Anti-Money Laundering: Efforts in the Securities Industry
Published: 2001-10-10T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: To disguise illegally obtained funds, money launderers have traditionally targeted banks, which accept cash and arrange domestic and international fund transfers. However, criminals seeking to hide illicit funds may also be targeting the U.S. securities markets. Although few documented cases exist of broker-dealer or mutual fund accounts being used to launder money, law enforcement agencies are concerned that criminals may increasingly try to use the securities industry for that purpose. Most broker-dealers or firms that process customer payments for mutual funds are subject to U.S. anti-money laundering requirements. However, unlike banks, most of these firms are not required to report suspicious activities. The Treasury Department is now developing a rule requiring broker-dealers to report suspicious activities. Treasury expects that the rule will be issued for public comment by the end of this year. Various intergovernmental groups, such as the Financial Action Task Force, have been working on recommendations that call for member nations to take various steps to combat money laundering through their financial institutions, including requiring securities firms to report suspicious activities. Although many members countries report that they have issued all or many of these recommendations and have applied them to their securities firms, it is difficult to determine how well the measures are being implemented and enforced.

section_title: Letter
paragraphs: This report is in response to your request that we conduct a review of  money laundering issues related to the securities industry.  Money  laundering is criminal activity that occurs when individuals or  organizations seek to disguise or place illegally obtained funds in the  stream of legitimate commerce and finance. Money launderers have  traditionally targeted banks, which accept cash and facilitate domestic and  international funds transfers.  However, the U.S. securities markets, which  are the largest and most liquid in the world, may also be targeted by  criminals seeking to hide and obscure illicit funds.  In response to one of  the matters raised in your request, we reported in March 2001 on the status  of regulatory efforts to oversee the anti-money laundering activities of  certain broker-dealers affiliated with banks after the passage of the  Gramm-Leach-Bliley Act (GLBA).
To address the remaining matters contained in your request, this report  describes (1) government and industry views on the potential for money  laundering in the securities industry, (2) current legal and regulatory  requirements relating to anti-money laundering in the securities industry  and the actions regulators have taken to oversee these requirements, (3)  the efforts that broker-dealers and mutual funds have undertaken to detect  and prevent money laundering, and (4) international anti-money laundering  efforts relating to securities activities and the effectiveness of these efforts.
In completing our work, we interviewed U.S. and foreign officials from law  enforcement and regulatory agencies, broker-dealers, mutual fund groups,  industry associations, and international bodies formed to combat money  laundering.  We also reviewed available documents, including domestic and  foreign reports on anti-money laundering initiatives, pertinent U.S. laws  and examination procedures, and proposed drafts of a suspicious activity  report (SAR) rule for the U.S. securities industry.  In addition, we surveyed  randomly selected samples of the industry and used this information to  estimate the extent to which firms in 2 key populations—3,015 broker- dealers and 310 direct-marketed, no-load mutual fund groups—had  implemented measures to detect and prevent money laundering.   We did  not, however, verify the information that firms reported on their anti- money laundering measures nor did we evaluate the effectiveness of these  measures, which depends on various factors such as the level of  management commitment to the area.  Appendix I provides more detailed  information on the scope and methodology of our review, and appendix II  contains an example of one of the survey instruments we administered.
We conducted our work between May 2000 and May 2001 in accordance  with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: Illicit activities, such as drug trafficking, robbery, fraud, or racketeering,  produce cash.  Money laundering is the process used to transform the  monetary proceeds derived from such criminal  activities into funds and  assets that appear to have come from legitimate sources.  Money  laundering generally occurs in three stages.  As shown in figure 1, in the  placement stage, cash is converted into monetary instruments, such as  money orders or traveler’s checks, or deposited into financial institution  accounts.  In the layering stage, these funds are transferred or moved into  other accounts or other financial institutions to further obscure their illicit  origin.  In the integration stage, the funds are used to purchase assets in the  legitimate economy or to fund further activities.
There is no way to determine the actual amount of money that is being  laundered in general, let alone through a single industry such as the  securities industry.  However, experts have estimated that money  laundering in the global financial system is between 2 to 5 percent of the  world’s gross domestic product.  Estimates of the amount of money  laundered in the United States have been as high as $100 billion.
subsections: section_title: The Securities Industry Has Various Participants
paragraphs: Money launderers can target any of the various types of businesses that  participate in the U.S. securities industry.  Broker-dealers, for instance,  provide a variety of products and services to retail (usually individual) and  institutional investors—buying and selling stocks, bonds, and mutual fund  shares.  As shown in figure 2, two types of broker-dealers—introducing  brokers and clearing brokers—perform different roles that can affect the  extent of their anti-money laundering responsibilities.
Provide brokerage services and offer financial advice to customers.
Some broker-dealers regulated as clearing firms may clear only their own  firms’ transactions and not those of other firms.  These firms are known as  a self-clearing firms.
Mutual funds are another major participant in the securities markets.   Mutual funds are investment companies that pool the money of many  investors and use it to purchase diversified portfolios of securities.  The  administrator of a mutual fund, which in most cases is the fund’s  investment adviser, contracts with other entities to provide the various  services  needed to operate the fund.  Figure 3 shows some of these  entities, the services they perform, and some of the institutions that usually  perform them.  Depending on the extent to which these entities interact  with the fund’s customers or accept customer payments, their  responsibilities for conducting anti-money laundering activities may also  vary. to perform other services. payments. broker-dealers, or banks) (Broker-dealers, banks, or  nonfinancial firms)
Sells fund shares, including customer payments. for fund securities and cash. (Broker-dealer, bank, or (Banks) other financial institution)
section_title: SEC Is the Primary Regulator of Securities Activities, but Other Organizations Also Provide Oversight
paragraphs: SEC has primary responsibility for overseeing the various participants in  the U.S. securities industry, including broker-dealer and mutual fund firms.   It promulgates regulations, performs examinations, and initiates  enforcement actions against alleged violators of the securities laws.  Before  conducting business with the public, broker-dealers are required to register  with SEC and must also join and submit to oversight by an SRO.  These  SROs, which include NASDR and NYSE, oversee members’ compliance  with their own rules, rules enacted by SEC, and the securities laws.   Federal regulators of depository institutions have oversight responsibilities  for banks, thrifts, and their holding companies. Prior to the passage of  GLBA in 1999, banks conducting securities activities directly were subject  to regulation and supervision by their respective banking regulators rather  than SEC.  After GLBA is fully implemented, banks and thrifts conducting  certain securities activities will have to do so in entities registered as  broker-dealers subject to oversight by SEC and securities industry SROs.  The role of the depository institution regulators, with regard to the  securities activities of the entities that they regulate, now involves sharing  information with SEC, although under certain circumstances these  regulators may conduct examinations of the subsidiaries.
Under current legislation governing money laundering, the Secretary of the  Treasury has a variety of responsibilities.  These include issuing anti-money  laundering regulations applicable to financial institutions and other  organizations, such as banks, broker-dealers, casinos, and money  transmitters.  Within Treasury, the authority to issue and administer these  regulations has been delegated to the Director of the Financial Crimes  Enforcement Network (FinCEN).  FinCEN was established in 1990 to  support law enforcement agencies by collecting, analyzing, and  coordinating financial intelligence information to combat money  laundering.
section_title: The Securities Industry Is Viewed as a Potential Target, but the Extent of Actual Money Laundering Is Unknown
paragraphs: Although the extent to which broker-dealers and mutual funds are being  used to launder money is not known, law enforcement officials were  concerned that the securities industry would increasingly be a target for  potential money launderers. All financial sectors, and even commercial  businesses, could be targeted by money launderers. The securities industry  has characteristics similar to other financial sectors but also has some  significant differences.  Criminals seeking to convert their illegal proceeds  to legitimate assets have targeted banks, which take cash for deposit, as a  means to initially introduce illicit income into the financial system.
Law enforcement and securities industry officials said that because  securities activities generally do not involve cash, broker-dealers and  mutual funds are not as vulnerable as banks during the initial placement  stage of the money laundering process.  However, some structuring  schemes used in the placement stage involve monetary instruments such as  money orders, and money launderers could attempt to use broker-dealers  and mutual funds that accept these forms of payment.
According to law enforcement officials, money launderers would more  likely attempt to use brokerage or mutual fund accounts in the layering and  integration stages of money laundering, rather than for the placement  stage.  Similar to their use of banks, money launderers could use brokerage  or mutual fund accounts to layer their funds by, for example, sending and  receiving money and wiring it quickly through several accounts and  multiple institutions.  The securities industry could also be targeted for  integrating illicit income into legitimate assets.  In one case, illicit proceeds  from food stamp fraud were used to open brokerage accounts and invest in  stocks through an ongoing stream of deposits that ranged from less than  $1,000 to almost $10,000.
Law enforcement officials were concerned that various characteristics of  the securities industry and securities transactions were particularly  attractive to money launderers.  For example, the U.S. national money  laundering strategy for 2000, issued by the Secretary of the Treasury and  the U.S. Attorney General, notes that the general nature of the securities  industry provides criminals with opportunities to move and thus obscure  funds.  The report suggests that money launderers may target the industry  because funds can be efficiently transferred among accounts and to other  financial institutions, both domestically and internationally.  For example,  like some banking organizations, several large broker-dealers have offices  located throughout the United States and in many foreign countries.  Some  law enforcement officials noted that wire transfers, specifically those that  involve offshore accounts, can be particularly vulnerable to money  laundering.  The national strategy report also suggests that money  launderers may be attracted to the industry because of the high degree of  liquidity in securities products, which can be readily bought and sold.
Some law enforcement officials pointed to the high volume, large-dollar  amounts, and potentially profitable nature of securities transactions.  On a  typical day, for example, an estimated 3 billion shares of stock worth over  $85 billion are traded on the main U.S. markets—a dramatic increase from  about $20 billion in 1995.  (Appendix III provides additional information on  the size and growth of the U.S. securities industry.)  Officials noted that the  rapid growth of the securities markets and increasing popularity of  investing in stocks and mutual funds may also have raised the industry’s  profile with money launderers, who are becoming increasingly  sophisticated and are attempting to find as many avenues as possible to  launder funds.
Law enforcement and securities industry officials also identified several  specific financial activities that securities firms conduct and that they  viewed to be more at risk for potential money laundering.  For example,  law enforcement officials expressed concern that on-line brokerage  accounts were vulnerable to use by money launderers, and such accounts  have grown substantially in the last few years, jumping from an estimated 7  million in 1998 to almost 20 million in 2000.  On-line brokerage services  provide little opportunity for face-to-face contact with customers or for  verifying the identity of those logging into accounts—a safeguard that is  important to anti-fraud as well as anti-money laundering initiatives.  Although the industry already conducts much of its customer contacts  solely by telephone, securities regulators and industry officials  acknowledged that on-line activities pose particular challenges from a  money laundering perspective.  Law enforcement officials also noted that  some large broker-dealers are offering private banking services (broadly  defined as financial and related services provided to wealthy clients) that  are deemed vulnerable to money laundering.  These services generally  attempt to offer considerable confidentiality as part of the client  relationship, routinely involve large-dollar transactions, and sometimes  offer the use of offshore accounts.
Some law enforcement officials maintained that the securities industry  lacks adequate anti-money laundering requirements and thus represents a  weak link in the U.S. regulatory regime that can be exploited by money  launderers in their search for new ways to hide their funds.  These officials  described the securities sector as a “money laundering loophole” within the  financial services industry that should be closed, particularly as other  financial sectors are being required to improve their defenses against  money laundering.  For example, Treasury issued rules for banks in 1996  and for money services businesses in 2000 requiring these firms to report  suspicious activities, including potential money laundering. However,  similar requirements do not yet apply to all broker-dealers and mutual fund  firms, and law enforcement officials saw this fact as a reason that criminals  may seek to use such firms to facilitate money laundering.  Some law  enforcement officials also suggested that as financial institutions continue  to merge in response to GLBA, the need for consistent and adequate anti- money laundering requirements in all financial sectors is becoming even  more pronounced.
Securities industry officials acknowledged that money launderers could  potentially target their industry. SEC staff have noted that the large volume  of money generated by illegal activities creates a risk for broker-dealers as  well as other financial institutions.  In a May 2001 speech, an SEC official  stated that firms in the securities industry face great risks if they allow  themselves to be used for money laundering.  The official noted that  trillions of dollars flow through the industry each year, and criminal activity  within the industry could taint important U.S. capital markets.
subsections: section_title: The Number of Identified Cases in Which Money Has Been Laundered Through Securities Accounts Is Limited
paragraphs: Despite concerns regarding potential money laundering in the securities  industry, the extent to which money launderers are actually using broker- dealers and mutual fund firms is not known. According to law enforcement  officials, no organization currently collects information in a way that lends  itself to readily identifying cases in which funds generated by illegal activity  outside of the securities industry were laundered through brokerage or  mutual fund accounts.  Legal searches of cases primarily identify money  laundering cases in which broker-dealers or others committed securities  law violations, such as insider trading, market manipulation, or the sale of  fraudulent securities, and then laundered the proceeds from their illegal  activities through banks or other financial institutions.
Law enforcement and securities industry officials acknowledged that a  limited number of cases involving money laundering through broker-dealer  or mutual fund accounts could be readily identified to date.  At our request,  the Internal Revenue Service and the Executive Office for U.S. Attorneys  collected information from some of their field staff that identified about 15  criminal or civil forfeiture cases since 1997 involving money laundering  through brokerage and mutual fund accounts.  The laundered funds in  these cases came from a number of activities, including drug trafficking,  illegal gambling, and food stamp fraud, and the estimated amounts of  laundered funds varied widely, ranging from $25,000 to $25 million per  case. In contrast, during 1999 alone, the United States reported having 996  money laundering convictions, most of which involved funds that were  laundered through banks or other means.   SEC and industry officials also  pointed out that the industry has not had a history of money laundering  cases.
Law enforcement officials suggested that several factors could have  contributed to the limited number of known cases involving money  laundered through brokerage or mutual fund accounts.  These factors  include the difficulty of detecting money laundering at the layering and  integration stages and the lack of adequate systems to detect money  laundering activities in the securities industry. Specifically, they noted that  the absence of a SAR rule may be limiting the identification of money  laundering through broker-dealer and mutual fund accounts. A few  officials also explained that some investigators faced with time constraints  and multiple leads may choose to trace illegal funds through bank rather  than brokerage or mutual fund accounts because banks are subject to SAR  rules and thus are expected to have SAR-related procedures and  documentation needed for investigations.
Law enforcement officials anticipated that more cases may surface in the  future as criminals continue to search for new ways to launder their funds  and turn to the securities industry.  One U.S. attorney stated that although,  historically, money laundering through the securities industry has not been  an apparent problem, some pending investigations involving the movement  of Russian funds through various types of financial accounts, including  brokerage accounts, indicate that activity in the area may be increasing.   Other law enforcement agencies were also attempting to identify and  develop additional cases in which brokerage and mutual funds accounts  were used to launder money.  For example, staff at one agency was in the  process of analyzing whether money orders made payable to broker- dealers, mutual funds, and other financial institutions were being used for  money laundering.
section_title: Broker-Dealer and Mutual Fund Firms Are Not Subject to All Anti- Money Laundering Regulatory Requirements
paragraphs: Broker-dealers and the firms that receive and process customer payments  on behalf of mutual fund groups (hereinafter referred to as mutual fund  service providers) can be held criminally liable if they are found to be  involved in money laundering. They are also subject to certain reporting  and recordkeeping requirements.  However, unless a broker-dealer is a  subsidiary of a depository institution or of a depository institution’s holding  company, or a mutual fund service provider is itself a depository institution  (as are some transfer agents), it is not subject to regulations requiring it to  file SARs for transaction that could involve money laundering.  SEC and the  SROs monitor the industry’s compliance with the currency and related  reporting and recordkeeping requirements during examinations and,  according to SEC officials, are planning to conduct more extensive reviews  of firms’ anti-money laundering efforts starting in the fall of 2001.
subsections: section_title: Broker-Dealer and Mutual Fund Firms Can Be Prosecuted for Aiding Money Launderers and Are Subject to Certain BSA Requirements
paragraphs: Broker-dealers and mutual fund service providers that accept customer  funds are subject to the Money Laundering Control Act of 1986, which is a  statute that applies broadly to all U.S. citizens. This act makes knowingly  engaging in financial transactions that involve profits from certain illegal  activities a criminal offense. As a result, individuals and companies  conducting financial transactions on behalf of customers can be  prosecuted if they are found to have conducted transactions involving  money from illegal activities.  Broker-dealers and mutual fund service  providers can also be prosecuted if they knew or were willfully blind to the  fact that a transaction involved illegal profits.  Penalties under the Money  Laundering Control Act include imprisonment, fines, and forfeiture.
Like other financial institutions, broker-dealers and those mutual fund  service providers that accept customer funds are required to comply with  various BSA or similar reporting and recordkeeping requirements.  Such  requirements are designed to be useful in tax, regulatory, or criminal  investigations, including those relating to money laundering.  As shown in  table 1, firms subject to these requirements are to identify and report  currency transactions exceeding $10,000 with FinCEN, file reports on  foreign bank and financial institution accounts with FinCEN, and report  the transportation of currency or monetary instruments into or out of the  United States with the U.S. Customs Service.
In addition to imposing reporting requirements, the BSA requires broker- dealers and mutual fund service providers to maintain certain records. For  example, broker-dealers and other financial institutions conducting  transmittals of funds of $3,000 or more (including wire transfers) are  required to obtain and keep information on both the sender and recipient  and to record such information on the transmittal order. Broker-dealers  also are required to have compliance programs in place for ensuring  adherence to the federal securities laws, including the applicable BSA  requirements.
Regulations under the BSA also require that banks report suspicious  transactions of $5,000 or more relating to possible violations of law, but  these requirements do not currently apply to all broker-dealers and mutual  fund service providers.  Amendments to the BSA adopted in 1992 gave  Treasury the authority to require financial institutions to report any  suspicious transaction relevant to a possible violation of a law.  In 1996,  Treasury issued a rule requiring banks to report suspicious activities  involving possible money laundering to FinCEN using a SAR form. In  1996, the depository institution regulators promulgated regulations that  require broker-dealer subsidiaries of bank holding companies, national  banks, and federal thrifts to file SARs if the subsidiaries identify potential  money laundering or violations of the BSA involving transactions of $5,000  or more. Until Treasury promulgates SAR rules for broker-dealers, only  broker-dealers that are subsidiaries of depository institutions or of their  holding companies are subject to SAR requirements. Depository institution  regulators have also issued regulations that require banks to have BSA  compliance programs in place, including (1) developing internal policies,  procedures, and controls; (2) independently testing for compliance; (3)  designating an individual responsible for coordinating and monitoring  compliance; and (4) conducting training for personnel.
section_title: Efforts to Develop a Securities SAR Rule Renewed
paragraphs: Treasury is engaged in renewed efforts to develop a SAR rule for the  securities industry and anticipates that a proposed rule will be issued for  public comment before the end of 2001.  Working with SEC, Treasury  initially attempted to develop a SAR rule for the securities industry in 1997.   Treasury officials explained that this effort was set aside so that the  Department could focus first on cash-intensive businesses, such as the  money services businesses and casinos, that are viewed as more vulnerable  to money laundering at the placement stage.  During 2001, Treasury  resumed working with SEC to develop a SAR rule for the securities  industry.  Key issues being discussed include determining the appropriate  threshold for reporting suspicious activities, ensuring that the SAR rule will  not interfere with existing procedures for reporting securities law  violations that apply to broker-dealers, and providing for compliance  program requirements.
One question being debated is whether the $5,000 threshold for reporting  suspicious activities that applies to banks should also apply to the  securities industry.  Securities industry and regulatory officials explained  that this reporting threshold reflects the cash-intensive nature of the  banking industry and its vulnerability to money laundering at the  placement stage and, as such, should not be applied to securities firms.   They also noted that the banking threshold does not reflect the typically  high-dollar amount of securities transactions.  Instead, these officials have  proposed thresholds ranging from $25,000 to $100,000.  Officials from a few  large firms stated that they currently use thresholds ranging from $250,000  to $1 million in their proprietary systems for monitoring suspicious  transactions.  They explained that $5,000 transactions would be too  difficult to identify in the accounts of several million customers and too  burdensome for processing and review purposes. In responding to our  survey, five broker-dealer subsidiaries of bank holding companies, which  are required by bank regulators to file SARs, suggested that the threshold  for the securities SAR rule needed to be raised. A few broker-dealer  subsidiaries said that the thresholds should be the same for both the  banking and securities industry rules, and the remaining 18 respondents  did not offer any comment on tailoring the SAR threshold to the securities  industry.
Results from our surveys did suggest that the average securities transaction  tends to be much larger than $5,000.  For example, broker-dealers reported  that the average size of an individual transaction processed for retail  customers was about $22,000, although the size of these transactions  ranged anywhere from $200 to $150,000.  Appendix V provides additional  survey information on the size of average transaction amounts.
Securities industry representatives also pointed out that a low SAR  threshold could result in an inordinate number of SAR filings from the  industry, undermining the ability of law enforcement agencies to use the  reports effectively.  Federal Reserve officials supported a higher SAR  threshold for the securities industry, in part because they thought it could  help justify a higher reporting threshold for the banking industry as well.   Finally, some law enforcement officials also viewed the reporting threshold  as too low for the securities industry but did not propose an alternative  amount.  Although they acknowledged that the securities industry appears  to be engaged in larger dollar transactions than other types of financial  institutions, a few officials expressed concerns about having different  reporting thresholds for the banking and securities financial sectors.
Another issue being discussed is the scope of suspicious activities that  should be reported to FinCEN on the SAR form.  Financial regulators,  industry, and law enforcement officials agree that any rule requiring the  securities industry to report suspicious activities involving money  laundering should not replace existing procedures that require broker- dealers to report suspected violations of securities laws.  Currently broker- dealers are to report possible securities law violations to SEC, SROs, or a  U.S. attorney’s office. In turn, SEC and the SROs are to refer criminal  money laundering offenses that are reported along with suspected  securities law violations to the appropriate U.S. attorney’s office.  To  minimize any potential confusion on the part of the industry, officials  emphasized that the language of the SAR rule should be written to ensure  that firms understand that they are to continue to report potential  securities violations to the appropriate securities regulators.
Both securities industry and law enforcement officials recognize the value  of requiring compliance programs for reporting suspicious activities and  are discussing whether the SAR rule is the most appropriate mechanism for  imposing such requirements. Law enforcement officials said that industry  participants cannot fully implement a suspicious activity reporting regime  unless they are also required to set up systems to monitor their customers’  activities to prevent and detect transactions involving money laundering.   In addition, securities industry officials said that the SAR rule should  provide that broker-dealers with systems for reasonably detecting  suspicious transactions, appropriate procedures for filing SARs, and no  basis for believing that these procedures are not being followed, have a  defense against being cited for violating the SAR reporting requirement.  Such a provision would be an effective incentive for broker-dealers to  develop and maintain up-to-date programs designed to monitor and report  suspicious activities that may involve money laundering.
In addition to issues relating to the SAR rule itself, some unique  characteristics of the securities industry, including the variety of business  structures and processes, product lines, and client bases among broker- dealers and mutual funds, will make implementing the rule more  challenging.  Not all firms in the industry perform similar activities and thus  may have to work with other firms to fulfill their SAR-related  responsibilities.  For example, determining whether particular transactions  are suspicious may require information from an introducing broker on a  customer’s identity and business activities or investment patterns and  information from a clearing broker on the customer’s payment and  transaction histories.  Regulators and others have also noted that  addressing anti-money laundering considerations will be more challenging  within the securities industry because firms may not collect the same type  of information about customers as banks.  Broker-dealers are expected to  collect enough information about their customers to ensure that any  recommended investments are suitable. However, for some accounts this  may not include all information, such as the customer’s source of the  wealth or income, that can be important for assessing whether this  customer’s activities are suspicious.   Further, with the securities industry,  there is a greater need to focus on the layering and integration stages of  money laundering.
section_title: Securities Regulators Examine Broker-Dealers and Mutual Fund Firms for Compliance With Applicable Requirements and Plan for Broader Reviews
paragraphs: SEC and the securities industry SROs oversee broker-dealers’ compliance  with BSA reporting and recordkeeping requirements involving currency  and other related transactions. After Treasury granted SEC the authority to  examine broker-dealers for compliance with these BSA requirements, SEC  adopted Rule 17a-8 under the Exchange Act, incorporating these  requirements into its own rules.  As a result, SEC and the SROs have the  authority to both examine broker-dealers for compliance with these  requirements and bring action against firms that violate them.
Along with SEC, the SROs are to perform examinations of broker-dealers,  including reviews to assess compliance with anti-money laundering  reporting and recordkeeping requirements. These examinations do not  routinely include assessing compliance with BSA SAR requirements that do  not yet apply to the industry.  During 2000, NASDR reported that it  conducted 1,808 broker-dealer examinations, and NYSE reported that it  conducted 319 examinations.  Both SROs found that some broker-dealers  had deficiencies in supervisory procedures pertaining to the currency  reporting and recordkeeping requirements under SEC Rule 17a-8.
Although most broker-dealers are not subject to SAR requirements,  National Association of Securities Dealers (NASD) and NYSE  representatives noted that they have reviewed broker-dealers’ procedures  relating to suspicious activities.  In 1989, NASD and NYSE issued guidance  advising their members that reporting suspicious activities could prevent  firms from being prosecuted under the Money Laundering Control Act. In  its issuance, NASD specifically warned its members that failure to report  suspicious transactions could be construed as aiding and abetting  violations of the act and could subject the broker to civil and criminal  charges. In its guidance, NYSE cautioned its members to establish  procedures to detect transactions by money launderers and others who  seek to hide profits obtained from illegal activity. In conducting reviews of  their members’ procedures relative to such guidance, these SROs cited a  few firms for deficiencies such as failing to maintain written supervisory  procedures to identify and record suspicious transactions.
Although the SROs conduct most examinations of broker-dealers, SEC staff  also perform them and examinations of certain transfer agents.  For  instance, SEC staff conduct oversight examinations of broker-dealers that  are designed to test both the firms’ compliance with securities laws and  SEC rules (such as SEC Rule 17a-8) and the quality of SRO examinations.   SEC staff also perform “cause examinations” that are initiated in response  to special concerns related to a firm.  These examinations can sometimes  cover compliance with Rule 17a-8, even though BSA compliance may not  have been the initial reason for the examination.  During 2000, SEC  completed 422 oversight examinations and 283 cause examinations but  found no violations of anti-money laundering requirements that had not  already been identified by the SROs.
SEC also conducts examinations of mutual funds and their transfer agents  that address some money laundering issues.  Among the firms that act as  transfer agents for mutual funds are broker-dealers, banks, and  nonfinancial firms that provide other services to mutual funds.  Although  Rule 17a-8 does not apply to transfer agents that are not broker-dealers,  SEC staff explained that the examiners also inquire about these firms’  policies for detecting transactions that may involve money laundering.   Most mutual fund shares, however, are sold by broker-dealers or other  financial intermediaries that have primary responsibility for complying  with the BSA or other currency reporting requirements (such as those  contained in the Internal Revenue Code).
Recognizing the need to strengthen the securities industry’s efforts to  combat money laundering, and anticipating a SAR rule for the industry,  SEC and the SROs are in the process of developing a “refocused” approach  to anti-money laundering examinations.  According to SEC officials, this  enhanced approach will result in a broader review of securities firms than  the current approach, which focuses on compliance with Rule 17a-8. The  new approach is intended to assess firms’ overall anti-money laundering  strategies to determine whether they include policies, procedures, and  internal control systems for monitoring suspicious activities.  SEC officials  anticipated that the expanded procedures would be used during  examinations starting in the fall of 2001.  They also indicated that once  Treasury adopts a SAR rule for the securities industry, SEC and the SROs  plan to develop additional examination procedures to review firms for  compliance with this rule.
section_title: Some Firms Reported Implementing Anti- Money Laundering Measures That Go Beyond Existing Requirements
paragraphs: In responding to our survey, broker-dealers and direct-marketed mutual  fund groups reported taking steps to combat money laundering that go  beyond the BSA requirements applicable to the securities industry at large.   Many firms have gone beyond currency reporting requirements by  restricting the acceptance of cash and other forms of payment that may be  used to launder money in the placement stage.  Survey results also showed  that some broker-dealers and direct-marketed mutual fund groups had  implemented voluntary anti-money laundering measures designed to  identify and report suspicious activities that may involve money  laundering, but most have yet to take such steps.  Clearing brokers were  more actively engaged in such voluntary anti-money laundering efforts than  introducing brokers. In some cases, introducing brokers relied on their  clearing brokers to conduct anti-money laundering activities for them, but  not all clearing firms performed such activities or subjected introducing  broker transactions to such measures.  The largest broker-dealers and  direct-marketed mutual fund groups, which represent the majority of  assets and accounts in the securities industry, were reportedly much more  actively engaged in such voluntary anti-money laundering efforts than  small and medium-sized firms, although these represent the majority of  industry participants.
subsections: section_title: Most Broker-Dealers and Mutual Fund Groups Restricted Cash Transactions and the Use of Some Monetary Instruments
paragraphs: A vast majority of the broker-dealers and direct-marketed mutual fund  groups surveyed reported having policies that prohibit the acceptance of  cash.  By prohibiting cash transactions, firms reduce their vulnerability to  money laundering at the placement stage and the number of instances in  which they must report certain currency transactions.  Our survey showed  that 95 percent of a projected 2,979 broker-dealers among our survey  population and 92 percent of the 310 mutual fund groups never accept  cash in the normal course of business.  The remaining firms accept cash  only as an exception. For example, these firms might accept small amounts  (less than $1,000) or conduct cash transactions approved by a legal or  compliance department.  Industry officials explained that most securities  firms and mutual funds are not set up to handle cash.  Conducting  securities business in cash is generally viewed as too burdensome, and  many firms have chosen not to develop the needed infrastructure,  including policies and procedures, storage facilities, and internal controls.   Furthermore, industry officials note that prohibiting the use of cash is a  prudent business practice that helps to reduce risks, other than money  laundering, commonly associated with handling cash, including theft and  embezzlement.
Although most broker-dealers and direct-marketed mutual fund groups  have reduced their vulnerability to money laundering that involves cash  transactions, many may still be vulnerable to money laundering using other  forms of payment or deposit, such as traveler’s checks, money orders, and  cashier’s checks.  As shown in figure 4, over 55 percent of direct-marketed  mutual fund groups reported always accepting money orders.  According to  law enforcement officials, such forms of payment or deposit can be used as  part of structuring schemes in which cash is converted into monetary  instruments and deposited in increments of less than the $10,000 reporting  threshold. In addition, a large portion of mutual fund groups and broker- dealers also reported accepting cashier’s checks, which can also be used in  money laundering schemes.  A securities industry official pointed out that  cashier’s checks are a common form of payment that firms tend to monitor  rather than restrict for money laundering purposes.  Personal checks are  the most widely accepted form of payment but, according to industry  officials, are viewed with less concern since they can usually be traced to  accounts at depository institutions that have their own anti-money  laundering requirements.
Industry representatives also pointed out that although the survey  responses reflect the proportion of firms that accept certain forms of  payment, these figures do not likely correspond with the extent to which  the cited forms of payment are actually used to deposit funds into broker- dealer or mutual fund accounts. For example, officials from a mutual fund  industry association said that considerable amounts of money are  deposited into mutual funds through electronic fund transfers from bank  accounts or through payroll deposits.
section_title: Some Broker-Dealers and Direct-Marketed Mutual Fund Groups Reported Implementing Additional Voluntary Anti-Money Laundering Measures
paragraphs: Although not subject to SAR requirements, some broker-dealers and direct- marketed mutual fund groups reported having implemented anti-money  laundering measures designed to identify and report suspicious activities.   According to our survey, 17 percent of broker-dealers, or an estimated 513  of 3,015 firms, reported implementing anti-money laundering measures that  go beyond BSA provisions for the securities industry at large.  In our  survey, we asked firms to identify the type of voluntary anti-money  laundering measures, if any, they have implemented.  We divided these  types of measures into four broad categories:    written policies and procedures, such as those requiring staff to learn  more about customers and the nature of the customers’ businesses;  internal controls, including supervisory reviews to ensure that anti- money laundering policies and procedures are being followed;  tools and processes, such as an automated transaction monitoring  program to facilitate the detection of potential money laundering; and  formal training programs for staff, such as those that provide guidance  on how to identify suspicious activities that may involve money  laundering.
These categories were used to determine the general nature of industry efforts and do not  represent a comprehensive list of anti-money laundering efforts. which firms that reported  implementing anti-money laundering measures  were actually adhering to them.  In addition, the effectiveness of these  measures at any firm would depend on various factors, including the level  of  a firm’s management commitment to detecting and preventing money  laundering  and the degree to which the employees responsible for  following anti-money laundering policies and procedures are being  supervised and held accountable.
Although 17 percent of broker-dealers overall reported implementing at  least one voluntary anti-money laundering measure, broker-dealers that  clear trades for themselves and other firms reported being more active in  the area.  According to our survey analysis, 15 percent of introducing  brokers and 63 percent of clearing brokers reported implementing  voluntary anti-money laundering measures. As shown in figure 5, the  extent to which introducing brokers reported implementing the various  voluntary measures identified in our survey ranged from 2 to 10 percent.   The extent to which clearing brokers reported implementing the various  voluntary measures identified in our survey ranged from 5 to 53 percent.
Our survey results also showed that the transactions processed by 40  percent of direct-marketed mutual fund groups were subject to some type  of voluntary anti-money laundering measures.  Over 30 percent of these  groups reported that they or their transfer agents had put in place policies  and many of the tools and processes for identifying and monitoring  suspicious activities (fig. 6).
The extent to which firms had implemented multiple anti-money  laundering measures varied.  For example, for broker-dealers that reported  having implemented voluntary anti-money laundering measures, almost 20 percent indicated they had three or fewer of these measures in place.   Almost 30 percent of these broker-dealers reported having implemented  more than 10 measures.
Even when firms reported implementing the same measures, the scope of  their efforts differed.  For example, officials at one firm explained that its  transaction monitoring system, although still in the process of being  implemented, was specifically designed for anti-money laundering  purposes and focused on the overall financial activities of its customers,  including deposits, wire transfers, and transactions involving cash  equivalents.  This firm’s system will eventually use customer profiling  techniques to identify unusual spikes in account activity and will have the  ability to make links among related customers to identify any suspicious  patterns of activity that may involve money laundering. In contrast,  officials at another firm that reported having a transaction monitoring  system told us that that their system involved the manual review of  transactions identified by a reporting system designed to identify fraud to  determine if the transactions might also involve money laundering.   Similarly, some firms described having ongoing training programs  specifically tailored to money laundering issues, including guidance on  how to identify suspicious activities.  A few firms addressed money  laundering issues only as part of the orientation training provided to new  employees.
Industry officials noted that, in general, a firm’s vulnerability to money  laundering will vary, depending upon such factors as its type of business  activities, customer base, and company size.  They suggested that this  variance in vulnerability among firms may account for some of the  observed differences in the extent and scope of voluntary anti-money  laundering measures implemented by broker-dealers and mutual fund  groups.
Our survey results also disclosed that a relatively small number of broker- dealers and direct-marketed mutual fund groups filed SARs during calendar  year 2000, although they were not legally required to do so.  Specifically, 12  of 152 broker-dealer respondents and 6 of 65 mutual fund group  respondents indicated that they had filed SARs. Almost all were larger  firms.  Most indicated that they had submitted 25 or fewer SARs during  2000, but 1 reported submitting over 200 reports during the year. An  industry association official noted that, rather than filing SARs, some firms  informally refer suspicious activities that may involve money laundering  informally to appropriate regulatory or law enforcement authorities.
Industry officials explained that firms have generally chosen to adopt  voluntary anti-money laundering measures to protect themselves from  becoming unwitting participants in money laundering activities.  The firms  hope that implementing such measures will also help to reduce the  likelihood of prosecution or civil enforcement actions for violations of  money laundering laws and mitigate sanctions in the event that a violation  does occur. Industry trade associations encourage voluntary efforts, noting  that firms are less likely to be subject to a regulatory penalty (or may have a  penalty reduced) if a violation occurs when an effective compliance  program is in place.  Firms also believe that being associated with criminal  elements or activities such as money laundering can threaten their  reputation and have a tremendous impact in terms of lost business and  costly legal fees.  Lastly, firms note that they are taking voluntary actions in  anticipation of a SAR rule for broker-dealers.
section_title: Extent to Which Introducing Brokers’ Transactions Were Covered by Anti-Money Laundering Activities Is Unclear
paragraphs: Although a relatively small portion of introducing brokers reported having  implemented voluntary anti-money laundering measures, many other  introducing brokers reported relying on their clearing brokers to conduct  anti-money laundering activities on their behalf.  According to our survey,  more than half of the introducing brokers indicated that they had not  undertaken such efforts, relying instead on their clearing brokers (fig. 7).   Almost another third reported that they had no voluntary measures of their  own and did not rely on their clearing brokers to undertake such measures  for them.
We found that the allocation of anti-money laundering responsibilities  between introducing and clearing brokers was not always clear. Of the  many introducing brokers that reported relying on clearing brokers to  conduct anti-money laundering activities, most did not know exactly what  types of anti-money laundering activities the clearing brokers performed.   Several introducing brokers indicated that they thought their clearing  brokers monitored customer accounts to identify suspicious activities that  could involve money laundering and would report such activities to them.   Few of the introducing brokers indicated that they received regular  transaction reports from their clearing brokers for anti-money laundering  purposes.
In addition, many of the clearing brokers responding to our survey reported  that they either did not engage in voluntary anti-money laundering  activities or performed them only for their own firms’ transactions, not for  those of introducing brokers.  As a result, some introducing brokers may  have been mistaken in assuming that their clearing brokers performed anti- money laundering activities on their behalf.  We were not able to determine  whether any of the introducing brokers in our survey population used the  clearing brokers that reported performing anti-money laundering  activities. Six of the 29 clearing broker respondents that provided clearing  services for other broker-dealers reported that they did not engage in any  type of voluntary anti-money laundering measures. While the remaining  23 clearing broker respondents reported having voluntary anti-money  laundering measures for their own trades, only about half of these firms  indicated they applied the same measures to their introducing brokers’  transactions.  Only a few of the clearing brokers reported that they  provided other broker-dealers with transaction exception reports for anti- money laundering purposes.  SEC officials explained that existing NYSE  and NASD rules, which require introducing and clearing brokers to clearly  delineate their respective responsibilities in a written agreement, will  require them to include any expanded anti-money laundering  responsibilities that will result from the issuance of a securities SAR rule in  such agreements.
section_title: Large Firms Were More Actively Engaged in Voluntary Anti-Money Laundering Efforts
paragraphs: Although most broker-dealers and direct-marketed mutual fund groups  have yet to implement voluntary anti-money laundering measures, larger  firms reported having done so to a greater degree than had medium-sized  or small firms.  Larger firns also reported having implemented anti-money  laundering programs that included a broader range of measures.   Specifically, from the results of our survey, we estimated that 66 percent of  the 111 large broker-dealers had implemented measures that go beyond  those required by applicable BSA regulations compared with 14 percent of  the 1,738 small firms (table 2).  An estimated 77 percent of the large direct- marketed mutual fund groups had implemented measures beyond those  required, compared with 38 percent of the other mutual fund groups.   Appendix VI provides information on the types of voluntary anti-money  laundering measures implemented by broker-dealers and mutual fund  groups, by size.
The largest firms have also been the most active in implementing anti- money laundering measures.  For example, 18 firms in our broker-dealer  population had assets exceeding $10 billion; together, these firms held  about 80 percent of the industry’s total assets as of year-end 1999.  We  received responses from the nine firms we surveyed in this population.   According to their responses, eight of these firms had implemented  voluntary anti-money laundering measures, with each reporting to have  nine or more measures in place.  SEC officials told us that having such  measures in place at firms like these was particularly important because  money launderers would likely attempt to blend their activities with those  of the vast numbers of customers and transactions handled by large broker- dealers.
However, SEC officials as well as industry officials representing some of  the major broker-dealers and mutual fund groups acknowledged that no  firms in the industry, including small and medium-sized firms, are immune  to money laundering schemes.  They suggested that small and medium- sized firms also need to protect themselves from being inadvertently drawn  into charges of assisting with money laundering.  But the officials stressed  that these firms should be allowed to develop anti-money laundering  programs that are commensurate with their size, available resources, and— most importantly—any identified risks of vulnerability to money  laundering.  For example, some small firms with an established and limited  client base may know their customers well enough to be able to monitor  their business transactions with little need for expensive tracking systems  or formal training programs.
section_title: Certain Bank-Affiliated Respondents Also Reported Implementing Measures to Identify and Report Suspicious Activities
paragraphs: All 25 respondents to our survey of securities subsidiaries of bank holding  companies, along with an additional 14 firms identified as securities  subsidiaries of depository institutions during our other industry surveys,  reported having implemented anti-money laundering efforts to comply with  the SAR rules to which they were subject.  For example, at least 85 percent  of these bank-affiliated respondents reported having written procedures  for identifying and reporting suspicious activities, a formal training  program, and internal audit reviews to ensure compliance with anti-money  laundering policies and procedures.  Most of these firms had also hired  compliance staff with knowledge of and expertise in money laundering.  In  addition, 12 of 25 respondents that were securities subsidiaries of bank  holding companies and 3 of 14 respondents that were subsidiaries of  depository institutions reported having filed SARs during 2000.
section_title: Most Foreign Countries Have Anti- Money Laundering Rules for Securities Firms, but the Effectiveness of These Rules Is Unclear
paragraphs: U.S. and foreign officials from law enforcement and financial regulatory  agencies have been working together within various international forums  to develop anti-money laundering standards.  These standards call for  participating countries to require their financial institutions, including  securities firms, to take steps to prevent money laundering.  Among other  things, the recommended standards call for firms to identify their  customers, report suspicious activities, and implement anti-money  laundering programs.  Many foreign countries reported having issued most  or all of the recommended requirements for their financial institutions,  including their securities industry, whereas efforts in the United States are  still under way.  However, assessing the effectiveness of the measures other  countries have taken is difficult because many requirements have only  recently been issued.  In addition, most countries have also yet to report  many cases involving financial institutions, including securities firms.
subsections: section_title: International Forums Have Developed Anti-Money Laundering Standards
paragraphs: Money laundering issues are the focus of several internationally active  forums, including FATF, which is the largest and the most influential  intergovernmental body seeking to combat money laundering.   Established  in 1989, FATF has 31 members, including the United States. Its activities  include monitoring members’ progress in implementing anti-money  laundering measures, identifying current trends and techniques in money  laundering, and promoting the adoption of the organization’s standards.  Many of these activities are conducted during plenary meetings attended by  delegations from each member country.  Smaller international groups that  address money laundering issues are also able to attend FATF plenary  meetings.  These groups are often regional, like the Caribbean Financial  Action Task Force (CFATF), which includes 25 countries from the  Caribbean, Central America, and South America. Other regional forums  include the Asia Pacific Group on Money Laundering and the Financial  Action Task Force on Money Laundering in South America.
Some international bodies have recommended countermeasures against  money laundering to their members.  These recommendations cover  criminal justice and enforcement systems, financial systems, and  mechanisms for international cooperation.  Some recommendations apply  specifically to financial institutions, including securities firms (table 3).
section_title: Many Countries Reported Complying With FATF Recommendations for Financial Institutions
paragraphs: Many of the countries participating in international forums reported being  in compliance with the FATF recommendations relating to their financial  institutions, including the securities industry.  For example, 24 of the 26  FATF member countries that participated in a recent self-assessment  reported having in place most of the key FATF recommendations that apply  to stockbrokers. These included three FATF recommendations suggesting  that stockbrokers record customers’ identity, pay attention to unusually  large transactions that have no apparent economic purpose, and report  suspicious activities to authorities.  A fourth recommendation suggested  that guidelines be issued to assist stockbrokers in detecting suspicious  activities. Canada, one of the two member countries that had not  implemented the specific recommendation that stockbrokers be required  to report suspicious activities to competent authorities at the time of the  self-assessment, has since published suspicious activity reporting  regulations that cover the securities industry and are expected to come into  force in November 2001.  In a recent report on the anti-money laundering  systems of its members, FATF observed that countries such as Canada  and the United States, which have federal systems of government and a  division of responsibilities for financial institutions sectors, generally take  longer to implement controls for institutions regulated at the state or  provincial level. CFATF officials also observed that 8 of the 11 CFATF  members with organized securities exchanges had enacted legislation or  adopted regulations requiring their securities firms to report suspicious  transactions.
The United States has applied some of the FATF recommendations to its  securities industry.  For example, U.S. requirements for currency reporting  and funds transfers that apply to the securities industry already comply  with international recommendations.  According to U.S. officials, many of  the existing customer identification requirements for broker-dealers in the  United States also are consistent with FATF recommendations.  However,  the United States has not issued requirements on suspicious activity  reporting and related anti-money laundering programs for the securities  industry but, as previously discussed, is in the process of developing a SAR  rule.
section_title: The Effectiveness of Implementing Anti-Money Laundering Standards in Many Countries Is Unclear
paragraphs: Determining how well international anti-money laundering standards have  been implemented around the world is difficult because of the limited  amount of information available.  Some countries have only recently issued  anti-money laundering requirements for their financial institutions,  including securities firms, and have had little time to fully implement and  enforce them.  In addition, FATF reports that limited law enforcement tools  and resources in some countries may hinder the effective implementation  and enforcement of anti-money laundering requirements.
Most FATF countries have only a few years of statistics on suspicious  activity reporting by banks, and few countries have data on suspicious  activity reporting by other financial institutions.  Only six countries  provided information to FATF on SARs filed by their securities firms, and  all six countries showed limited activity in the area.  Specifically, securities  firms filed a relatively small portion of the total SARs filed in these  countries—from nearly 0 percent to just over 4 percent (table 4).
In some countries, suspicious activity reporting requirements for financial  institutions are relatively new, and it may be too early to judge the  effectiveness of implementing these measures.  As previously noted, 8 of 11  CFATF members with organized securities exchanges had implemented  legislation or regulations requiring firms to report suspicious activities, but  7 did not enact these laws until 1998 or later.  Similarly, FATF’s three  newest members issued their anti-money laundering laws covering  suspicious activity reporting requirements in 1997, 1998, and 2000.
Some countries may not have the necessary enforcement tools and  resources to implement anti-money laundering measures properly. FATF  reported that while some member countries have sanctions in place for  firms that fail to report suspicious activities indicative of money  laundering, other countries do not. In the United Kingdom, for example, we  were told that officers of firms that do not report suspicious activities can  be sentenced to up to 15 years in jail.  In general, however, FATF reports  that few members have applied such sanctions.  In some member countries  where the regulatory framework and mechanisms for monitoring  suspicious activities are in place, the resources fall short of what is needed  to make full use of these systems. FATF identified limited staff resources as  a particular problem that has resulted in a backlog of SARs that have not  been investigated. However, these countries are planning to allocate more  resources to the units responsible for collecting, analyzing, and  disseminating suspicious transaction information.
Most countries had not reported many money laundering cases involving  nonbank financial institutions, and data on securities-specific cases are  generally not available.  Overall, other countries reported having much  lower rates of enforcement activity related to money laundering than the  United States. FATF reported that law enforcement statistics showed  marked differences in the anti-money laundering activities of its member  countries and in some cases indicated that members had undertaken few  prosecutions or confiscations of funds.  Law enforcement statistics for  CFATF members also showed limited activity in the area, including few  money laundering prosecutions and convictions. In contrast, the United  States has reported relatively large numbers of prosecutions, convictions,  confiscations, and seizure rates involving money laundering.  During 1999,  for example, the United States had 996 money laundering convictions, the  highest number reported by any of the FATF member countries.
section_title: Conclusions
paragraphs: The extent to which money laundering is occurring in the securities  industry is not known, although law enforcement officials believe that  various characteristics of the industry may make it a target like other  financial industries.  An assessment of the industry’s vulnerability must  also consider the extent to which the industry is covered by anti-money  laundering regulatory requirements and the actions broker-dealers and  mutual fund firms themselves have taken to prevent their use by money  launderers.   Although firms in the securities industry are subject to  criminal prosecution for facilitating money laundering and must comply  with certain BSA reporting and recordkeeping requirements, all broker- dealer and mutual fund firms are not yet required to report suspicious  activities that could be evidence of potential money laundering.  As a result,  the extent to which firms in the industry have taken steps to detect and  prevent money laundering also varied.  We found that many of the larger  firms, which hold the majority of accounts and assets in the industry, had  implemented voluntary anti-money laundering measures, but most of the  small and medium-sized firms that represent the majority of broker-dealer  and mutual fund firms in the industry had not.  Although efforts by  regulators to develop a SAR rule applicable to the securities industry are  under way, they are not yet complete.   As a result, regulators, broker- dealers, and mutual fund firms have more to do to further reduce the  securities industry’s overall vulnerability to money laundering.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments on a draft of this report from Treasury’s  FinCEN and SEC.  FinCEN, whose written comments appear in appendix  VIII, generally agreed with the draft report.  FinCEN noted that the report  provides information that will be useful in identifying and evaluating the  operational effects of any future anti-money laundering regulatory  requirements pertaining to the securities industry.  This includes FinCEN’s  current efforts to promulgate a draft rule that would require registered  broker-dealers to establish programs to identify and report suspicious  activities.  FinCEN also provided technical comments, which we  incorporated in this report as appropriate.
SEC, whose written comments appear in appendix IX, similarly agreed with  the observations contained in the draft report and noted that the draft  provided a helpful overview of issues facing the securities industry,  securities regulators, and law enforcement agencies as they continue their  efforts to block money laundering.  In its view, SEC said that our draft  report identified two insights that would be particularly helpful to the  government’s continued fight against money laundering.  First, because  more than 90 percent of broker-dealer and mutual fund firms reported  never accepting cash, SEC noted that placement of physical currency into  the financial system is not a significant risk for the securities industry.
Secondly, SEC’s letter highlighted that our survey results indicated that the  firms responsible for most of the U.S. securities industry’s accounts,  transactions, and assets have implemented a broad range of voluntary anti- money laundering measures.  We agree that the larger firms were more  likely to report having implemented a variety of anti-money laundering  measures.  We note, however, that we did not attempt to verify the  information provided by firms responding to our survey.   In addition, the  effectiveness of firms’ anti-money laundering programs also depends on  such factors as the extent of management support and the level of  supervision over employees and customer activity.  In its letter, SEC also  noted that the implementation of an effective SAR requirement for broker- dealers—one focused on layering and integration—should help all  regulators and law enforcement officials address money laundering.  SEC  also provided technical comments, which we incorporated in this report as  appropriate.
Justice provided us with informal comments in which it generally  concurred with the substance of the draft report and offered a few  additional observations.  Justice noted, for example, that most of its  enforcement efforts have focused on the large broker-dealers, leaving a  significant segment of the securities industry unaddressed.  It also  emphasized that the opportunities for laundering illegal proceeds through  on-line brokerage accounts require further scrutiny.
As agreed with your office, unless you publicly release its contents earlier,  we plan no further distribution of this report until 14 days from its issuance  date.  At that time, we will send copies of this report to interested  congressional committees and members.  We will also send copies to the  Secretary of the Treasury, the U.S. Attorney General, and the Chairman of  SEC.  Copies will also be made available to others upon request.
Key contributors to this report are listed in appendix X.  If you have any  questions, please call me at (202) 512-5431 or Cody Goebel, Assistant  Director, at (202) 512-7329.
section_title: Scope and Methodology
subsections: section_title: Determining Potential for Money Laundering and the Extent to Which Existing Regulations and Oversight Apply to the Securities Industry
paragraphs: To develop information on the potential for money laundering in the U.S.  securities industry, we obtained the views of securities industry  representatives and regulatory officials as well as the perspectives of  several law enforcement agencies.  At the Department of the Treasury, we  spoke with officials from the Financial Crimes Enforcement Network  (FinCEN), U.S. Customs Service, Internal Revenue Service, U.S. Secret  Service, Office of Foreign Assets Control, and Office of Enforcement.  At  the Department of Justice, we spoke with officials from the Drug  Enforcement Administration, Federal Bureau of Investigation, and  Executive Office for U.S. Attorneys.  We reviewed relevant reports,  including the National Money Laundering Strategy for 2000 issued by  Treasury and the U.S. Attorney General, International Narcotics Control  Strategy Report issued by the U.S. Department of State, and Report on  Money Laundering by the International Organization of Securities  Commissions.  We also conducted an independent legal search of cases  involving money laundering through the securities industry and reviewed  indictments, news articles, and other supporting documentation (provided  primarily by the Internal Revenue Service and the Executive Office for U.S.  Attorneys) to identify relevant cases.
To describe the anti-money laundering legal framework applicable to the  U.S. securities industry and related regulatory oversight, we interviewed  officials at the Securities and Exchange Commission (SEC), New York  Stock Exchange (NYSE), National Association of Securities Dealers  (NASD), Federal Reserve Board, Office of the Comptroller of the Currency,  and Office of Thrift Supervision.  We also reviewed U.S. anti-money  laundering laws, rules, and regulations; accompanying congressional  records; SEC and self-regulatory organization (SRO) examination  procedures covering compliance with Bank Secrecy Act (BSA)  requirements and related anti-money laundering guidance; semiannual  reports to Treasury summarizing SEC and SRO examination findings  pertaining to BSA, SEC correspondence on anti-money laundering issues,  and other relevant documentation.
section_title: Determining the Extent to Which Broker- Dealers and Mutual Funds Have Implemented Anti- Money Laundering Activities
paragraphs: To determine the nature of the anti-money laundering efforts of broker- dealers and mutual funds, we interviewed industry officials at their  respective companies and held roundtable discussions with panels of  industry officials representing some of the nation’s major broker-dealer and  mutual fund firms.  We also spoke with representatives of industry trade  associations, such as the Securities Industry Association and Investment  Company Institute, and reviewed available reports and other documents  covering money laundering issues relative to the securities industry.
To determine the extent to which firms were undertaking anti-money  laundering activities, we also surveyed representative probability samples  of broker-dealers and mutual funds. For our survey of broker-dealers, our  target population was all broker-dealers conducting a public business,  including firms that carry customer accounts, clear trades, or serve as  introducing brokers.  These firms were selected because their activities  may expose them to potential money laundering, unlike brokers who do  not conduct transactions for customers.  For our survey of mutual fund  firms, our target population was direct-marketed, no-load mutual fund  families that sell shares directly to investors and would have some anti- money laundering responsibilities because of their direct contact with  customers.  The majority of other mutual funds are sold by other financial  institutions, such as broker-dealers, banks, and insurance companies, and  these entities would have the contact with customers potentially seeking to  launder money.
Our representative probability samples included three groupings:  (1)  broker-dealers, (2) securities subsidiaries of bank holding companies and  foreign banking organizations, and (3) mutual funds.  For each grouping,  we used survey data to estimate what types of monetary instruments are  accepted and what anti-money laundering activities are conducted,  including voluntary measures such as implementing written anti-money  laundering procedures to identify noncash suspicious activities,  establishing related internal controls, providing personnel training, and  filing suspicious activity reports (SAR).  Appendix II is an example of one  of our survey instruments.
subsections: section_title: Sample Design
paragraphs: Our three statistically valid random samples were drawn so that each  sampled firm had a known, nonzero probability of being included in our  survey.  In the broker-dealer and mutual fund surveys, the samples were  allocated across several categories, or strata, defined by the size of the  firm, so that proportionally more of the sample was allocated to the strata  with larger firms.  This makes our estimates of anti-money laundering  activity, which tends to vary by size of firm, more precise.  To produce the  estimates from this survey, answers from each responding firm were  weighted in the analysis to account for the different probabilities of  selection by stratum and to make our results representative of all the  members of the population, including those that were not selected or did  not respond to the survey.
For our survey of broker-dealers, our target population was all broker- dealers conducting a public business, including firms that carry customer  accounts, clear trades, or serve as introducing brokers.  Using these  specifications, we requested year-end 1999 financial and operational  reports filed with SEC by 5,460 firms.  From this list, we eliminated 1,626  NASD-member firms not conducting a public business and carrying or  clearing trades, such as those that act as floor brokers on the various  exchanges or that sell mutual funds, direct participation plans, or units of  mutual funds, but that nevertheless file broker-dealer reports with SEC.  We  also removed the 53 section 20 subsidiary firms identifiable in the dataset  at that time, resulting in a population of 3,781 broker-dealers for sampling  purposes.  Table 5 provides additional information on the  selected  characteristics of this broker-dealer population.
From these 3,781 firms, we drew a random probability sample of 231  broker-dealers.  We distributed that sample over three size strata defined by  total assets of the firms.
For our survey of mutual funds, our target population was direct-marketed  funds whose shares are sold directly to retail or institutional customers.   We developed a list of 363 of these direct-marketed mutual fund groups  from lists of no-load mutual fund families (those fund complexes most  likely to distribute shares of their funds themselves) from publications  widely available at the time of our survey. We drew a random sample of 92  fund families across two strata defined by the year-end 1998 asset size of  firms.
Some broker-dealers and mutual fund groups have been subject to  additional money laundering regulation because of their affiliation with  banks or other depository institutions—specifically, as subsidiaries of  depository institutions or of their holding companies. As a result, we  attempted to remove this group from our overall survey population of  broker-dealers and administered a separate survey for such bank-affiliated  brokers.  However, we were unable to develop a survey population that  included all securities subsidiaries of depository institutions or of their  holding companies because comprehensive data on the extent and the  identities of all such subsidiaries were not available. However, the Federal  Reserve maintained data on the securities subsidiaries of the bank holding  companies and foreign banking organizations that it oversees.  These  bank-affiliated broker-dealers were subject to banking SAR requirements.   As of December 31, 1999, the Federal Reserve oversaw 53 of these firms,  and we randomly selected 37 of them for our survey.
section_title: Administration of the Surveys
paragraphs: We contacted all sampled firms by telephone to determine their eligibility  for the survey and to determine who in each firm should receive the  questionnaire.  We sent questionnaires primarily by fax to firms beginning  in December 2000.  We made telephone follow-up contacts to some of the  firms that did not respond within several weeks, to encourage them to  return a completed questionnaire or to answer our questions by telephone.   We stopped collecting completed questionnaires in April 2001. We used  several variants of the questionnaires tailored to each industry and to  whether the firm was subject to the banking SAR requirements.  Although  we conducted follow-up work with some of the respondents to clarify their  responses and obtain additional information, we did not systematically  verify the accuracy of survey responses or the extent to which firms were  adhering to reported policies and procedures.
section_title: Disposition of Samples
paragraphs: We received 164 usable broker-dealer responses, 67 mutual fund responses,  and 25 responses from securities subsidiaries of bank holding companies.   After adjusting for those sampled firms that were discovered to be  ineligible for our survey because they were no longer independent entities  in their respective industries, the number of usable responses resulted in  final response rates of 87 percent, 83 percent, and 69 percent, respectively  (tables 6 to 8).  Because not all respondents provided an answer to each  question that they were eligible to answer, the item response rate varies  and is generally lower than the unit response rate for each industry.
During the course of administering the surveys of broker-dealers and  mutual fund groups, we identified 12 broker-dealers and 2 mutual fund  groups that indicated that they were subject to the banking SAR  requirements.  Responses of these 14 firms were analyzed in conjunction  with responses of the securities subsidiaries of institutions overseen by the  Federal Reserve.
section_title: Survey Error and Data Quality
paragraphs: Point estimates from sample surveys are subject to a number of sources of  error, which can be grouped into the following categories: sampling error,  coverage error, nonresponse error, measurement error, and processing  error.  We took a number of steps to limit these errors.
Sampling error exists because our random sample is only one of a large  number of samples that we might have drawn.  Since each sample could  have produced a different estimate, we express the precision of our  particular sample's results as a 95-percent confidence interval.  This is the  interval (e.g., ±7 percentage points on either side of the percentage  estimate) that would contain the actual population value for 95 percent of  the samples we could have drawn.  As a result, we are 95-percent confident  that each of the confidence intervals cited in this report will include the  true values in the study population.
Surveys may also be subject to coverage error, which occurs when the  sampling frame does not fully represent the target population of interest.   We used the most up-to-date lists that were available to us, and we  attempted to remove firms that were no longer in the industry of interest.   For the mutual fund survey, our results are representative only of those  mutual fund groups that are direct marketed and that offer predominantly  no-load funds, which we believe is closest to the target population of  mutual funds that are self-distributing.  Also, we discovered a small number  of firms in our broker-dealer sample that was affiliated with depository  institutions and subject to banking SAR requirements.  These firms would  have been excluded from our overall broker-dealer sample frame had we  known this before conducting our survey; their responses were analyzed  with those from our sample frame for bank-affiliated securities  subsidiaries, which represented broker-dealers subject to banking SAR  requirements.
Measurement errors are defined as differences between the reported and  true values.  Such errors can arise from the way that questions are worded,  differences in how questions are interpreted by respondents, deficiencies  in the sources of information available to respondents, or intentional  misreporting by respondents.  To minimize such errors, we asked subject  matter experts to review our questionnaires before the survey, and  pretested the questionnaires by telephone with respondents at several  firms of various sizes and levels of anti-money laundering activity.
Nonresponse error arises when surveys are unsuccessful in obtaining any  information from eligible sample elements or fail to get valid answers to  individual questions on returned questionnaires.  To the extent that those  not providing information would have provided significantly different  information from those that did respond, bias from nonresponse can also  result.  Because the seriousness of this type of error is often proportional to  the level of missing data, response rates are commonly used as indirect  measures of nonresponse error and bias.  We took steps to maximize  response rates, such as sending multiple faxes of the questionnaires and  making several telephone follow-ups to convert nonrespondents.
Finally, surveys may be subject to processing error in data entry,  processing, and analysis.  We verified the accuracy of a small sample of  keypunched records by comparing them with their corresponding  questionnaires, and we corrected any errors found.  Less than 1 percent of  the data items we checked had random keypunch errors that would not  have been corrected during data processing.  Analysis programs were also  independently verified.
We conducted follow-up work with many of the respondent firms to obtain  additional information on or clarification of their survey responses. We also  worked with FinCEN to corroborate survey responses on the extent that  securities firms have filed SARs using procedures that attempted to  maintain the confidentiality of the identities of our survey respondents.
section_title: International Anti- Money Laundering Efforts
paragraphs: To obtain information on international efforts aimed at addressing money  laundering in the securities industry, we interviewed members of the U.S.  delegation to the Financial Activities Task Force (FATF), officials of the  Caribbean Financial Activities Task Force (CFATF), and representatives of  the U.S. Department of State.  We also spoke with foreign officials  representing the financial supervising authorities, law enforcement or  financial intelligence units, prosecuting offices, and securities industries in  Barbados, Germany, Trinidad and Tobago, and the United Kingdom.  In  addition, we interviewed knowledgeable representatives at the U.S.  embassies located in these jurisdictions.  We reviewed FATF and CFATF  annual reports; summaries of mutual evaluations, self-assessments, and the  results of plenary meetings; documents provided by countries we visited on  their anti-money laundering oversight and law enforcement efforts; and  relevant reports issued by various international working groups and  committees.  Lastly, we researched the Web sites of selected foreign  financial regulators and reviewed available documentation on their anti- money laundering regulations, policies, and industry guidelines.  Information on foreign anti-money laundering laws or regulations is based  on interviews and secondary sources and does not reflect our independent  legal analysis.
We conducted our work between May 2000 and May 2001 in accordance  with generally accepted government auditing standards.
section_title: Example of a Data Collection Instrument Used to Survey the Securities Industry
subsections: section_title: Please provide the following information in the event we need to clarify a response:
section_title: Demographic Information on the U.S. Securities Industry
paragraphs: One of the reasons that the U.S. securities industry is seen as potentially  attractive to money launderers is the rapid growth in securities activities in  the United States.  As shown in figure 8, the value of securities traded on  the NYSE and the Nasdaq markets has grown significantly since 1990.
The number of shares traded on these two major U.S. markets has also  increased during the 1990s (fig. 9).
In addition to the increase in stock trading, mutual funds have also  experienced considerable growth in the 1990s.  As shown in figure 10,  assets in mutual funds exceeded $7 trillion in 2001.
Securities markets are now more accessible to investors with the advent of  on-line trading accounts that allow investors to open accounts and send  transaction instructions to broker-dealers using the Internet.  As shown in  figure 11, research staff for one broker-dealer reported that the number of  on-line brokerage accounts was close to 20 million at the end of 2000.
Although many countries have active securities markets, trading on  markets in the United States continues to represent the majority of trading  on all large markets (fig. 12).
section_title: Identified Cases of Money Laundering Through the U.S. Securities Industry
paragraphs: To obtain information on the extent to which the U.S. securities industry  was used to launder money as well as the vulnerability of the industry to  money laundering, we contacted various U.S. law enforcement agencies.   Within Treasury, we contacted the Customs Service, Internal Revenue  Service’s Criminal Investigation Division, Secret Service, FinCEN, Office of  Foreign Assets Control, and Office of Enforcement.  At Justice, we spoke  with officials from the Drug Enforcement Administration, Federal Bureau  of Investigation, and Executive Office for U.S. Attorneys.
Statistics on the number of cases in which money was laundered through  brokerage firms and mutual funds were not readily available, but we  compiled a listing of cases in which illegal funds were laundered through  brokerage firms or mutual funds from information provided primarily by  two of the law enforcement agencies we contacted. At our request, the  Internal Revenue Service and Executive Office for U.S. Attorneys collected  information from some of its field staff that identified about 15 criminal or  civil forfeiture cases since 1997 that involved money laundering through  brokerage and mutual fund accounts.  Some cases in which money  laundering is alleged involved securities fraud or crimes committed by  securities industry employees who then moved their illegally earned  proceeds to other institutions or used them to purchase other assets, thus  violating the anti-money laundering statutes.  However, we only included  such cases if broker-dealer or mutual fund accounts were alleged to have  been used to launder the money.
Table 9 provides a list of criminal cases in which proceeds from illegal  activities were laundered through brokerage or mutual fund accounts.    Table 10 provides a list of forfeiture cases in which property, including  assets held in brokerage or mutual fund accounts, obtained from proceeds  that were traceable to certain criminal offenses were taken by the United  States to be distributed to the victims of such crimes as restitution.  These  lists contain examples of cases that involve charges of money laundering  through brokerage or mutual fund accounts and do not represent an  exhaustive compilation of all such known cases.  For example, law  enforcement officials indicated that they were unable to provide  information on many relevant pending cases in the area and further  emphasized that not all field offices and staff had been formally queried.   Specific case information presented in the tables was extracted from public  documents provided primarily by the Internal Revenue Service and  Executive Office for U.S. Attorneys.
section_title: Survey Information on the Average Dollar Size of Transactions Processed for Retail Customers
paragraphs: The overall average dollar size of individual transactions processed for  retail customers among firms responding to our survey was $22,000 for  broker-dealers and $11,000 for mutual funds groups, as shown in table 11.   The median, or middle value for the full range of responses, was  substantially lower than the average for each of the two types of firms.  The  combined range of the average transactions varied widely—from $200 to  $200,000.
section_title: Additional Information on Voluntary Anti- Money Laundering Measures From Surveys of Broker-Dealers and Mutual Fund Groups
paragraphs: For those broker-dealers that indicated that they had voluntary anti-money  laundering measures in place, large broker-dealers tended to implement  more of the anti-money laundering tools and processes than the medium- sized or small firms, as shown in figure 13.  Implementation of the other  types of voluntary anti-money laundering measures varied.
For those mutual fund groups that indicated they had voluntary anti-money  laundering measures in place, large mutual funds reported implementing  more of the various voluntary anti-money laundering measures, but  medium-sized and small funds have also implemented many of the same  measures (see fig. 14).
section_title: Additional Information on the Caribbean Financial Action Task Force
paragraphs: CFATF is the Caribbean basin counterpart of FATF that works to assist  member governments in implementing anti-money laundering mechanisms.   Its 25 members are countries and territories from the Caribbean, Central  America, and South America.  CFATF was created as the result of meetings  held in the early 1990s by representatives of the Western Hemisphere  countries to develop a common approach to combat the laundering of drug  trafficking proceeds. In 1992, CFATF developed 19 recommendations on  the basis of this common approach, which have specific relevance to the  region and complement the 40 recommendations of FATF. Member  governments have signed a memorandum of understanding, known as the  Kingston Declaration on Money Laundering, which confirms their  agreement to adopt and implement various internationally accepted  standards and recommendations and CFATF’s 19 regionally focused  recommendations.  The CFATF Secretariat monitors members’  implementation of the Kingston Declaration through various mechanisms,  including self-assessment questionnaires, mutual evaluations of anti-money  laundering regimes, training technical assistance programs, and plenary  and Ministerial meetings.
subsections: section_title: Laws Requiring Securities Firms to Report Suspicious Transactions in Some CFATF Jurisdictions Were Recently Enacted
paragraphs: According to CFATF officials, most CFATF jurisdictions that have  organized securities exchanges require their securities firms to report  suspicious transactions; however, almost all of these requirements were  enacted recently. CFATF officials noted that 11 member jurisdictions (i.e.,  the Bahamas, Barbados, Bermuda, the Cayman Islands, Costa Rica, the  Dominican Republic, Jamaica, Nicaragua, Panama, Trinidad and Tobago,  and Venezuela) have at least 1 organized securities exchange.  Eight of  these members have enacted legislation requiring their securities firms to  report suspicious transactions to relevant authorities (fig. 15).
CFATF officials noted that, with the exception of Panama, which has  required its securities firms to report suspicious transactions since 1995,  the remaining seven CFATF members with organized securities exchanges  enacted such requirements only since 1998.  The Bahamas and Trinidad and  Tobago, for example, enacted anti-money laundering legislation in 2000  requiring, among other things, securities firms to report suspicious  transactions to relevant authorities; Jamaica enacted similar legislation in  1999.
section_title: Implementation Efforts in Other CFATF Jurisdictions Have Been Criticized
paragraphs: Although CFATF officials indicated that most CFATF jurisdictions require  their financial institutions to report suspicious transactions, U.S. and  international anti-money laundering authorities have criticized legislation  and implementation in some CFATF jurisdictions.  Treasury documents  based on the mutual evaluations of CFATF members’ activities indicate that  anti-money laundering results in the region are very limited, noting that few  cases of money laundering have actually been prosecuted or convicted. A  June 2000 FATF report cited six CFATF jurisdictions as having significant  deficiencies in their anti-money laundering systems and labeled them as  “non-cooperative countries and territories.”  In addition, during 2000,  FinCEN issued a series of advisories to U.S. businesses describing  deficiencies in the anti-money laundering systems of six CFATF  jurisdictions, including three jurisdictions with organized securities  exchanges. FinCEN reported in a July 2000 advisory, for example, that the  Bahamas did not require its financial institutions to report suspicious  activities and that, although the Cayman Islands did have this reporting  requirement, it lacked any sanctions for financial institutions that failed to  comply. FinCEN also criticized the effectiveness of Panama’s suspicious  transaction reporting procedures that allowed the Office of the President of  Panama to screen reports before referring them for investigation. However,  in 2001, FATF removed the Bahamas, the Cayman Islands, and Panama  from its list of noncooperative countries, noting that they had adequately  addressed their deficiencies through legislative reforms and  implementation efforts.  FinCEN also retracted its advisories on the basis  of the improvements made by these jurisdictions.
section_title: Securities Industry Viewed as Less Vulnerable Than Other Sectors of Caribbean Economies
paragraphs: Securities regulators with whom we spoke in Barbados and Trinidad and  Tobago believed that the Caribbean securities markets would likely not be  appealing to money launderers and other criminals because of their small  size and low trading volumes. For example, compared with over 7,000  registered broker-dealers in the United States, regulatory officials stated  that the Barbados stock exchange has only 17 member-brokers and the  local securities market in Trinidad and Tobago has only 5 participating  brokers. They also explained that trading activity in these markets is  limited to 2 days a week in Barbados and 3 days a week in Trinidad and  Tobago. Finally, regulatory officials believed that the small size of these  markets would make it relatively easy to detect any unusual or suspicious  activities.
Law enforcement officials and financial experts in the CFATF jurisdictions  we visited considered other sectors of Caribbean economies more  vulnerable to money laundering than the securities industry, citing, as an  example, the increased use of local commercial businesses to launder  money.  Trinidad and Tobago law enforcement officials, for one, stated that  they were aware of specific cases in which drug dealers invested in  legitimate businesses such as supermarkets for the sole purpose of  laundering illicit funds. Barbados authorities also stated that they were  aware of money laundering through businesses engaged in the import or  export of goods, sometimes involving high-volume, cash sales.
section_title: Comments From the Financial Crimes Enforcement Network
section_title: Comments From the Securities and Exchange Commission
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to those named above, Evelyn E. Aquino, Emily R. Chalmers,  Bradley D. Dubbs, Tonita W. Gilllich, May M. Lee, Christine J. Kuduk, Carl  M. Ramirez, and Sindy R. Udell made key contributions to this report.
section_title: Related GAO Products
paragraphs: Money Laundering: Oversight of Suspicious Activity Reporting at Bank- Affiliated Broker-Dealers Ceased (GAO-01-474), Mar. 22, 2001.
Suspicious Banking Activities: Possible Money Laundering by U.S.  Corporations for Russian Entities (GAO-01-120), Oct. 31, 2000.
Money Laundering: Observations on Private Banking and Related  Oversight of Selected Offshore Jurisdictions (GAO-T-GGD-00-32), Nov. 9,  1999.
Private Banking: Raul Salinas, Citibank, and Alleged Money Laundering  (GAO/T-OSI-00-3), Nov. 9, 1999.
Private Banking: Raul Salinas, Citibank, and Alleged Money Laundering  (GAO/OSI-99-1), Oct. 30, 1998.
Money Laundering: Regulatory Oversight of Offshore Private Banking  Activities (GAO/GGD-98-154), June 29, 1998.
Money Laundering: FinCEN’s Law Enforcement Support Role Is Evolving  (GAO/GGD-98-117), June 19, 1998.
Money Laundering: FinCEN Needs to Better Manage Bank Secrecy Act  Civil Penalties (GAO/GGD-98-108), June 15, 1998.
Money Laundering: FinCEN’s Law Enforcement Support, Regulatory,  and International Roles (GAO/GGD-98-83), Apr. 1, 1998.
Money Laundering: FinCEN Needs to Better Communicate Regulatory  Priorities and Timelines (GAO/GGD-98-18), Feb. 6, 1998.
Private Banking: Information on Private Banking and Its Vulnerability  to Money Laundering (GAO/GGD-98-19R), Oct. 30, 1997.
Money Laundering: A Framework for Understanding U.S. Efforts  Overseas (GAO/GGD-96-105), May 24, 1996.
Money Laundering: U.S. Efforts to Combat Money Laundering Overseas  (GAO/T-GGD-96-84), Feb. 28, 1996.
Money Laundering: Stakeholders View Recordkeeping Requirements for  Cashier’s Checks as Sufficient (GAO/GGD-95-189), July 25, 1995.
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section_title: Public Affairs