Testimony 

Before the Subcommittee on Criminal 

Justice, Drug Policy, and Human 

Resources, Committee on Government 

Reform, House of Representatives

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 10:00 a.m. EDT 

Tuesday, May 11, 2004 INVESTIGATING MONEY 

LAUNDERING AND 

TERRORIST FINANCING 

Federal Law Enforcement 

Agencies Face Continuing 

Coordination Challenges 

Statement of Richard M. Stana, Director 

Homeland Security and Justice Issues 

GAO-04-710T 
www.gao.gov/cgi-bin/getrpt?GAO-04-710T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Richard M. 

Stana at (202) 512-8777 or stana@gao.gov. 

Highlights of GAO-04-710T, a testimony 

before the Subcommittee on Criminal 

Justice, Drug Policy, and Human 

Resources, Committee on Government 

Reform, House of Representative 

May 11, 2004

INVESTING MONEY LAUNDERING AND 

TERRORIST FINANCING 

Federal Law Enforcement Agencies Face 

Continuing Coordination Challenges 

GAO’s September 2003 report noted that the annual strategy generally has 

not served as a useful mechanism for guiding the coordination of federal law 

enforcement agencies’ efforts to combat money laundering and terrorist 

financing. For example, although expected to have a central role in 

coordinating law enforcement efforts, interagency task forces created 

specifically to address money laundering and related financial crimes 

generally had not yet been structured and operating as intended and had not 

reached their expectations for leveraging investigative resources or creating 

investigative synergies. Also, while the Departments of the Treasury and 

Justice had made progress on some strategy initiatives designed to enhance 

interagency coordination of money laundering investigations, most 

initiatives had not met expectations. Moreover, even though adjusted in 2002 

to reflect a new federal priority—combating terrorist financing—the strategy 

did not address agency and task force roles and interagency coordination 

procedures for investigating terrorist financing, which contributed to 

duplication of efforts and disagreements over which agency should lead 

investigations. 

GAO’s February 2004 report noted that the FBI and ICE had implemented or 

taken concrete steps to implement most of the key provisions in the May 

2003 Memorandum of Agreement on terrorist financing investigations. For 

instance, the agencies had developed collaborative procedures to determine 

whether applicable ICE investigations or financial crimes leads may be 

related to terrorism or terrorist financing—and, if so, determine whether 

these investigations or leads should thereafter be pursued under the 

auspices of the FBI. However, as of May 2, 2004, the FBI and ICE had not yet 

issued a joint report on the implementation status of the Agreement, which 

was required 4 months from its effective date. Also, GAO noted that the FBI 

and ICE have confronted and will continue to confront a number of 

operational and organizational challenges, such as ensuring that the financial 

crimes expertise and other investigative competencies of both agencies are 

appropriately and effectively utilized. 

Money laundering provides the fuel 

for terrorists, drug dealers, arms 

traffickers, and other criminals to 

operate and expand their activities. 

GAO focused on two issues. The 

first is whether the nation’s annual 

National Money Laundering 

Strategy has served as a useful 

mechanism for guiding federal law 

enforcement efforts to combat 

money laundering and terrorist 

financing. Unless reauthorized by 

the Congress, the annual 

requirement ended with the 2003 

strategy. The second issue is the 

implementation status of a May 

2003 Memorandum of Agreement, 

signed by the Attorney General and 

the Secretary of Homeland 

Security, that was designed to 

enhance the coordination of 

terrorist financing investigations 

conducted by the Federal Bureau 

of Investigation (FBI) and the U.S. 

Immigration and Customs 

Enforcement (ICE). 

GAO’s September 2003 report 

recommended that, if the 

requirement for a national strategy 

is reauthorized, the Secretaries of 

the Treasury and Homeland 

Security and the Attorney General 

strengthen the leadership structure 

for strategy development and 

implementation, require processes 

to ensure key priorities are 

identified, and establish 

accountability mechanisms. The 

departments generally concurred 

with GAO’s report. 
Page 1 GAO-04-710T Investigating Money 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss federal law enforcement agencies’ 

efforts to cooperatively investigate money laundering and terrorist 

financing. Money laundering—the process of disguising or concealing 

illicit funds to make them appear legitimate—is a serious crime, with an 

estimated $500 billion to $1 trillion laundered worldwide annually, 

according to the United Nations Office of Drug Control and Prevention. 

Money laundering provides the fuel for terrorists, drug dealers, arms 

traffickers, and other criminals to operate and expand their activities, 

which can have devastating social and economic consequences. Terrorist 

financing is generally characterized by different motives than money 

laundering, and the funds often originate from legitimate sources. 

However, investigations of money laundering and investigations of 

terrorist financing often involve similar approaches or techniques because 

the methods used for hiding the movement of funds also involve 

similarities. 

As requested, my testimony will focus on recent strategic plans and 

organizational changes designed to improve the interagency coordination 

of money laundering and terrorist financing investigations. Specifically, I 

will discuss two important issues: 

• The first issue is whether the nation’s annual National Money 

Laundering Strategy (NMLS), required by 1998 federal legislation, has 

served as a useful mechanism for guiding the coordination of federal 

law enforcement agencies’ efforts to combat money laundering and 

terrorist financing. Unless reauthorized by the Congress, the 

requirement for an annual NMLS ended with the 2003 strategy, which 

was issued on November 18, 2003.1

• The second issue is the implementation status of a May 2003 

Memorandum of Agreement on terrorist financing investigations. The 

Agreement, signed by the Attorney General and the Secretary of 

Homeland Security, contained various provisions designed to enhance 

interagency coordination of terrorist financing investigations 

conducted by two of the nation’s law enforcement agencies—the 

Federal Bureau of Investigation (FBI) and the U.S. Immigration and 

 1

In November 2003, Senator Charles Grassley introduced a bill (S. 1837, the “Combating 

Money Laundering and Terrorist Financing Act of 2003”) that, among other purposes, 

would extend the requirement for an annual NMLS to 2006. 
Page 2 GAO-04-710T Investigating Money 

Customs Enforcement (ICE), a component of the Department of 

Homeland Security. 

My statement today is based on two reports we have provided to the 

Congress on these issues—that is, our September 2003 report on 

implementation of the annual NMLS2

 and our February 2004 report on 

implementation of the Memorandum of Agreement.3

Our September 2003 report noted that the annual NMLS generally has not 

served as a useful mechanism for guiding the coordination of federal law 

enforcement agencies’ efforts to combat money laundering and terrorist 

financing. For example, although expected to have a central role in 

coordinating law enforcement efforts, interagency task forces created 

specifically to address money laundering and related financial crimes 

generally had not yet been structured and operating as intended and had 

not reached their expectations for leveraging investigative resources or 

creating investigative synergies. Also, while the Departments of the 

Treasury and Justice had made progress on some strategy initiatives 

designed to enhance interagency coordination of money laundering 

investigations, most initiatives had not achieved the expectations called 

for in the annual strategies. Moreover, even though adjusted in 2002 to 

reflect a new federal priority—combating terrorist financing—the NMLS 

did not address agency and task force roles and interagency coordination 

procedures for investigating terrorist financing. Law enforcement officials 

told us that the lack of clearly defined roles and coordination procedures 

contributed to duplication of efforts and disagreements over which agency 

should lead investigations. 

Our February 2004 report noted that the FBI and ICE had implemented or 

taken concrete steps to implement most of the key provisions in the May 

2003 Memorandum of Agreement on terrorist financing investigations. For 

instance, the agencies had developed collaborative procedures to 

determine whether applicable ICE investigations or financial crimes leads 

may be related to terrorism or terrorist financing—and, if so, determine 

 2

U.S. General Accounting Office, Combating Money Laundering: Opportunities Exist to 

Improve the National Strategy, GAO-03-813 (Washington, D.C.: Sept. 26, 2003). 

3

U.S. General Accounting Office, Investigations of Terrorist Financing, Money 

Laundering, and Other Financial Crimes, GAO-04-464R (Washington, D.C.: Feb. 20, 

2004). 

Summary 
Page 3 GAO-04-710T Investigating Money 

whether these investigations or leads should be pursued under the 

auspices of the FBI. However, as of May 2, 2004, the FBI and ICE had not 

yet issued a joint report on the implementation status of the Agreement, 

which was required 4 months from its effective date. Also, we noted that 

the FBI and ICE have confronted and will continue to confront a number 

of operational and organizational challenges, such as establishing and 

maintaining effective interagency relationships and ensuring that the 

financial crimes expertise and other investigative competencies of both 

agencies are appropriately and effectively utilized. 

To enhance strategic planning, our September 2003 report recommended 

that, if the requirement for a national strategy is reauthorized, the 

Secretaries of the Treasury and Homeland Security and the Attorney 

General (1) strengthen the leadership structure for strategy development 

and implementation, (2) require processes to ensure key priorities are 

identified, and (3) establish accountability mechanisms. In commenting on 

a draft of the September 2003 report, Treasury said that our 

recommendations are important, should the Congress reauthorize the 

legislation requiring future strategies; Justice said that our observations 

and conclusions will be helpful in assessing the role that the strategy 

process has played in the federal government’s efforts to combat money 

laundering; and Homeland Security said that it agreed with our 

recommendations. 

The Money Laundering and Financial Crimes Strategy Act of 1998 

(Strategy Act) required the President—acting through the Secretary of the 

Treasury and in consultation with the Attorney General and other relevant 

federal, state, and local law enforcement and regulatory officials—to 

develop and submit an annual NMLS to the Congress by February 1 of 

each year from 1999 through 2003.4

 The goal of the Strategy Act was to 

increase coordination and cooperation among the various law 

enforcement and regulatory agencies and to effectively distribute 

resources to combat money laundering and related financial crimes. The 

1998 Strategy Act required that each NMLS define comprehensive, 

research-based goals, objectives, and priorities for reducing money 

laundering and related financial crimes in the United States. The annual 

 4

Pub. L. No. 105-310, 112 Stat. 2941 codified as 31 U.S.C. §§ 5340-42, 5351-55 (1998). 

Background 
Page 4 GAO-04-710T Investigating Money 

NMLS generally has included multiple priorities to combat money 

laundering to guide federal agencies’ activities.5

Another provision of the Strategy Act authorized the Secretary of the 

Treasury to designate High Intensity Money Laundering and Related 

Financial Crime Areas (HIFCA), in which federal, state, and local law 

enforcement would work cooperatively to develop a focused and 

comprehensive approach to targeting money-laundering activity.6

 As 

envisioned by the Strategy Act, HIFCAs were to represent a major NMLS 

initiative and were expected to have a flagship role in the U.S. 

government’s efforts to disrupt and dismantle large-scale money 

laundering operations. They were intended to improve the coordination 

and quality of federal money laundering investigations by concentrating 

the investigative expertise of federal, state, and local agencies in unified 

task forces, thereby leveraging resources and creating investigative 

synergies. 

The former U.S. Customs Service, which is now part of ICE, and the FBI 

both have a long history of investigating money laundering and other 

financial crimes. In response to the terrorist attacks of September 11, 

Treasury and Justice both established multiagency task forces dedicated 

to combating terrorist financing. Treasury established Operation Green 

Quest, led by Customs, to augment existing counterterrorist efforts by 

targeting current terrorist funding sources and identifying possible future 

sources. In addition to targeting individuals and organizations, Operation 

Green Quest was designed to attack the financial systems that may be 

used by terrorists to raise and move funds, such as fraudulent charities 

and the shipment of bulk currency. In January 2003, Customs expanded 

Operation Green Quest by doubling the personnel commitment to a total 

of approximately 300 agents and analysts nationwide to work solely on 

terrorist financing matters. In March 2003, Operation Green Quest was 

transferred to ICE, within the Department of Homeland Security. 

On September 13, 2001, the FBI formed a multiagency task force—which 

is now known as the Terrorist Financing Operations Section (TFOS)—to 

combat terrorist financing. The mission of TFOS has evolved into a broad 

 5

Also, in the aftermath of the September 11 attacks, the NMLS was adjusted in 2002 to 

reflect a new federal priority—combating terrorist financing. 

6

Such an “area” could be a geographic area, financial system, industry sector, or financial 

institution. 
Page 5 GAO-04-710T Investigating Money 

role to identify, investigate, prosecute, disrupt, and dismantle all terroristrelated financial and fundraising activities. The FBI also took action to 

expand the antiterrorist financing focus of its Joint Terrorism Task Forces 

(JTTF)—teams of local and state law enforcement officials, FBI agents, 

and other federal agents and personnel whose mission is to investigate and 

prevent acts of terrorism.7 In 2002, the FBI created a national JTTF in 

Washington, D.C., to collect terrorism information and intelligence and 

funnel it to the field JTTFs, various terrorism units within the FBI, and 

partner agencies. 

The attacks of September 11 emphasized the need for federal agencies to 

wage a coordinated campaign against sources of terrorist financing. 

Following September 11, representatives of the FBI and Operation Green 

Quest met on several occasions to attempt to delineate antiterrorist 

financing roles and responsibilities. However, such efforts were largely 

unsuccessful until May 2003, when the Attorney General and the Secretary 

of Homeland Security signed a Memorandum of Agreement that contained 

a number of provisions designed to resolve jurisdictional issues and 

enhance interagency coordination of terrorist financing investigations. 

According to the Agreement, the FBI is to lead terrorist financing 

investigations and operations, using the intergovernmental and intraagency national JTTF at FBI headquarters and the JTTFs in the field. The 

Agreement also specified that, through TFOS, the FBI is to provide overall 

operational command to the national JTTF and the field JTTFs. Further, to 

increase information sharing and coordination of terrorist financing 

investigations, the Agreement required the FBI and ICE to (1) detail 

appropriate personnel to each other’s agency and (2) develop specific 

collaborative procedures to determine whether applicable ICE 

investigations or financial crimes leads may be related to terrorism or 

terrorist financing. Also, the Agreement required the FBI and ICE to 

produce a joint written report on the status of the implementation of the 

Agreement 4 months from its effective date. 

 7

According to the FBI, the first JTTF came into being in 1980, and the total number of task 

forces has nearly doubled since September 11, 2001. Today, there is a JTTF in each of the 

FBI’s 56 main field offices, and additional task forces are located in smaller FBI offices. 
Page 6 GAO-04-710T Investigating Money 

In September 2003, we reported that, as a mechanism for guiding the 

coordination of federal law enforcement agencies’ efforts to combat 

money laundering and related financial crimes, the NMLS has had mixed 

results but generally has not been as useful as envisioned by the Strategy 

Act. For example, we reported that HIFCA task forces were expected to 

have a central role in coordinating law enforcement agencies’ efforts to 

combat money laundering but generally had not yet been structured and 

operating as intended and had not reached their expectations for 

leveraging investigative resources or creating investigative synergies. The 

NMLS called for each HIFCA to include participation from all relevant 

federal, state, and local agencies. However, in some cases, federal law 

enforcement agencies had not provided the levels of commitment and 

staffing to the task forces called for by the strategy. We found, for 

instance, that most of the HIFCAs did not have FBI or Drug Enforcement 

Administration (DEA) agents assigned full time to the task forces. FBI 

officials cited resource constraints as the primary reason why the bureau 

did not fully participate. A DEA official told us that, because of differences 

in agencies’ guidelines for conducting undercover money laundering 

investigations, DEA would not dedicate staff to HIFCA task force 

investigative units but would support intelligence-related activities. Also, 

we noted that four of the five operating HIFCAs had little or no 

participation from state and local law enforcement agencies. Various task 

force officials mentioned lack of funding to compensate or reimburse 

participating state and local law enforcement agencies as a barrier to their 

participation in HIFCA operations. While recognizing that law 

enforcement agencies have resource constraints and competing priorities, 

we noted that HIFCA task forces were expected to make more effective 

use of existing resources or of such additional resources as may be 

available. As called for in the 2002 NMLS, Treasury and Justice are in the 

process of reviewing the HIFCA task forces to enhance their potential and 

remove obstacles to their effective operation. The results of this review 

could provide useful input for an evaluation report on the HIFCA program, 

which the Strategy Act requires Treasury to submit to the Congress in 

2004. 

We further reported that, while Treasury and Justice had made progress 

on some NMLS initiatives designed to enhance interagency coordination of 

money laundering investigations, most had not achieved the expectations 

called for in the annual strategies, including plans to (1) use a centralized 

system to coordinate investigations and (2) develop uniform guidelines for 

undercover investigations. Headquarters officials cited differences in the 

various agencies’ anti-money laundering priorities as a primary reason why 

initiatives had not achieved their expectations. 

Opportunities Exist to 

Improve the National 

Money Laundering 

Strategy 
Page 7 GAO-04-710T Investigating Money 

In our September 2003 report, we noted that our work in reviewing 

national strategies for various crosscutting issues has identified several 

critical components needed for their development and implementation, 

including effective leadership, clear priorities, and accountability 

mechanisms. For a variety of reasons, these critical components generally 

have not been fully reflected in the development and implementation of 

the annual NMLS. For example, the joint Treasury-Justice leadership 

structure that was established to oversee NMLS-related activities generally 

has not resulted in (1) reaching agreement on the appropriate scope of the 

strategy; (2) ensuring that target dates for completing strategy initiatives 

were met; and (3) issuing the annual NMLS by February 1 of each year, as 

required by the Strategy Act. 

Also, although Treasury generally took the lead role in strategy-related 

activities, it had no incentives or authority to get other departments and 

agencies to provide necessary resources or compel their participation. 

And, the annual strategies have not identified and prioritized issues that 

required the most immediate attention. Each strategy contained more 

priorities than could be realistically achieved, the priorities have not been 

ranked in order of importance, and no priority has been explicitly linked to 

a threat and risk assessment. Further, although the 2001 and 2002 

strategies contained initiatives to measure program performance, none 

had been used to ensure accountability for results. Officials attributed this 

to the difficulty in establishing such measures for combating money 

laundering. In addition, we noted that Treasury had not provided annual 

reports to the Congress on the effectiveness of policies to combat money 

laundering and related financial crimes, as required by the Strategy Act. 

As mentioned previously, unless reauthorized by the Congress, the 

requirement for an annual NMLS ended with the issuance of the 2003 

strategy. To assist in congressional deliberations on whether there is a 

continuing need for an annual NMLS, we reviewed the development and 

implementation of the 1999 through 2002 strategies. Our September 2003 

report recommended that—if the Congress reauthorizes the requirement 

for an annual NMLS—the Secretary of the Treasury, working with the 

Attorney General and the Secretary of Homeland Security, should take 

appropriate steps to 

• strengthen the leadership structure responsible for strategy 

development and implementation by establishing a mechanism that 

would have the ability to marshal resources to ensure that the 

strategy’s vision is achieved, resolve disputes between agencies, and 

ensure accountability for strategy implementation; 
Page 8 GAO-04-710T Investigating Money 

• link the strategy to periodic assessments of threats and risks, which 

would provide a basis for ensuring that clear priorities are established 

and focused on the areas of greatest need; and 

• establish accountability mechanisms, such as (1) requiring the 

principal agencies to develop outcome oriented performance measures 

that must be linked to the NMLS’s goals and objectives and that also 

must be reflected in the agencies’ annual performance plans and (2) 

providing the Congress with periodic reports on the strategy’s results. 

In commenting on a draft of the September 2003 report, Treasury said that 

our recommendations are important, should the Congress reauthorize the 

legislation requiring future strategies; Justice said that our observations 

and conclusions will be helpful in assessing the role that the strategy 

process has played in the federal government’s efforts to combat money 

laundering; and Homeland Security said that it agreed with our 

recommendations. 

Our review of the development and implementation of the annual 

strategies did not cover the 2003 NMLS, which was issued in November 

2003, about 2 months after our September 2003 report. While we have not 

assessed the 2003 NMLS in detail, we note that it emphasized that “the 

broad fight against money laundering is integral to the war against 

terrorism” and that money laundering and terrorist financing “share many 

of the same methods to hide and move proceeds.” In this regard, one of the 

major goals of the 2003 strategy is to “cut off access to the international 

financial system by money launderers and terrorist financiers more 

effectively.” Under this goal, the strategy stated that the United States will 

continue to focus on specific financing mechanisms—including charities, 

bulk cash smuggling, trade-based schemes, and alternative remittance 

systems—that are particularly vulnerable or attractive to money 

launderers and terrorist financiers. 
Page 9 GAO-04-710T Investigating Money 

As mentioned previously, the NMLS was adjusted in 2002 to reflect new 

federal priorities in the aftermath of the September 11 attacks, including a 

goal to combat terrorist financing. However, due to difficulties in reaching 

agreement over which agency should lead investigations, the 2002 NMLS 

did not address agency and task force roles and interagency coordination 

procedures for investigating terrorist financing. Law enforcement officials 

told us that the lack of clearly defined roles and coordination procedures 

contributed to duplication of efforts and disagreements over which agency 

should lead investigations. To help resolve these long-standing 

jurisdictional issues, in May 2003, the Attorney General and the Secretary 

of Homeland Security signed a Memorandum of Agreement regarding roles 

and responsibilities in investigating terrorist financing. 

In our February 2004 report, we noted that most of the key Memorandum 

of Agreement provisions had been implemented or were in the process of 

being implemented. For example, in accordance with the Agreement, the 

FBI and ICE have cross detailed key management personnel at the 

headquarters level, with an ICE manager serving as Deputy Section Chief 

of TFOS and an FBI manager detailed to ICE’s financial crimes division. 

Also, the FBI and ICE have developed collaborative procedures to 

determine whether appropriate ICE money laundering investigations or 

financial crime leads may be related to terrorism or terrorist financing. 

Further, as an integral aspect of the collaborative procedures, ICE created 

a joint vetting unit, in which ICE and FBI personnel—who have full access 

to ICE and FBI databases—are to conduct reviews to determine whether a 

potential nexus to terrorism or terrorist financing exists in applicable ICE 

investigations or financial crimes leads. If so, the matter is to be referred 

to TFOS, where the FBI Section Chief is to provide the ICE Deputy Section 

Chief with information demonstrating the terrorism nexus, as well as the 

stage and development of the corresponding FBI investigation. Then, the 

Section Chief and the ICE Deputy Section Chief are to discuss the 

elements of the terrorism nexus, ICE’s equity or commitment of resources 

to date in the investigation, violations being pursued by ICE before the 

Memorandum of Agreement, and the direction of the investigation. After 

this collaborative consultation, the FBI and ICE are to decide (1) whether 

the ICE investigation will be conducted under the auspices of a JTTF and 

(2) agency roles in pursuing related investigations. Specific investigative 

strategies generally are to be developed at the field level by FBI, ICE, and 

U.S. Attorneys Office personnel. The Terrorist Financing Unit of the 

Counterterrorism Section in Justice’s Criminal Division is involved in 

coordinating and prosecuting matters and cases involving terrorist 

financing, which are investigated by both the FBI and ICE. 

Most Key 

Memorandum of 

Agreement Provisions 

Have Been 

Implemented, but 

Terrorist Financing 

Investigations Still 

Present Operational 

and Organizational 

Challenges 
Page 10 GAO-04-710T Investigating Money 

Another Agreement provision—requiring ICE to detail a significant 

number of appropriate personnel to the national JTTF and JTTFs in the 

field—is being handled on a location-specific, case-by-case basis. In 

response to our inquiries, FBI and ICE officials said that this provision was 

not intended to refer to a specific number of personnel and certainly was 

not intended to imply that all former Operation Green Quest agents were 

to be detailed to JTTFs. According to ICE officials, as of February 2004, a 

total of 277 ICE personnel (from various legacy agencies) were assigned 

full time to JTTFs—a total that consisted of 161 former Immigration and 

Naturalization Service agents, 59 Federal Air Marshals, 32 former Customs 

Service agents, and 25 Federal Protective Service agents. ICE officials said 

that this total does not include ICE agents who will be assigned to JTTFs 

in consonance with vetted cases being transitioned to JTTFs, nor does it 

include ICE investigators who participate part time on JTTFs. 

Another provision in the May 2003 Memorandum of Agreement required 

that the FBI and ICE jointly report to the Attorney General, the Secretary 

of Homeland Security, and the Assistant to the President for Homeland 

Security on the implementation status of the Agreement 4 months from its 

effective date. As of May 2, 2004, the FBI and ICE had not yet produced the 

required joint report on the implementation status. 

The Memorandum of Agreement, by granting the FBI the lead role in 

investigating terrorist financing, altered ICE’s role in investigating 

terrorism-related financial crimes. However, while the Agreement 

specified that the FBI has primary investigative jurisdiction over 

confirmed terrorism-related financial crimes, the Agreement does not 

preclude ICE from investigating suspicious financial activities that have a 

potential (unconfirmed) nexus to terrorism—which was the primary role 

of the former Operation Green Quest. Moreover, the Agreement generally 

has not affected ICE’s mission or role in investigating other financial 

crimes. Specifically, the Agreement did not affect ICE’s statutory 

authorities to conduct investigations of money laundering and other 

traditional financial crimes. ICE investigations can still cover the wide 

range of financial systems—including banking systems, money services 

businesses, bulk cash smuggling, trade-based money laundering systems, 

illicit insurance schemes, and illicit charity schemes—that could be 

exploited by money launderers and other criminals. According to ICE 

headquarters officials, ICE is investigating the same types of financial 

systems as before the Memorandum of Agreement. 

Further, our February 2004 report noted that—while the Memorandum of 

Agreement represents a partnering commitment by the FBI and ICE—
Page 11 GAO-04-710T Investigating Money 

continued progress in implementing the Agreement will depend largely on 

the ability of these law enforcement agencies to meet various operational 

and organizational challenges. For instance, the FBI and ICE face 

challenges in ensuring that the implementation of the Agreement does not 

create a disincentive for ICE agents to initiate or support terrorist 

financing investigations. That is, ICE agents may perceive the Agreement 

as minimizing their role in terrorist financing investigations. Additional 

challenges involve ensuring that the financial crimes expertise and other 

investigative competencies of the FBI and ICE are effectively utilized and 

that the full range of the agencies’ collective authorities—intelligence 

gathering and analysis as well as law enforcement actions, such as 

executing search warrants and seizing cash and other assets—are 

effectively coordinated. Inherently, efforts to meet these challenges will be 

an ongoing process. Our interviews with FBI and ICE officials at 

headquarters and three field locations indicated that long-standing 

jurisdictional and operational disputes regarding terrorist financing 

investigations may have strained interagency relationships to some degree 

and could pose an obstacle in fully integrating investigative efforts. 

From a strategic perspective, the annual NMLS has had mixed results in 

guiding the efforts of law enforcement in the fight against money 

laundering and, more recently, terrorist financing. Although expected to 

have a flagship role in the U.S. government’s efforts to disrupt and 

dismantle large-scale money laundering operations, HIFCA task forces 

generally are not yet structured and operating as intended. Treasury and 

Justice are in the process of reviewing the HIFCA task forces, which 

ultimately could result in program improvements. Also, most of the NMLS 

initiatives designed to enhance interagency coordination of money 

laundering investigations have not yet achieved their expectations. While 

the annual NMLS has fallen short of expectations, federal law enforcement 

agencies recognize that they must continue to develop and use interagency 

coordination mechanisms to leverage existing resources to investigate 

money laundering and terrorist financing. 

Through our work in reviewing national strategies, we identified critical 

components needed for successful strategy development and 

implementation, but, to date, these components have not been well 

reflected in the annual NMLS. The requirement for an annual NMLS ended 

with the issuance of the 2003 strategy. If the Congress reauthorizes the 

requirement for an annual NMLS, we continue to believe that 

incorporating these critical components into the strategy—a strengthened 

leadership structure, the identification of key priorities, and the 

Concluding 

Observations 
Page 12 GAO-04-710T Investigating Money 

establishment of accountability mechanisms—could help resolve or 

mitigate the deficiencies we identified. 

Also, regarding investigative efforts against sources of terrorist financing, 

the May 2003 Memorandum of Agreement signed by the Attorney General 

and the Secretary of Homeland Security represents a partnering 

commitment by two of the nation’s law enforcement agencies, the FBI and 

ICE. In the 12 months since the Agreement was signed, progress has been 

made in waging a coordinated campaign against sources of terrorist 

financing. Continued progress will depend largely on the agencies’ ability 

to establish and maintain effective interagency relationships and meet 

various other operational and organizational challenges. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 

respond to any questions that you or Members of the Subcommittee may 

have. 
Page 13 GAO-04-710T Investigating Money 

For further information about this testimony, please contact 

Richard M. Stana at (202) 512-8777. Other key contributors to this 

statement were Danny R. Burton and R. Eric Erdman. 

Appendix I: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

(440320) 
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Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Public Affairs