Detailed Information on the
Bank Secrecy Act Administration Assessment

Developing a long-range plan to expand compliance oversight and reporting by state regulators for newly covered industries. FinCEN is currently in discussions with the IRS, the federal banking agencies, and state regulatory agencies and their associations to develop a long-range plan for compliance oversight over the money services business industry.

Streamline regulatory requirements and other modifications relating to money services businesses subsequent to a review of existing regulatory framework and current issues.

Expand information sharing agreements with federal and state regulators, with a focus on insurance commissioners.

Expanding outreach efforts to certain targeted industries to augment their understanding of the value of BSA data. FinCEN has developed a BSA value presentation for standard outreach presentations and training sessions targeted toward depository institutions presented by FinCEN. In FY 2008, FinCEN will continue including the BSA value presentation in standard outreach presentations, with a focus on expanding use of presentations to involve other covered industries

Developing measures of the impact of program activities on preventing the misuse of the financial system by those engaged in illicit activities. In FY 2007, FinCEN developed a working group to examine options and data available to create a meaningful performance measure to assess the impact of project activities on preventing the misuse of the financial system by those engaged in illicit activities. By the end of FY 2007, the working group will review options with management for possible measures.

FinCEN will meet with staff from the Office of Information and Regulatory Policy (OIRA) and OMB to discuss the tools and methods they employ when making cost/benefit decisions related to regulations.

Measure: The percentage of BSA compliance examinations conducted on depository institutions that indicate a systemic compliance failure with their BSA program. (New measure, added February 2007)

Explanation:The percentage of bank examinations that reveal the existence of systemic compliance failure (i.e., demonstrated by cited violations of the anti-money laundering program rule) provides an assessment of the effectiveness of FinCENs efforts in providing policy guidance and taking formal and informal compliance and enforcement actions to increase financial industry compliance with the Bank Secrecy Act.

Measure: Percentage of FinCEN's Resource Center customers rating the regulatory guidance received as understandable. (New measure, added February 2007)

Explanation:This measure tracks the percentage of financial institution customers who contact FinCEN's Resource Center for guidance on a regulation and respond to a survey indicating that the guidance received was understandable. Providing understandable guidance to financial institutions is critical to establishing programs that comply with the BSA.

Measure: Average time to process enforcement matters

Explanation:This measure tracks FinCEN's efficiency in processing enforcement actions. Efficient resolution of enforcement matters is an important element of FinCEN's regulatory oversight.

Is the program purpose clear?

Explanation: The program's purpose is to safeguard the financial system from the abuses of financial crime including terrorist financing, money laundering, and other financial crime through the effective administration of the Bank Secrecy Act (BSA). This includes issuing, interpreting and enforcing compliance with regulations implementing the Act, as well as supporting and overseeing compliance examination activities delegated to other federal regulators.

Evidence: Treasury Order 180-01; 31 U.S.C. 5311, Title 31; USA PATRIOT AC; Treasury Strategic Plan; FinCEN Strategic Plan

Does the program address a specific and existing problem, interest, or need?

Explanation: FinCEN was created by order of the Secretary of the Treasury on April 25,1990. Section 361 of the USA PATRIOT Act, October 25, 2001, established the organization as a bureau within the Department of the Treasury and clarified the duties and powers of the Director. FinCEN's responsibilities stem from its role as sole administrator of the Bank Secrecy Act. The BSA is the nation's primary tool to combat money laundering and terrorist financing. The work that FinCEN does is critical to preventing and detecting terrorist financing, money laundering, and other financial crime.

Evidence: US PATRIOT Act Title III Section 352 and 361; Treasury Order 180-01; 31 U.S.C. 5311, Title 31; FY 2007 Congressional Budget Submission.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: As the sole administrator of the BSA, FinCEN has the responsibility to issue regulations and guidance to a broad array of financial institutions, as well as provide oversight and enforce compliance with the regulations implementing the Act. Without FinCEN's coordination, it would be incumbent upon the bank regulatory agencies to separately develop potentially inconsistent regulatory regimes.

Evidence: Congressional Budget Submission; USA PATRIOT Act Title III Section 352 and 361; Memorandum of Understanding between Board of Governors of the Federal Reserve System, National Credit Union Administration, U.S. Department of Treasury-Financial Crimes Enforcement Network, U.S. Department of Treasury- Office of the Comptroller of Currency; Memorandum of Understanding between the U.S. Department of the Treasury, Financial Crimes Enforcement Network and the U.S. Department of Treasury, Internal Revenue Service

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: FinCEN's program design stems from its role as administrator of the Bank Secrecy Act as defined by order of the Secretary of the Treasury. Its role is further clarified through Sections 352 and 361 of the US PATRIOT Act. Although FinCEN's programs are statutorialy defined, FinCEN is designed to maximize net beneifts through the coordination of BSA administration activities. Without FinCEN's coordination, duplication of efforts as well as inconsistent application of the BSA would be at risk. FinCEN has established memoranda of understanding with other federal and state regulatory agencies to share information to assist FinCEN in administering the BSA. The memoranda of understanding also ensure there is no redundancy with existing programs and that resources and expertise are being effectively shared.

Evidence: US PATRIOT Act; Treasury Order 180-01; Memorandum of Understanding between Board of Governors of the Federal Reserve System, National Credit Union Administration, U.S. Department of Treasury-Financial Crimes Enforcement Network, U.S. Department of Treasury- Office of the Comptroller of Currency; Memorandum of Understanding between the U.S. Department of the Treasury, Financial Crimes Enforcement Network and the U.S. Department of Treasury, Internal Revenue Service.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Currently a portion of FinCEN's resources are used to fund activities conducted by the Internal Revenue Service. Other regulatory agencies do not receive funds from FinCEN. This arrangement hampers accountability and could provide an unwarranted subsidy.

Evidence: FY 2007 Congressional Budget Submission

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The prevention of financial crime is one of the most important outcomes affected by FinCEN's activities and also one of the most difficult to measure. Long-term outcome measures that focus on the intended result of the program, the prevention of financial crime as a result of program activities, are under development.

Evidence:

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: FinCEN's long-term outcome measures are currently under development.

Evidence:

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: FinCEN currently has a number of specific, useful measures that are focused on effective BSA administration, such as the percentage of customers rating the regulatory guidance received as understandable and the percentage of BSA compliance examinations conducted on depository institutions that indicate a systemic compliance failure with their BSA program. The first measure tracks the percentage of financial institution customers who contact FinCEN's Resource Center for guidance on a regulation and respond to a survey indicating that the guidance received was understandable. Providing understandable guidance to financial institutions is critical to establishing programs that comply with the BSA. The second measure looks at the percentage of bank examinations that reveal the existence of a systemic compliance failure (i.e., demonstrated by cited violations of the anti-money laundering program rule). This measure is meaningful because it provides an assessment of the effectiveness of FinCEN's efforts in providing policy guidance and taking formal and informal compliance and enforcement actions to increase depository institution compliance with the Bank Secrecy Act.

Evidence:

Does the program have baselines and ambitious targets for its annual measures?

Explanation: For the percentage of customers rating the regulatory guidance received as understandable, FinCEN established a baseline of 94% in 2006 and has an ambitious target of maintaining an annual rating of 90%. For the percentage of BSA compliance examinations indicating a systemic compliance failure with a depository institution's BSA compliance program, FinCEN established a baseline of 7.8% in 2006 and has set an ambitious annual target of maintaining an annual rate of 8%. This target will be revised as more data becomes available.

Evidence: FY 2007 Congressional Budget Submission

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: FinCEN partners with several agencies, including the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Internal Revenue Service, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Securities and Exchange Commission and the Commodity Futures Trading Commission that have delegated authority to examine for BSA compliance. FinCEN also partners with enforcement agencies, such as the FBI, the IRS, the Department of Homeland Security, the Drug Enforcement Agency, and the Terrorist Threat Interrogation Center. These agencies track and submit quarterly exam data which FinCEN monitors to detect trends in compliance and enforcement activity, which relates to their annual goal for enforcing compliance with BSA regulations.

Evidence:

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: The GAO and the Treasury Inspector General have conducted evaluations on FinCEN's administration of the BSA. These studies have included an IG report on the establishment of FinCEN's Office of Compliance; an IG report on FinCEN's efforts to register Money Services Businesses; a GAO report on the implementation of regulations related to customer identification and information sharing procedures; and a GAO report on how FinCEN and the banking regulators can strengthen the framework for consistent BSA oversight.

Evidence: OIG-05-030 Terrorist Financing/Money Laundering: Status Report on the Establishment of the Financial Crimes Enforcement Network Office of Compliance March 10, 2005; GAO-06-386 Bank Secrecy Act: Opportunities Exist for FinCEN and the Banking Regulators to Further Strengthen the Framework for Consistent BSA Oversight; OIG-05-050 Bank Secrecy Act: Major Challenges Faced by FinCEN in its Program to Register Money Services Businesses. GAO-05-412 USA PATRIOT ACT: Additional Guidance Could Improve Implementation of Regulations Related to Customer Identification and Information Sharing Procedures.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: FinCEN's budget is presented programmatically to align resources with performance and to define the relationship between the performance targets and budget resources.

Evidence:

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: Consistent with the new terrorism and financial intelligence focus of the Department of Treasury, FinCEN released an updated strategic plan for FY 2006 - FY 2008. The Department of the Treasury is currently revising its Department-wide strategic plan, and FinCEN is subsequently revising its strategic plan to align with the Department's. In addition to the above, the program has a Strategic Plan Implementation team and has adopted policies to align casework and weekly reporting with strategic goals in an effort to reduce strategic planning deficiencies, such as clarifying and strengthening quantifiable performance measures.

Evidence:

Are all regulations issued by the program/agency necessary to meet the stated goals of the program, and do all regulations clearly indicate how the rules contribute to achievement of the goals?

Explanation: Questions have been raised concerning compliance and burden issues relating to the regulations FinCEN issues, and studies are needed to examine the costs and benefits of the reporting requirements for financial institutions.

Evidence:

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: FinCEN collects and monitors compliance data received from industry regulators under its MOUs to detect trends in enforcement and compliance activity, which indicate whether some action, such as the issuance of training and guidance to regulators or more stringent enforcement policies, is required. Other data that FinCEN collects includes the average time to process enforcement matters, the number of federal and state regulatory agencies with which FinCEN has conducted memoranda of understanding, and the number of pieces of significant regulatory policy guidance developed.

Evidence: Print out from Treasury's Performance Reporting System; FinCEN Director's Quarterly Performance Report FY 2006 First Quarter; Federal Banking Agency Bank Secrecy Act Compliance Examination Consolidated Quarterly Report 4th Quarter Fiscal Year 2005; Fiscal Year 2005 Annual Report Federal Banking Agency Bank Secrecy Act Compliance Examination Consolidated Results.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: FinCEN's partners submit quarterly workload reports on the number of exams conducted and other exam data, but are not held accountable for cost or performance results. In 2005, FinCEN senior managers had program performance elements that tie to goal achievement written into their performance plans. Success with these elements is ranking criteria for managers' yearly performance ratings.

Evidence: Senior Management Performance Plan; Memorandum of Understanding between Board of Governors of the Federal Reserve System, National Credit Union Administration, U.S. Department of Treasury-Financial Crimes Enforcement Network, U.S. Department of Treasury- Office of the Comptroller of Currency

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: FinCEN's resource and acquisition review processes ensure that resources are used for the programs for which they are intended. All proposed acquisitions are subject to a multi-level review process. All acquisitions are reviewed by the program/project officer, Division Director or Assistant Director, and by the Deputy CFO. All acquisitions over the $25,000 threshold are approved by the Deputy Director of FinCEN. FinCEN's Investment Review Board reviews all major information technology projects. All funds are reviewed on a quarterly basis by the CFO's office to ensure funds are obligated timely and in accordance with the funding plan, which is approved by the Deputy Director. FinCEN plans for an unobligated lapse of approximately 0.5% of estimated obligations for potential adjustments needed in future years.

Evidence: Standard Object Class Table; Quarterly Financial Management Reports-sample attached; SF-132 (Apportionment); SF-133 (Report on Budget Execution)

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Standard operating procedures for enforcement case processing are in place. The program has an efficiency measure that tracks time taken to process enforcement related to the most severe compliance matters. When the measure was established in FY 1999 there was a processing time of 2.0 years. The long-term targets aim to cut that time in half with a target of maintaining the average processing time at 1 year.

Evidence: FY 2007 Congressional Budget Submission and FY 2004 President's Budget Submission

Does the program collaborate and coordinate effectively with related programs?

Explanation: It is integral to FinCEN's mission to work with federal regulatory partners, state regulators, and industry groups and associations. Over the past two years, FinCEN has developed and executed information sharing agreements with FinCEN's regulatory partners, who examine for BSA compliance. FinCEN leads the BSA Advisory Group on behalf of the Secretary. This statutorily created group provides a unique venue in which industry, law enforcement, and the regulators can discuss critical BSA issues. Collaboration with the Federal Financial Institutions Examination Council (FFIEC) and FinCEN led to the FFIEC BSA Anti-Money Laundering Examination Manual. The examination manual provides guidance to examiners for carrying out BSA/AML examinations. The manual contains an overview of BSA/AML compliance program requirements, BSA/AML risks and risk management expectations, industry sound practices and examination procedures. The development of this manual was a collaborative effort of the federal banking agencies and FinCEN to ensure consistency in the application of the BSA/AML requirements. Additionally, the SAR Activity Review - Trends, Tips & Issues is a product of continuing dialogue and close collaboration among the nations' financial institutions, law enforcement officials, and regulatory agencies to provide meaningful information about the preparation, use, and value of Suspicious Activity Reports filed by financial institutions.

Evidence: The BSA Advisory Group (BSAAG) is a collaboration of 50 representatives of federal regulators, federal law enforcement agencies, state regulators and financial institutions and financial trade groups. The interaction of regulators, law enforcement and regulated industries provides a forum for the interrelated but separate efforts of the various agencies to administer the BSA. The BSA created the Group, run by FinCEN, as delegee of the Secretary of the Treasury, which meets twice a year to discuss issues relating to BSA reporting and record-keeping requirements. To ensure that meaningful and practical results occur, permanent and ad hoc subcommittees of the members meet throughout the year to recommend specific actions and present products. Subcommittees of the Advisory Group are addressing a variety of issues including: Privacy/Security Issues, Non-Bank Financial Institutions, Examination Consistency; FATF Wire Threshold Issues; Cross-Border Wire Transmittal Feasibility Study; Securities/Futures; CTR/SAR Reporting Issues; Law Enforcement Matters; The SAR Activity Review and By the Numbers. FinCEN has also used the BSAAG to discuss FATF issues, respond to a Congressional mandate to determine the feasibility of creating a system to capture certain data on cross border wire transmittals; and other issues requiring collaboration among regulators and the industries. Evidence of the success of the BSAAG in providing results based on collaboration is shown in the subcommittee reports of the meeting of November, 2005. FFIEC Bank Secrecy Act Anti-Money Laundering Examination Manual June 2005; BSAAG November 2005 Meeting Minutes

Does the program use strong financial management practices?

Explanation: In an audit of FinCEN's 2005 balance sheet for fiscal year 2005, one material weakness was reported related to internal controls over financial reporting. FinCEN has taken steps to address this weakness.

Evidence: OIG-06-027 Audit of FinCEN's FY 2005

Has the program taken meaningful steps to address its management deficiencies?

Explanation: FinCEN has takes steps to correct management deficiencies. The Director's Quarterly Performance Report, implemented in 2005, is used for making management decisions. An example of the Quarterly Performance Report being used to make management decisions was the identification and reduction in the backlog of enforcement matters. In response to issues associated with compliance and enforcement of the Bank Secrecy Act, FinCEN created the Office of Compliance to oversee the examination activities of the agencies examining for BSA compliance and to more aggressively administer and implement the BSA. FinCEN faced a significant management challenge after executing the first of the information sharing agreements with the federal banking agencies because of the substantial increase in the volume of compliance referrals. In response, FinCEN developed compliance and enforcement standard operating procedures to better handle the increase in the number of specific matters referred to FinCEN by other regulators. These new procedures have allowed FinCEN to handle the flow and identify the cases of particular concern with greater efficiency.

Evidence: FY 2005 Treasury Performance and Accountability Report (pg 198); OIG-05-030 Terrorist Financing/Money Laundering: Status Report on the Establishment of the Financial Crimes Enforcement Network Office of Compliance; Written Testimony of Samuel W. Bodman, Deputy Secretary U.S. Department of the Treasury Before the House Financial Services Subcommittee on Oversight and Investigations June 16, 2004

Did the program seek and take into account the views of all affected parties (e.g., consumers; large and small businesses; State, local and tribal governments; beneficiaries; and the general public) when developing significant regulations?

Explanation: In accordance with the Administrative Procedures Act, FinCEN seeks comment from affected parties on all of its proposed regulations. FinCEN recognizes that its regulations would not be effective without a cooperative partnership with the affected industry as well as law enforcement. FinCEN takes into account comments received on proposed regulations as evidenced by the discussion and evaluation of comments in the issuing of the final rule.

Evidence: Two examples of FinCEN's most recent regulations are provided in the evidence binder to demonstrate how regulations are tailored within industries to the risks posed and confirm for the industry, how their efforts assist in protecting themselves and the U.S. financial system. 31 U.S.C. 5312; 70 FR 66754 (Nov.3, 2005) See preambles and rules; Financial Action Task Force Forty Recommendations -Recommendation 15 and Glossary; International Association of Insurance Supervisors, Guidance Paper on Anti-Money Laundering and Combating the Financing of Terrorism, Guidance Paper # 5 (Oct.2004)

Did the program prepare adequate regulatory impact analyses if required by Executive Order 12866, regulatory flexibility analyses if required by the Regulatory Flexibility Act and SBREFA, and cost-benefit analyses if required under the Unfunded Mandates Reform Act; and did those analyses comply with OMB guidelines?

Explanation: Although FinCEN takes into account and evaluates the views of all affected parties when it develops regulations, impact analyses and cost-benefit analyses are not conducted.

Evidence:

Are the regulations designed to achieve program goals, to the extent practicable, by maximizing the net benefits of its regulatory activity?

Explanation: FinCEN does not currently report on or analyze the compliance reporting burden for its regulations and the costs of the program's requirements on regulated industries in total, or perform thorough cost-benefit analyses on its regulatory activities.

Evidence:

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: FinCEN's long-term outcome oriented performance measure are under development.

Evidence:

Does the program (including program partners) achieve its annual performance goals?

Explanation: For the percent of BSA compliance examinations indicating a systemic compliance failure, an annual goal of 8% was set. The data collected with this measure is one indicator to help FinCEN evaluate the effectiveness of it's efforts in providing policy guidance and taking formal and informal compliance and enforcement actions to increase financial industry compliance with the Bank Secrecy Act. Therefore, an increase or decrease in the annual goal may indicate the need for improved training and outreach to regulators, education and outreach to industry, or stronger enforcement actions.

Evidence:

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The program has an efficiency measure that tracks time taken to process the most severe compliance issues that rise to the level of a monetary penalty. When the measure was established in FY 1999 there was a processing time of 2.0 years. The long-term targets aim to cut that time in half with a target of maintaining the average processing time at 1.0 years.

Evidence: FY 2007 Congressional Budget Submission and FY 2004 President's Budget Submission Directors Quarterly Report

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: No formal comparison to determine how FinCEN compares to other U.S. government agencies and foreign government anti-money laundering programs has been conducted.

Evidence:

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: FinCEN's administration of the BSA has been the subject of a number of GAO and IG reviews. While these reviews have identified implementation challenges and guidance issues, they have generally validated the effectiveness of the Administration program.

Evidence: OIG-05-030 Terrorist Financing/Money Laundering: Status Report on the Establishment of the Financial Crimes Enforcement Network Office of Compliance March 10, 2005; GAO-06-386 Bank Secrecy Act: Opportunities Exist for FinCEN and the Banking Regulators to Further Strengthen the Framework for Consistent BSA Oversight; OIG-05-050 Bank Secrecy Act: Major Challenges Faced by FinCEN in its Program to Register Money Services Businesses. GAO-05-412 USA PATRIOT ACT: Additional Guidance Could Improve Implementation of Regulations Related to Customer Identification and Information Sharing Procedures.

Were programmatic goals (and benefits) achieved at the least incremental societal cost and did the program maximize net benefits?

Explanation: To date, no impact analyses or evaluations, such as a cost-benefit analysis of reporting requirements, have been conducted. However, in developing regulations, FinCEN allows the financial institutions to design their programs based on their own risk assessments geared toward their geographic location, customer base, products, and size.

Evidence: To date no impact analyses or evaluations have been conducted.