The BSA and its implementing regulations, in general, require financial institutions to maintain certain records and to file certain reports (e.g., currency transaction reports) that are useful in criminal, tax, or regulatory investigations, such as money laundering cases. Failure to file BSA reports can result in criminal and/or civil penalties, depending on the nature of the violation. Criminal investigations are the responsibility of IRS’ Criminal Investigation Division. Civil penalties are currently assessed by FinCEN, and the agency is to send each referral to IRS for review before any administrative or civil enforcement action is taken. Treasury has issued guidelines to assist regulatory agencies in determining which BSA violations warrant referral to Treasury for consideration of criminal and/or civil penalties. For example, according to the guidelines, violations customarily warranting referral include a pattern of failing to file currency transaction reports on applicable transactions. After receiving a referral, FinCEN’s role includes evaluating the circumstances of the alleged violation and determining whether some type of civil action, including seeking the imposition of a civil monetary penalty, should be taken against the person or financial institution. Generally, FinCEN disposes of the majority of its civil penalty cases with one of three courses of action: (1) close the case without contacting the subject of the referral, (2) issue a letter of warning to the subject institution or individual, or (3) assess a civil monetary penalty. The Director, FinCEN, makes the final decisions. Civil monetary penalties generally can range from $25,000 to $100,000 per willful violation. In addition, civil monetary penalties may be assessed for each negligent violation of the BSA up to $500. Appendix II provides more information about FinCEN’s procedures. Except for the delegation of responsibility to FinCEN in 1994, Treasury’s policies and procedures for processing civil penalty referrals for BSA violations generally have remained unchanged since our 1992 report. Treasury’s Office of Financial Enforcement was established in 1985 to, among other things, develop referrals of alleged civil violations of the BSA and make recommendations as to whether civil penalties should be assessed against noncompliant financial institutions and their officers, directors, employees, and individuals, and if so, the amounts of the penalties. Treasury’s Assistant Secretary for Enforcement was responsible for making the final decision to assess a penalty. In May 1994, the Assistant Secretary for Enforcement delegated civil penalty authority to FinCEN. Presently, civil penalty referrals are processed by FinCEN’s Office of Compliance and Regulatory Enforcement (OCRE). According to FinCEN, in processing civil penalty referrals, OCRE staff follow the same policies and procedures that existed before the 1994 delegation. Also, the number of staff processing civil penalty referrals has remained fairly constant, at about six, before and after the 1994 delegation of authority to FinCEN. FinCEN officials told us that the staff of Treasury’s Office of Financial Enforcement—the unit previously responsible for processing civil penalty referrals—was merged into OCRE in 1994. FinCEN officials noted, however, that none of OCRE’s six staff work on civil penalty referrals on a full-time or exclusive basis; rather, they spend about one-half of their time performing other mission functions and responsibilities. As a result of the merger, several staffing changes occurred. For example, four former Office of Financial Enforcement senior analysts who had worked on referral cases were transferred into other divisions within FinCEN, while four other FinCEN staff members, with no experience in administering the BSA, were transferred into OCRE. FinCEN officials told us that there have been several personnel departures during the past year, which have affected the management and expertise in this area. For example, OCRE’s chief and deputy chief left the agency. As of May 1998, these positions were still vacant. In the past, civil penalty cases have not been processed in a timely manner. That was the conclusion we reached in our 1992 report, which analyzed Treasury’s case inventories between 1985 and 1991. Our current work, which analyzed case inventory data provided by FinCEN for 1992 through 1997, shows that the problem of lengthy processing times is growing worse. For the period 1985 through 1997, data from Treasury’s Office of Financial Enforcement and/or FinCEN showed a total of 648 closed civil penalty cases. Of this total, 430 cases were closed during 1985 through 1991 (a 7-year period), and the remaining 218 cases were closed during 1992 through 1997 (a 6-year period). Our analyses show that relatively few cases have been closed in recent years, particularly after 1994. Case closures in each of the 3 most recent years, 1995 through 1997, dropped below 30 for the first time since 1985 (see fig. 1). Civil penalty cases closed represented 22 percent, 8 percent, and 13 percent, respectively, of FinCEN’s annual workloads in 1995, 1996, and 1997 (see fig. 2). During each of these 3 years, the number of cases closed was fewer than the number of referrals received, which represented a reversal of the trend in 1990 through 1994 (see fig. 3). For example, in 1997, 19 cases were closed while 34 referrals were received. In contrast, in 1990, 103 cases were closed while 65 referrals were received. For 1985 through 1991, Treasury’s data show that the average processing time to close a case was 1.77 years. Processing times for the 430 cases closed during this 7-year period ranged from 4 days to 6.44 years. According to FinCEN’s data, the processing times have slowed during the more recent period, 1992 through 1997 (see fig. 4). Specifically, the average processing time to close a case was 3.02 years. Processing times for the 218 cases closed during this period ranged from 8 days to 10.14 years. For cases closed in each of the 4 most recent years, 1994 through 1997, figure 4 shows that average processing times were 3 years or higher, a threshold not reached in any of the previous years. “Officials at 2 of... agencies...told us that they believed—although it could not be proved or measured—that the lengthy processing times resulted in a decrease in enforcement efforts.... “We think it would be reasonable to assume that the effectiveness of any penalty as a deterrent to prevent future violations would be directly related to the length of time between the violation and the action taken. Given this assumption, lengthy processing times for civil penalty referrals could affect compliance with the Bank Secrecy Act. “Perhaps the most serious result of civil penalty cases remaining inactive for lengthy periods of time can be the expiration of the statute of limitations....” According to FinCEN’s data for the period January 1, 1992, through March 27, 1998, a total of 16 cases had one or more BSA violations that could not be pursued because the statute of limitations had expired. Our 1992 report, which analyzed civil penalty case inventories between 1985 and 1991, concluded that cases had not been processed in a timely manner. More recently, as shown in figure 4, the average processing times for civil penalty cases closed since 1994 are higher than the average times for previous years. There may be several reasons for this trend. Regarding recent years, for example, FinCEN officials mentioned staff inexperience and personnel departures as being reasons. Further, the officials noted a change in the kinds of cases being referred to FinCEN. Specifically, the officials said the majority of cases referred to FinCEN now involve nonbank financial institutions (i.e., casinos, check cashers, and currency exchangers). According to FinCEN officials, it generally is more difficult to obtain records and documentary evidence and to reconstruct transactions for these entities than for banks. In addition, we believe that insufficient management attention has been a significant cause of the lengthy processing times for civil penalty cases. First, FinCEN and its predecessor, Treasury’s Office of Financial Enforcement, did not (1) set timeliness goals for civil penalty case processing and (2) monitor or measure performance against those goals. FinCEN officials told us that the agency has never set timeliness goals for civil penalty processing. The officials also said that any such goals would prove arbitrary since each case varies significantly based on complexity, volume of transactions, and other factors. However, those goals can be valuable performance management tools for improving overall results and can take into account the differences in cases. Moreover, goal setting and performance measurement are widely considered to be good management practices, and these practices are reflected in the Government Performance and Results Act of 1993. Implementing such practices should help FinCEN (1) better identify the key factors that determine the timeliness of processing civil penalty cases and (2) find ways to streamline the management and processing of cases to reverse the trend of increasingly lengthy processing times. Second, FinCEN’s civil penalty tracking system, which resides on a stand-alone microcomputer, has not been an effective management tool, according to a 1990 report by Treasury’s Inspector General. Generally, the tracking system has remained unchanged since 1990, even though the Inspector General reported that database improvements were needed to assist in prioritizing, managing, and controlling civil penalty cases. The Inspector General’s report noted, for example, that the database was not being used to track the age of referrals and cases nor to track statute of limitation expiration dates. Third, as previously mentioned, according to FinCEN’s data for the period January 1, 1992, through March 27, 1998, a total of 16 cases were affected by expiration of the statute of limitations. However, FinCEN did not close several of these cases until months or years after expiration of the statute of limitations. In fact, since our inquires about the status of case processing, FinCEN has closed 15 of these 16 cases involving expiration of the statute of limitations.