ official we interviewed said that the observations from this letter were generally 

still valid. 

98Financial Crimes Enforcement Network, Feasibility of a Cross-Border Electronic Funds 

Transfer Reporting System under the Bank Secrecy Act (October 2006). 

99Financial Crimes Enforcement Network, Cross-Border Electronic Transmittals of Funds, 

Notice of Proposed Rulemaking, 75 Fed. Reg. 60,377 (Sept. 30, 2010). 
Page 42 GAO-16-65 Remittance Providers

searchable database of remittances for law enforcement to analyze, while 

information provided by a lower funds transfer threshold without a 

reporting requirement would have to be requested by law enforcement on 

a case-by-case basis. FinCEN is still evaluating ways to implement the 

2010 proposed rule in a way that takes into account industry concerns 

such as the cost to financial institutions and the government’s ability to 

implement, manage, and support a reporting system. FinCEN also 

continues to consider the appropriate reporting thresholds.

Four of the five money transmitters we spoke with, and all four depository 

institutions, told us they generally supported or were already using a 

lower funds transfer threshold for obtaining identification and other 

information on remittances. Stakeholders we spoke with noted that these 

providers were generally already collecting and maintaining information at 

lower thresholds. Larger depository institutions often used a zero dollar 

threshold. For example, all four of the depository institutions we spoke 

with said they were already using a zero dollar threshold as part of their 

customer identification and recordkeeping practices. Also, in FinCEN’s 

studies of the 2010 proposed rule, FinCEN determined that banks, by and 

large, keep records for funds transfers regardless of dollar value.

Nearly all of the money transmitters we interviewed also said that they 

already had self-imposed thresholds of around $1,000 for verifying and 

collecting information on funds transfers, and that most of their 

transactions were significantly below the $3,000 funds transfer threshold. 

The $1,000 threshold is an industry and international standard 

recommended by the Financial Action Task Force and, according to 

FinCEN in the 2010 proposed rule, adopted by many countries, which 

money transmitters must follow when operating in their jurisdictions. 

Some states have also implemented a recordkeeping threshold below the 

federal requirement that money transmitters in those states must comply 

with. For example, Arizona and Oklahoma have implemented a $1,000 

threshold for recording certain information, including some identifying 

information.100

In the 2010 proposed rule, FinCEN stated that through extensive 

consultation with the industry, the threshold for money transmitters to 

report on international transfers of $1,000 or more was appropriate 

 

100See Ariz. Rev. Stat. Ann. § 6-1241(E); Okla. Admin. Code § 85:15-7-5.
Page 43 GAO-16-65 Remittance Providers

because the industry in large part already observed this threshold. Money 

transmitters we spoke with or stakeholders that commented on the 2006 

advance notice generally did not advocate reducing the threshold for 

money transmitters to zero dollars, noting that eliminating the funds 

transfer threshold would be burdensome for them and would likely drive 

transactions underground. Similarly, law enforcement officials from DHS, 

DOJ, and IRS indicated that they did not support reducing the threshold 

to zero for money transmitters because doing so could impede legitimate 

transactions and cause remitters to resort to alternative methods of 

laundering proceeds. DHS officials noted that they would still have the 

authority to investigate alternative remittance systems.

Some stakeholders had concerns about a lower threshold, however, 

largely because of the additional recordkeeping and costs that would be 

involved. Some of these stakeholders also indicated that information 

already collected was sufficient, and that the additional cost to monitor the 

information at a lower amount would not be worth the benefits of law 

enforcement tracking such small amounts. Federal and state banking 

regulators we spoke with generally did not advocate for a lower funds 

transfer threshold. Officials from these regulators believed that reducing 

the threshold would require increased recordkeeping for banks, and one 

state regulator believed that it could increase costs for both providers and 

regulators which would need to review more transactions. In our review of 

the published comments to FinCEN’s 2006 advance notice we found that 

nearly half (12 of the 25 commenters) recommended no change in the 

threshold largely because of the additional recordkeeping and costs 

involved. The comments opposed to lowering the threshold were mostly 

from or referred to relatively small community banks or credit unions that 

were opposed to the additional recordkeeping, in part because they were 

not already collecting and maintaining information for transactions below 

the federal threshold. Some of these commenters noted that additional 

recordkeeping and verification requirements would increase costs that 

would be passed on to customers, who then might turn to alternate forms 

of transmitting money.
Page 44 GAO-16-65 Remittance Providers

Most parties we spoke with, including officials from law enforcement, 

money transmitters, depository institutions, industry associations, and 

policy and consumer advocacy groups, voiced concerns about the 

implications of requiring verification of legal immigration status of 

remittance senders. Law enforcement officials we spoke with told us that 

a requirement to verify legal immigration status might not assist AML 

efforts and could lead senders to use less detectable forms of transmitting 

money, as the following examples illustrate.

• IRS officials said that the Remittance Status Verification Act would, if 

passed, effectively require an identification verification threshold of 

near zero and the collection of information on de minimis, or very 

minor, transaction amounts.101 IRS concluded that verifying identities 

and collecting information at a near zero dollar threshold would not be 

useful and could cause remitters to resort to off-the-book methods.

• DHS officials we spoke with said that, in general, collecting 

identification information would be beneficial to investigations but that 

verifying legal immigration status would not necessarily hurt or help 

their investigations. They added that a lower funds transfer threshold 

was more crucial to their investigations. DHS officials did say that 

knowing senders’ legal immigration status could be beneficial if DHS 

was looking at potentially removing illegal immigrants from the 

country. But they added that the verification requirements could drive 

remitters to informal remittance systems. One official noted that 

although criminals could turn to alternative methods of transferring 

money to avoid being identified, it could take several years to 

establish a new criminal financial network, and could result in a 

positive AML effect for a time—at least until the criminals identified 

alternative networks.

In interviews with us, officials from the five money transmitters, four 

depository institutions, six of their respective industry associations, and 

three policy and consumer advocacy groups nearly all raised concerns 

about asking for information from remittance senders about their legal 

immigration status in the United States. Among other things, they said 

 

101As discussed previously, the Remittance Status Verification Act would amend the 

Electronic Fund Transfer Act (EFTA), so the proposed law, if passed, would be subject to 

EFTA’s definition of remittance transfer. 15 U.S.C. § 1693o-1(g)(2). Regulation E, which 

implements EFTA, excludes small value transactions of $15 or less from its definition of 

remittance transfer. 12 C.F.R. § 1005.30(e)(2)(i). 

Most Stakeholders Raised 

Concerns That 

Requirements to Verify 

Legal Immigration Status 

Would Increase the Use of 

Less Detectable Forms of 

Remittances
Page 45 GAO-16-65 Remittance Providers

doing so would likely contribute to pushing remittances out of formal 

financial systems to less detectable methods. Officials from two money 

transmitters we spoke with compared the potential outcomes to those 

they observed when the state of Oklahoma imposed a requirement they 

felt had similar implications.102 According to these officials, the enactment 

of the Oklahoma legislation led to a significant drop of around 28 percent 

in their Oklahoma remittances shortly after the law was passed. However, 

an official from one of these money transmitters stated that the volume of 

transfers in surrounding states increased by as much as half during the 

same time period—indicating that some customers went to bordering 

states to conduct remittances to avoid the fee in Oklahoma. An official 

from the Oklahoma Bureau of Narcotics & Dangerous Drugs Control 

stated that he believed that the Oklahoma remittance fee had helped 

reduce transfers of proceeds from illicit activity from Oklahoma, adding 

that the amount collected annually in wire transmitter fees had 

increased.103

We provided a draft of this report to CFPB, DHS, DOJ, Federal Reserve, 

FDIC, FTC, IRS, NCUA, OCC, Treasury, and USPS for review and 

comment. NCUA and USPS provided written comments that are 

described below and reprinted in appendixes III and IV. Officials from 

DHS, Federal Reserve, FDIC, OCC, and Treasury provided technical 

comments, which we incorporated as appropriate. CFPB, DOJ, FTC, and 

IRS had no comments on the report. In its letter, USPS said that they 

had no comments. In its letter, NCUA noted that the scale and scope of 

international remittances raise significant public policy issues, and that 

 

102As discussed previously, Oklahoma enacted a law in July 2009 requiring that a fee be 

imposed on all remittances that originate in Oklahoma. Although this law does not require 

providers to verify legal immigration status of remitters, it imposes a fee on all remittances, 

regardless of remitters’ legal status, and only those remitters who file income tax returns 

with the state may claim a credit for the fee paid. Since individuals who do not have proof 

of legal status are unlikely to have a valid Social Security number or tax identification 

number, they are unlikely to file income tax returns, and therefore unlikely to obtain a 

credit for the remittance fee paid. 

103For wire transmitter fee collections increasing in Oklahoma, see Oklahoma Tax 

Commission, Annual Reports (Oklahoma City, OK: June 30, 2011 through 2015). Also, 

there may be other economic factors contributing to the increase in Oklahoma wire 

transfer collections, including generally low remittance revenue during the recession from 

2007 through 2009. See Suírez-Orozco, Marcelo M., The Remittance Hole, Americas 

Quarterly, vol. 3, no. 2 (Spring 2009), 85-89. 

Agency Comments 

and Our Evaluation
Page 46 GAO-16-65 Remittance Providers

this report will go far toward informing the debate about constructive 

remittance policy.

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

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

report date. At that time, we will send copies to CFPB, DHS, DOJ, 

Federal Reserve, FDIC, FTC, IRS, NCUA, OCC, Treasury, USPS, the 

appropriate congressional committees and members, and others. In 

addition, the report is available at no charge on the GAO website at 

http://www.gao.gov. 

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

contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix V. 

Lawrance L. Evans, Jr.

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

Methodology

Page 47 GAO-16-65 Remittance Providers

Our objectives were to examine (1) the Bank Secrecy Act (BSA) 

remittance requirements that exist for remittance providers and related 

challenges that remittance providers face in complying with these 

requirements; (2) the money laundering risks that remittance transfer 

methods pose; (3) stakeholders’ views on the extent to which requiring 

remittance providers to verify identification and collect information at a 

lower dollar transaction amount than is currently required, or adding a 

requirement to verify legal immigration status, would assist federal 

agencies’ anti-money laundering (AML) efforts.1

To examine BSA remittance requirements for remittance providers, we 

reviewed relevant laws and regulations and obtained information from 

remittance providers on their efforts to comply with BSA (including their 

methods and practices) and the challenges they faced in these efforts. 

We also obtained and analyzed available data on money transmitters’ 

compliance with BSA-related requirements. Compliance data we 

reviewed included Internal Revenue Service (IRS) BSA-related violation 

and exam data on money transmitters for fiscal years 2013 and 2014. We 

assessed the reliability of data provided to us by IRS by reviewing related 

documentation of the database from which the data come and also 

through interviews with agency officials, and found the data to be reliable 

for purposes of this report.

To examine the money laundering risks posed by remittance transfers, 

we reviewed and summarized available reports and documents that the 

Financial Crimes Enforcement Network (FinCEN), federal law 

enforcement, regulatory agencies, international organizations, and 

remittance providers maintained on money laundering through remittance 

transfers. We also collected and reviewed information from the 

Department of Justice (DOJ) and Department of Homeland Security 

(DHS) on closed money laundering cases from fiscal year 2006 to April 

2015 involving remittance providers.

 

1

We obtained stakeholder views on both (1) lowering or eliminating the reporting dollar 

threshold for collecting and retaining information on funds transfers and (2) imposition of a 

requirement that individuals document immigration status for funds transfers beginning at 

a near-zero threshold. Because imposing these requirements beginning at a low dollar 

threshold may result in similar challenges and benefits for law enforcement, stakeholders 

views on a lower dollar threshold for required BSA recordkeeping may inform our 

discussion of the potential effects of the immigrant status documentation requirement 

GAO has ongoing work underway that will be reporting on the reliability of remittance 

estimates in a separate report that it plans to issue in fiscal year 2016.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 48 GAO-16-65 Remittance Providers

We also reviewed FinCEN data on the number of suspicious activity 

reports filed by money transmitters related to remittance transfers to 

determine the most frequently reported categories of suspicious activity. 

FinCEN noted that there were some limitations regarding the data on 

suspicious activity report filings related to international remittances. The 

totals of suspicious activities reported could exceed the actual number of 

reports filed because some reports can reflect more than one type of 

suspicious activity. For example, a single suspicious activity report may 

be counted in “Money Laundering” and “Structuring” because both 

categories in that report were selected. The data we reviewed were

based on the number of money transmitters that selected “funds transfer” 

when reporting the type of payment mechanism involved in the suspicious 

activity; however, the statistics are incomplete because some filers (about 

40 percent) did not fill out the payment mechanism. Additionally, the data 

are incomplete because the filers may not have filled out relevant fields 

that would identify whether a transfer was a remittance. We assessed the 

reliability of suspicious activity report data through interviews with agency 

officials and comparing information to published data. Although FinCEN 

noted limitations with the data, we found the data to be reliable for 

purposes of reporting the top two categories of suspicious activity filed by 

remittance providers, which were consistent with common methods of 

money laundering identified in the Department of the Treasury’s 2015 

National Money Laundering Risk Assessment. 

For purposes of our report, stakeholders included officials from 30 

entities: FinCEN, federal law enforcement entities—including 

representatives from a High Intensity Financial Crime Area, federal and 

state regulators, industry associations, money transmitters, depository 

institutions, and policy and consumer advocacy groups. To examine 

stakeholders’ views on the extent to which lowering the funds transfer 

threshold for complying with recordkeeping requirements or adding a 

legal immigration status verification requirement would assist agencies’ 

AML efforts we reviewed an advance notice of proposed rulemaking, a 

proposed rule, and proposed legislation related to remittance transfers—

including 25 public comment letters available on the advance notice and 

proposed rule. We also obtained, through interviews, the views of 

stakeholders on the extent to which lowering the funds transfer threshold 

or adding a legal immigration status verification requirement (which could 

include requiring certain identification for transfers at the near zero dollar 

threshold) would further AML efforts. We researched and reviewed 

information on international customer identification standards for 

remittance transfers. Sources for this information included, among others: 

the Financial Action Task Force report, International Standards on 
Appendix I: Objectives, Scope, and 

Methodology

Page 49 GAO-16-65 Remittance Providers

Combating Money Laundering and the Financing of Terrorism and 

Proliferation: The Financial Action Task Force Recommendations 

(February 2012); the Financial Action Task Force, Money Laundering 

through Money Remittance and Currency Exchange Providers (June 

2010); Department of State report, Country Reports on Terrorism 2013; 

FinCEN’s report, Feasibility of a Cross Border Electronic Funds Transfer 

System under the Bank Secrecy Act; and PricewaterhouseCoopers, Anti 

Money Laundering – Know Your Customer Quick Reference Guide

(January 2014). 

For all objectives, we interviewed officials from FinCEN and federal law 

enforcement entities—including DHS, DOJ, and DHS representatives 

from the Southwest High Intensity Financial Crime Area. We also 

interviewed federal banking regulators and officials from the Conference 

of State Banking Supervisors, which included representatives from state 

banking regulators. In addition, we interviewed agency officials at the 

Consumer Financial and Protection Bureau and the Federal Trade 

Commission. We interviewed officials from depository institution industry 

associations including the American Bankers Association, The Clearing 

House, and Independent Community Bankers of America. We also 

interviewed money transmitter industry associations including The Money 

Services Roundtable, The National Money Transmitters Association, and 

the Association of Certified Anti-Money Laundering Specialists—

representing both money transmitters and depository institutions. 

Additionally, we interviewed representatives from a policy group, InterAmerican Dialogue, and two consumer advocacy groups—National 

Council of La Raza and Appleseed. Furthermore, we interviewed a 

selection of money transmitters and depository institutions. We 

judgmentally selected a cross-section of medium and large money 

transmitters and depository institutions that included five nondepository 

money transmitters and four depository institutions (two banks and two 

credit unions) based on a number of factors, including the volume of 

remittances and diversity of countries serviced. For all objectives, we also 

reviewed reports and guidance published by FinCEN and international 

organizations such as the World Bank and the Financial Action Task 

Force.
Appendix I: Objectives, Scope, and 

Methodology

Page 50 GAO-16-65 Remittance Providers

We conducted this performance audit from October 2014 to December

2015 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: IRS Bank Secrecy Act 

Examinations of Money Transmitters

Page 51 GAO-16-65 Remittance Providers

Under delegated authority from the Financial Crimes Enforcement 

Network (FinCEN), the Internal Revenue Service (IRS) examines 

nondepository financial institutions—including money transmitters—for 

compliance with the Bank Secrecy Act (BSA).1 According to IRS data, the 

results of examinations of money transmitters from fiscal years 2013 and 

2014 showed that the top three most frequently cited violations were 

failure to comply with AML program requirements, failure to file suspicious 

activity reports, and inadequate recordkeeping of funds transfers.

Table 1: Summary of IRS Bank Secrecy Act Examinations of Money Transmitters, 

Fiscal Years 2013-2014

Fiscal year 2014 Fiscal year 2013

Number of exams 2,729 3,073

Number of violations 6,104 8,659

Top 3 most frequently occurring violations:

AML program requirementsa 3,191 3,554

Reports of suspicious activityb 1,323 2,893

Recordkeeping—funds transfersc 531 838

Source: IRS data and GAO analysis. | GAO-16-65

a

AML Compliance Program Violations 1022_210, 1022_210(d)(1), 1022_210(d)(2), 1022_210(d)(3), 

1022_210(d)(4). These subcategory violations are all requirements for maintaining an adequate AML 

program. Subcategories include policies, procedures, and internal controls; designation of compliance 

officer; training; and independent review, respectively.

b

Reporting violations 1022_320(a), 1022_320(b), 1022_320(c) . Money transmitters are required to 

file reports of any suspicious transaction relevant to a possible violation of law or regulation. 31 

C.F.R. § 1022.320.

c

Recordkeeping violation 1010_410(e). Money transmitters are required to obtain and retain specific 

information, such as the name and address of the sender, for each transfer of $3,000 or more. 31 

C.F.R. § 1010.410(e).

 

1

See 31 C.F.R. § 1010.810(b)(8).

Appendix II: IRS Bank Secrecy Act 

Examinations of Money Transmitters
Appendix III: Comments from the National 

Credit Union Administration

Page 52 GAO-16-65 Remittance Providers

Appendix III: Comments from the National 

Credit Union Administration 
Appendix IV: Comments from the United 

States Postal Service

Page 53 GAO-16-65 Remittance Providers

Appendix IV: Comments from the United 

States Postal Service
Appendix V: GAO Contact and 

Staff Acknowledgments

Page 54 GAO-16-65 Remittance Providers

Lawrance L. Evans, Jr. (202) 512-8678 or evansl@gao.gov. 

In addition to the contact named above, Andrew Pauline (Assistant 

Director), Verginie Tarpinian (Analyst-in-Charge), Tonita Gillich, Elvira 

Josifi, Daniel Kaneshiro, Angela Messenger, and Ashton Warren made 

key contributions to this report. Also contributing to this report were Emily 

Chalmers, Pamela Davidson, Marc Molino, and Patricia Moye.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(250806)
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