Money Laundering:
U.S. Efforts To Fight It Are Threatened By Currency Smuggling
(Chapter Report, 03/09/94, GAO/GGD-94-73).
U.S. banking and tax laws require the filing of reports on currency transactions
exceeding $10,000. People disguising illicit income are sidestepping U.S. reporting rules
by smuggling cash out of the country--apparently with relative ease. Once the funds are
deposited in a foreign financial institution, they are much harder to trace and can be
spent or transferred back to the United States with less risk of exposure. Treasury
Department and U.S. Customs Service officials have no way to estimate the amount of
currency being smuggled, although law enforcement officials GAO spoke with believe that
the amount is substantial--potentially billions of dollars each year. In addition to
discussing the extent of currency smuggling, this report describes the techniques used to
smuggle currency and U.S. efforts to curtail it.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-94-73
TITLE: Money Laundering: U.S. Efforts To Fight It Are Threatened By Currency Smuggling
DATE: 03/09/94
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Report to the Chairman, Permanent Subcommittee on Investigations,
Committee on Governmental Affairs
U.S. Senate
March 1994
MONEY LAUNDERING - U.S. EFFORTS
TO FIGHT IT ARE THREATENED BY
CURRENCY SMUGGLING
GAO/GGD-94-73
Currency Smuggling
Abbreviations
=============================================================== ABBREV
BSA - Bank Secrecy Act
CMIR - Report of International Transportation of Currency or
Monetary Instruments
CTR - Currency Transaction Report
FinCEN - Financial Crimes Enforcement Network
IRS - Internal Revenue Service
Letter
=============================================================== LETTER
B-256098
March 9, 1994
The Honorable Sam Nunn
Chairman, Permanent Subcommittee
on Investigations
Committee on Governmental Affairs
United States Senate
Dear Mr. Chairman:
This report was prepared in response to your request to assess the extent to which
currency and monetary instruments are being smuggled out of the United States in order to
avoid reporting requirements. The report identifies what efforts are being taken to
prevent the smuggling and discusses how efforts to combat money laundering are affected.
As arranged with the Subcommittee, unless you announce its contents earlier, we plan no
further distribution of this report until 30 days from its issue date. At that time, we
will send it to other congressional committees, various bureaus and offices within the
Department of the Treasury, and other interested parties. Copies will be made available to
others upon request.
The major contributors to this report are listed in appendix III. Please contact me on
(202) 512-8777 if you or your staff have any questions concerning this report.
Sincerely yours,
Laurie E. Ekstrand
Associate Director, Administration of Justice Issues
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
A major weapon in this country's efforts to combat money laundering are banking and tax
laws that require the reporting of large cash transactions. To avoid these requirements,
currency and other negotiable instruments are being smuggled out of the country. The
Permanent Subcommittee on Investigations, Senate Committee on Governmental Affairs, asked
GAO to assess the extent of currency smuggling and determine what the Customs Service is
doing to curtail it.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
Money laundering is the process of disguising illicit income to make it appear
legitimate. In 1970 Congress enacted the Bank Secrecy Act as a major step in fighting
money laundering. The act's implementing regulations require that several types of reports
be filed, such as the Currency Transaction Report, which banks and other financial
institutions are to file on currency transactions exceeding $10,000. Another report is
required from anyone transporting more than $10,000 in currency or monetary instruments
into or out of the country. In 1984, the Internal Revenue Code was revised to require an
additional report. Persons engaged in a trade or business who receive more than $10,000 in
cash payments in a single transaction or series of related transactions must file a report
with the Internal Revenue Service.
Requirements to report large cash transactions have made it increasingly difficult to
disguise and conceal the huge amounts of cash that criminal activity such as drug
trafficking can generate. According to law enforcement officials, one increasingly popular
method of circumventing the reporting requirements is to smuggle the currency out of the
country. Once the funds are deposited in a foreign financial institution, they are much
more difficult to trace and can be spent or transferred back to the United States with
less risk of exposure.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
Treasury and Customs officials said that the amount of currency being smuggled out of
the country cannot be determined. Moreover, because of the clandestine nature of
smuggling, a sound basis for estimates is difficult to establish. While estimates vary,
law enforcement officials GAO interviewed agreed the amount is substantial and could be
billions of dollars a year.
Smugglers use a variety of techniques and conveyances. For example, bulk shipments are
sometimes driven across the border or hidden in air or ocean cargo shipments. Individuals
have been stopped attempting to board aircraft with several hundred thousand dollars in
cash hidden on their bodies. Some have even swallowed rolls of bills wrapped in condoms.
The U.S. mail is also being used to ship currency out of the country without reports being
filed.
Smuggling currency out of the country is relatively easy. The nation has thousands of
miles of unguarded borders; where ports do exist, the inspection of outbound cargo and
passengers is not given the same emphasis as inbound inspection. Although comparative data
are not available, the Customs Service acknowledges that most of its resources are devoted
to inspecting passengers and cargo entering the country. Nonetheless, in the 4-year period
ending September 30, 1992, the Customs Service interdicted and seized $171 million in
currency and negotiable instruments that was being taken out of the country without being
reported.
The level of effort given outbound inspections is generally determined at the local
level, and resource allocations are constrained by the necessity of maintaining an
adequate level of inbound interdiction efforts. However, Customs has recently increased
the Service-wide oversight of and emphasis on its efforts to interdict unreported currency
leaving the country.
GAO'S ANALYSIS
---------------------------------------------------------- Chapter 0:4
CURRENCY SMUGGLING CIRCUMVENTS REPORTING REQUIREMENTS
-------------------------------------------------------- Chapter 0:4.1
Faced with the difficulties of laundering money domestically, many individuals take
currency and other negotiable instruments to other countries, where it can be put into the
flow of commerce and returned to this country under an air of legitimacy. The extent of
the outbound currency problem is unknown, although some estimates are available. The 1984
President's Commission on Organized Crime estimated that as much as $5 billion a year in
currency generated by the illegal drug trade was being taken out of the country. More
recently, an Arizona law enforcement official has estimated that as much as $3 billion is
being smuggled into Mexico or elsewhere every year just through that state's border.
Although these are not analytically based estimates, they are experts' assessments of the
magnitude of the problem. (See pp. 16 and 17.)
Foreign and U.S. currencies are brought into and taken out of the country on a routine
basis and for legitimate reasons. In fiscal year 1992 businesses and individuals filed
over 32,000 reports with Customs of almost $30 billion in currency and negotiable
instruments leaving the country. These reports can be used to trace the funds.
Consequently, currency is being smuggled out of the country to avoid any record that would
associate individuals or businesses with large amounts of funds. (See pp. 15 and 16.)
A number of methods are being employed to smuggle currency out of the country. Law
enforcement officials GAO interviewed described them as ranging from simple to complex.
The variety of concealment techniques makes smuggling extremely difficult to detect. For
example, currency has been found hidden on passengers and in luggage, commercial cargo,
false compartments, vehicles, vessels, mail, and commercial aircraft. As with drugs, there
have even been instances where individuals have swallowed currency or taped it to various
parts of their bodies. (See pp. 17 through 28.)
Individuals caught smuggling currency represent many nationalities and are stopped en
route to a number of destinations. Consequently, no typical profile or country of
destination exists. (See pp. 36 and 37.)
CUSTOMS HAS HAD SOME SUCCESS IN COMBATTING CURRENCY SMUGGLING
-------------------------------------------------------- Chapter 0:4.2
The Customs Service has traditionally emphasized those programs directed at inspecting
the flow of persons and cargo into the country. Enforcement efforts to interdict illegal
exports do exist, however, and include one program, "Operation Buckstop,"
specifically aimed at selectively inspecting passengers and cargo leaving the country to
ensure that currency being transported outside the United States is reported. (See pp. 29
and 30.)
Customs does not collect data on a nationwide basis that can be used to compare the
resources used on inbound and outbound inspections. Outbound inspections, however, are the
exception rather than the rule. Only 85 of the 338 Customs ports have staff performing
outbound inspections on a full-time basis. These staff total 130 of the 6,228 inspectors
in Customs. (See p. 29.)
GAO visited 28 ports in 11 Customs districts and found a wide variation in how and when
Operation Buckstop inspections were done. Resource constraints were a major factor in
making these decisions. Other considerations included the perceived threat of currency
smuggling at particular ports, the adequacy of facilities to accommodate outbound
inspections, and the availability of specialized equipment for examining bulk cargo. (See
pp. 29 through 32.)
Customs efforts to combat currency smuggling have resulted in substantial amounts of
currency being interdicted. However, Customs officials acknowledged that the seizures
represent only a fraction of the amount that is probably taken out of the country
unreported. In the 4-year period ending on September 30, 1992, $171 million was seized by
Customs inspectors as it was being smuggled out of the country. (See p. 34.) Fifty-two of
Customs' 338 ports reported 862 seizures totalling $42.4 million in fiscal year 1992. (See
app. II.) Most of the currency seized (71 percent) was being smuggled on commercial
aircraft, while 17 percent of the seized currency was found on commercial ocean vessels.
(See p. 38.) Eighty-six percent of the currency was seized at 10 ports, and more than a
third was seized at 1 port, New York's JFK airport.
In the first 11 months of fiscal year 1993 seizures had increased to 913 for a total of
$39.2 million. (See pp. 44 and 45.) Increases over the number of seizures in fiscal year
1992 could be related to an increase in smuggling activity, an increase in Customs
outbound inspection activity, or both.
CUSTOMS EFFORTS TO IMPROVE AND INCREASE OUTBOUND CURRENCY INSPECTIONS
-------------------------------------------------------- Chapter 0:4.3
Customs has increased the oversight and emphasis given currency interdiction efforts on
a nationwide basis. These efforts include the preparation of an Inspector's handbook to
ensure uniform procedures during Operation Buckstop inspections and special initiatives,
such as testing the use of specially trained dogs to detect U.S. currency. In addition,
certain geographical areas and means of conveyance have been targeted for special
attention. (See pp. 43 through 45.)
The primary factor limiting any increase in Operation Buckstop initiatives is scarce
resources. Any personnel, equipment, and funds directed to outbound interdiction efforts
are generally at the expense of those Customs programs directed at inbound interdiction.
Because its overall level of resources is not increasing, the Customs Service is faced
with the challenge of determining the appropriate balance between inbound and outbound
interdiction efforts. (See pp. 44 and 45.)
RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5
GAO is not making any recommendations in this report.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6
Customs officials provided GAO with oral comments on a draft of this report. (See p.
45.) They said the report was factually correct and an objective presentation of the
problems faced by Customs in combatting currency smuggling.
INTRODUCTION
============================================================ Chapter 1
Money laundering is the disguising or concealing of illicit income in order to make it
appear legitimate. Recognizing that money leaves a trail that can be traced to an
underlying crime, Congress has enacted legislation to make money laundering more difficult
to conceal and easier to prosecute. These efforts have been rewarded in that laundering
money through U.S. financial institutions and businesses is now considered to pose an
increased threat to those seeking to disguise illicit cash.
Law enforcement officials believe that successes in combatting money laundering have
caused criminals to avoid stringent U.S. reporting requirements by smuggling the cash out
of the country. Once across the border the money is much more difficult to trace and can
be more easily hidden under the guise of normal business transactions. This report
describes the known extent to which currency and other monetary instruments are being
smuggled out of the country, the methods used, and what Customs Service efforts are under
way to interdict these funds.
CRIMINALS FACE PROBLEMS IN DEALING IN LARGE AMOUNTS OF CASH
---------------------------------------------------------- Chapter 1:1
Criminal enterprises such as drug trafficking generate enormous amounts of cash. It is
estimated that the sale of illegal drugs in this country could be as much as $100 billion
each year. Although the preferred medium of exchange is cash, the transactions often are
small and drug traffickers must contend with a large volume of small-denomination bills.
Although the process of money laundering has been broken down into a number of steps,
it is generally agreed by law enforcement and regulatory officials that the point at which
criminals are most vulnerable to detection is "placement." Placement is the
concealing of illicit proceeds by converting the cash to another medium that is more
convenient or less suspicious for purposes of exchange, such as property, cashier's
checks, or money orders; or depositing the funds into a financial institution account for
subsequent disbursement.
Because of the problems associated with converting and concealing large amounts of
cash--about 450 paper bills weigh 1 pound, so that $1 billion in $100 bills would weigh
over 11 tons--placement is perhaps the most difficult part of money laundering and is
currently the primary focus of U.S. law enforcement, legislative, and regulatory efforts
to attack money laundering.
REPORTING REQUIREMENTS HAVE INCREASED THE RISKS OF LAUNDERING MONEY
---------------------------------------------------------- Chapter 1:2
Federal efforts to detect placement and track the international movement of money and
monetary instruments across the nation's borders were significantly enhanced with the
passage of the Bank Secrecy Act (BSA) in 1970. The act requires individuals as well as
banks and other financial institutions to report large foreign and domestic financial
transactions to the Department of the Treasury. The implementing regulations of the act
require the following
reports:
Currency Transaction Report (IRS Form 4789): this report must be filed by financial
institutions\1 for each deposit, withdrawal, exchange of currency, or other payment or
transfer, by, through, or to such financial institutions that involves a transaction in
currency of more than $10,000.
Currency Transaction Report by Casino (IRS Form 8362): this report must be filed for
each currency transaction in excess of $10,000 by any licensed casino operating in the
United States with gross annual gaming revenues in excess of $1 million.
Report of International Transportation of Currency or Monetary Instruments (Customs
Form 4790): this report must be filed when currency or monetary instruments over $10,000
are transported from or into the United States.
Report of Foreign Bank and Financial Accounts (Treasury Form TDF 90-22.1): this report
must be filed annually by U.S. persons who have a financial interest in or signature
authority over bank accounts, securities accounts, or other financial accounts in a
foreign country that have a combined value in excess of $10,000.
The act has been amended to provide substantial criminal and civil penalties for
institutions that fail to file the required reports and for individuals who deliberately
evade certain reporting requirements.
In addition to the BSA reports, Section 6050I was added to the Internal Revenue Code in
1984 requiring any person engaged in a trade or business (other than financial
institutions required to report under the Bank Secrecy Act) who receives more than $10,000
in cash payments in a single transaction or series of related transactions to file a
report with the Internal Revenue Service (IRS). The Secretary of the Treasury requires the
report be filed on an IRS Form 8300, Report of Cash Payments Over $10,000 Received in a
Trade or Business.
Data from the BSA reports and the Forms 8300 are maintained on two computer databases.
One is used by IRS in investigations involving tax fraud and evasion. The other is used by
law enforcement agencies at the state and federal level in criminal investigations, not
only of money laundering, but also in identifying suspicious transactions that might
indicate other possible criminal activity; evaluating the merits of any potential criminal
cases; and tracing, analyzing, or identifying the disposition of proceeds from any illegal
activity.
By far, the report most frequently filed has been the Currency Transaction Report
(CTR). In May 1993, we testified before the House Banking Committee\2 that over 95 percent
of the BSA reports filed up to that time were CTRs and that since 1987 the annual filings
of CTRs had increased at an average rate of 12.7 percent. We also pointed out that
Treasury and law enforcement officials generally believe that in the past, traditional
banks and other financial institutions were the primary means used by money launderers.
The officials also believe that increased efforts by federal regulatory and law
enforcement agencies, as well as enhanced cooperation by the banks themselves, have
significantly improved bank compliance with the reporting requirements, making it much
more difficult for banks to be used for money laundering purposes.
Given the increased level of risk, criminals must now pursue money laundering methods
less susceptible to detection. One such method is to take the cash out of the country,
after which it is not subject to U.S. reporting requirements and can be reintroduced into
the financial system with the appearance of legitimacy.
--------------------
\1 As defined by Treasury, "financial institutions" include banks, federally
regulated security brokers, currency exchange houses, funds transmitters, check cashing
businesses, and persons subject to supervision by state or federal bank supervisory
authority.
\2 Money Laundering: The Use of Bank Secrecy Act Reports by Law Enforcement Could Be
Increased (GA0/T-GGD-93-31, May 26, 1993).
OBJECTIVES, SCOPE, AND METHODOLOGY
---------------------------------------------------------- Chapter 1:3
The Chairman of the Permanent Subcommittee on Investigations, Senate Governmental
Affairs Committee, asked us to assess the extent to which currency is being smuggled out
of the U.S. and identify what efforts the Customs Service is taking to prevent the
smuggling. Rather than attempt to provide a quantified estimate of how much smuggling is
occuring, it was agreed that we would present the estimates of knowlegeable law
enforcement officials.
To address these objectives, we reviewed pertinent laws and regulations and an
extensive body of published material, including congressional hearings and reports;
academic and periodical literature; and reports prepared by federal and state agencies,
private research associations, and other experts. We also met with knowledgeable officials
and reviewed records within the Customs Service and the Financial Crimes Enforcement
Network (FinCEN).
To review ongoing interdiction efforts by Customs we obtained Service records and held
discussions with knowledgeable Customs officials at the headquarters, district, and port
levels. To the extent possible, we verified the statistical information we obtained
through a review of the source records and observations.
We also visited Customs ports and district offices that were judgmentally selected
based on the locations having a high degree of outbound interdiction activity. Overall,
the Customs districts we visited were responsible for 87.4 percent of all the outbound
currency seizures during fiscal year 1992. We ensured that our visits included land border
crossings with both Canada and Mexico, seaports on both the Atlantic and Pacific coasts,
and major airports throughout the country. To provide a basis for comparison, we visited
some smaller ports as well as ports that had no outbound currency seizures.
As shown in appendix I, we visited 11 districts and 28 ports. Since the sites were
selected judgmentally as described above, the results of our work cannot be projected
nationwide. At each of the ports visited, we met with Customs officials and observed
inspection activities. Where available, we analyzed documentation on outbound currency
inspections and seizures. We attempted to identify all the currency smuggling schemes that
Customs had detected and to determine the rationale for local differences in interdiction
efforts.
To determine the status of efforts to combat outbound currency through the U.S. mail,
we met with officials in both the Customs Service and the Postal Service in Washington,
D.C. We reviewed the current status of proposed interagency agreements and discussed the
status of current inspection efforts.
We provided the Customs Service with a draft of this report and received oral comments
from agency officials.
We did our work between February 1992 and November 1993 and in accordance with
generally accepted governmental auditing standards.
CURRENCY SMUGGLING IS BEING USED TO EVADE REPORTING REQUIREMENTS
============================================================ Chapter 2
Transporting large amounts of foreign and domestic currency into or out of the U.S. is
legal and a relatively common occurrence. However, Treasury regulations require that the
destination, method of transport, and owner of the funds be identified. Individuals
attempting to remove large amounts of illicit cash out of the country prefer to remain
anonymous and that the shipment be unrecorded. Consequently, they often resort to
smuggling.
The exact amount of money being smuggled out of the country is unknown. Because of our
open borders and the priority given inbound interdiction efforts, billions of dollars in
U.S. currency could be leaving the country each year unreported.
REPORTING REQUIREMENTS FOR TRANSPORTING CURRENCY INTO OR OUT OF THE COUNTRY
---------------------------------------------------------- Chapter 2:1
Businesses and individuals transport currency into or out of the country for a number
of legitimate reasons. For example, financial institutions and exchange houses operating
on the border may need to take currency back into the country. Also, businesses and
individuals may find they can negotiate better deals in foreign markets by having currency
on hand.
As discussed earlier (see ch. 1), any individual or business that transports more than
$10,000 in currency or monetary instruments\3 into or out of the country must file a
Report of International Transportation of Currency or Monetary Instruments (CMIR) or face
a fine or imprisonment. Generally, this filing is made at the Customs port where the funds
cross the border although some CMIRs can be mailed to Customs headquarters in Washington,
D.C. The information to be reported on the CMIR includes the name and other identifying
information of the individual transporting the funds, the method being used to transport
the funds, the amount being transported, the owner of the funds, and the destination of
the funds.
In fiscal year 1992, more than 200,000 CMIRs were filed to report about $61 billion in
currency entering or leaving the country. The amounts being transported can be quite
large. In fiscal year 1992, 43 percent of the outbound CMIRs filed by businesses and 6.5
percent of the outbound CMIRs filed by individuals were for amounts of at least $100,000.
The largest outbound business CMIR was for $72,852,579, while the largest outbound
individual filing was for $23,800,000. Overall, the average business CMIR was for
$1,124,111, while the average individual CMIR was for $61,680. Table 2.1 provides a
breakdown of the CMIRs filed by amounts reported, type of filer, and whether the funds
were entering or leaving the country.
Table 2.1
Distribution of CMIRs Filed in Fiscal
Year 1992
Amount Amount
(billion (billion
Direction Number s) Number s)
-------------------- -------- -------- -------- --------
Inbound 124,786 $6.836 50,537 $24.057
Outbound 6,348 $0.389 26,123 $29.365
------------------------------------------------------------
Source: U.S. Customs Service.
Customs officials told us that there is no reason to assume that the number of CMIRs
being filed should be relatively equal for inbound and outbound traffic and, as table 2.1
shows, they are not. Since we do not know how many outbound CMIRs should have been filed,
we cannot draw any conclusions about compliance with the reporting requirements from the
disparity between inbound and outbound filings.
--------------------
\3 As defined by Treasury regulations, "monetary instruments" include forms
of payment that are bearer negotiable, such as traveler's checks and money orders. For
clarification purposes, the word "currency" as used in this report will also
refer to monetary instruments.
THE AMOUNT OF CURRENCY BEING SMUGGLED OUT OF THE COUNTRY IS UNKNOWN
---------------------------------------------------------- Chapter 2:2
Despite the fact that U.S. currency is routinely taken out of the country for
legitimate purposes, Customs officials said that criminals are anxious to avoid the paper
trail created by filing a CMIR. Thus, they resort to currency smuggling by carrying money
out of the country in some surreptitious or concealed manner.
Treasury and Customs officials told us that it is not possible to measure accurately
how much currency is being smuggled out of the country. Moreover, because of the inherent
clandestine nature of the activity, it is very difficult to establish a sound basis for
estimates. These officials believe, however, that the millions of dollars in currency
being interdicted (see ch. 3) represent only a small fraction of the total amount being
smuggled.
Currency smuggling has been recognized as a problem since at least 1984, when the
President's Commission on Organized Crime reported that as much as $15 billion of the $50
to $75 billion in illegal drug money then being earned in the United States moved into
international financial channels each year. Of the $15 billion, as much as $5 billion was
thought to be transported in the form of currency, with the remainder being wired abroad
after deposit in the U.S. banking system.
A 1987 Customs Service report on money laundering methods reported that the currency
flow between two countries, Colombia and Panama, and the United States indicated that
approximately $1 billion a year in U.S. currency was being returned to this country, but a
corresponding flow of U.S. currency was not being reported as sent to those countries.
Treasury's Financial Crimes Enforcement Network (FinCEN) reported in July 1992 that
currency smuggling was extensive and appeared to be increasing. Nonetheless, the report
concluded that "The extent of currency smuggling is subject to a great deal of
conjecture."
In February 1992 hearings before the Permanent Subcommittee on Investigations, Senate
Committee on Governmental Affairs, federal as well as state law enforcement officials
expressed their concerns with the emerging trend of currency being smuggled into Mexico.
An Arizona Assistant Attorney General testified that law enforcement personnel were aware
of the export of cash drug proceeds and estimated that as much as $3 billion in U.S.
currency a year was being smuggled out of the country from Arizona into Mexico or
elsewhere. A Deputy Attorney General for California testified that individuals had been
caught walking across the California border into Mexico with shopping bags containing as
much as $500,000 in currency. However, as discussed below, Mexico is not the only
destination of U.S. currency being smuggled out of the country.
CURRENCY SMUGGLING METHODS VARY CONSIDERABLY
---------------------------------------------------------- Chapter 2:3
Smuggling currency out of this country is relatively simple because of the nation's
border characteristics and because of our historic treatment of exports and outbound
passengers. Geographically, the contiguous United States has approximately 11,323 miles on
two oceans and the gulf coast, 3,987 miles of shared border with Canada, and 1,933 miles
of shared border with Mexico. While Customs maintains over 300 ports where vehicles and
cargo can leave the country by air, land, or sea, there is little to prevent a person
leaving the country by simply crossing the border at other locations.
Smugglers use a variety of techniques to take money out of the country. The remainder
of this chapter presents some examples of methods used by currency smugglers, sorted by
type of conveyance used.
AIR
-------------------------------------------------------- Chapter 2:3.1
Customs officials believe that smuggling currency by commercial airlines has long been
a preferred method, since (1) the passenger can stay close to his money during the
transport, (2) so many destinations can be reached easily and quickly, and (3) so little
preplanning is required. Passengers on commercial air carriers can smuggle currency
concealed on their persons, in hand-carried baggage, or in the checked luggage
compartments of the aircraft. Commercial flights can be direct routes to foreign
destinations or may connect with other domestic flights prior to overseas departure.
Customs provided us with several examples of how currency is smuggled out of the country
on commercial airlines.
In March 1988 Customs seized $402,334 from a passenger departing from Los Angeles
International Airport en route to Colombia. While performing a search for outbound
currency violations, an inspector found a duffel bag with two 5-quart cooker/fryers packed
in boxes. The unusual weight of the boxes caused the inspector to examine their contents,
whereupon he noticed that the screws holding the bottoms of the appliances had been
tampered with. Upon removing the screws, the inspector found bundles of U.S. currency
stuffed into the bottoms of the appliances.
In November 1988 Customs seized $1,017,832 being transported in checked baggage from
Miami to Colombia. The currency consisted primarily of $20 bills stacked in groups of 100
and bound by rubber bands. The currency was packed among the wiring in electric space
heaters and in suitcases. A follow-up investigation resulted in the seizure of an
additional $2,400,000 from a garage at the residence of one of the violators identified in
the investigation. This currency was wrapped in foil and concealed in microwave ovens and
heaters awaiting shipment.
In January 1991 a Chicago O'Hare security guard at the X-ray security point observed a
large amount of currency hidden in a false-bottom briefcase. The guard notified Customs
officials, who responded by performing a search of passengers boarding the flight to
Paris, which had a connection to Hong Kong. The CMIR requirement was announced over the
intercom prior to passengers boarding the flight. The suspected violator approached an
inspector and declared $9,650. He was told that he had to declare currency only if it
exceeded $10,000. While boarding the aircraft, the suspect was stopped in the jetway and
advised again of the currency requirement. He orally declared $100,000 but then completed
a CMIR for $105,000. He again was afforded an opportunity to amend his declaration and did
so for $170,000. Customs' inspection disclosed the suspect was carrying $184,200, which
was then seized.
In September 1992 federal and state authorities performed an outbound currency search
of a commercial carrier's crew members departing from New York-JFK with final destination
to Colombia. A flight attendant was stopped and informed of the currency reporting
requirement. She declared a total of $1,000. Upon examination of her hand-carried crew
bag, a Customs inspector found $2,600 in a roll of toilet paper, $12,400 in an envelope,
$20,000 in a wooden box, $1,627 in her wallet, $5,000 in a carry-on garment bag, $40,000
in a box of laundry detergent, and $13,300 in her jacket pocket. In total, she was
carrying $95,541. The money was seized and the flight attendant was arrested.
Currency smugglers have become more sophisticated in their concealment methods as
Customs has targeted international flights for outbound searches. One such technique is
concealment on or within the body itself. Figure 2.1, for example, shows an individual who
had strapped money to his waist and another individual with money taped to his lower body.
Customs documented one case at New York-JFK where a woman had swallowed $7,500 in 15
condoms, hidden $3,500 in 7 condoms in a body cavity, and concealed $47,894 in her
baggage.
Figure 2.2 shows examples of money being extracted from a lotion bottle and currency
secreted in a false-bottom briefcase.
Figure 2.1: Examples of Individuals Attempting to Smuggle Currency by Concealment on
the Body
(See figure in printed edition.) Source: U.S. Customs Service.
Figure 2.2: Examples of Attempts to Smuggle Currency in Personal Baggage
(See figure in printed edition.) Source: U.S. Customs Service.
Currency smuggling by air is not limited to passengers but also may include air cargo.
In the largest such detected case, inspectors at New York-JFK found $6,469,024 in 26
sealed metal containers. In another case, inspectors found $1,752,106 in cash and money
orders in a water heater. Figure 2.3 is a Customs diagram of how this money was concealed.
In still another case, airline employees accidentally pierced the support railing on a
pallet containing empty fruit boxes, eventually leading to the discovery of $989,915
hidden in hollowed-out portions of the wood.
Figure 2.3: Diagram of Hot-Water Heater Used to Conceal $1,752,106 in Currency
(See figure in printed edition.) Source: U.S. Customs Service.
LAND
-------------------------------------------------------- Chapter 2:3.2
Smuggling currency across land border crossings lacks some of the advantages of using
air carriers. First, there are only two countries--Mexico and Canada--that border the
United States. If the actual currency is bound for some other country, it still has to be
converted or shipped again from the intermediate stop. Also, the smuggler must physically
go to the border rather than simply board an international flight.
At the same time, border crossings offer advantages for smugglers. Customs presence
tends to be less at the outbound stations, and inspections are infrequent because they
create massive traffic jams. Even if outbound searches are being performed, the individual
still can wait until the last minute to turn around, seek another crossing, or prepare a
CMIR. If the smuggler wishes to exit at an official crossing, Customs maintains 98 ports
on the Canadian border and 36 on the Mexican border. Also, the smuggler can easily carry
the currency across the border at some point where it is not patrolled.
Another advantage of land border crossings is that the smuggler often has a vehicle in
which to conceal currency. Customs agents have found currency in obvious locations, such
as on the seat and in the trunk, as well as in concealed locations, such as false
compartments, dashboards, and door panels. Customs officials said that unless they have
some evidence that these unusual concealment methods are being used, they are not likely
to perform the detailed searches necessary to disclose the hidden funds during routine
inspections.
Figure 2.4 shows some of the problems associated with preventing currency smuggling at
land border crossings. In many locations on the Canadian border there is no Customs
presence at all, and individuals and vehicles can cross the border at will. For example,
one picture shows a crossing on an isolated country road in Vermont while another shows a
crossing on a residential street in a Vermont town. Another picture shows the unpatrolled
nature of the border in a Washington town, where an individual can enter Canada simply by
walking across a park.
Figure 2.4: Typical Unpatrolled Crossing Points on the U.S.-Canadian Border
(See figure in printed edition.)
Even where Customs does have a checkpoint, the emphasis is generally on inbound
traffic. Figure 2.5 graphically illustrates the differences in control of inbound and
outbound traffic on the Mexican border. In this typical crossing at San Ysidro,
California, there is a considerable backup on the Mexican side, while cars and pedestrians
from the United States cross into Mexico unimpeded.
Figure 2.5: U.S.-Mexican Border Crossing at Otay Mesa, California (Inbound on Left,
Outbound on Right)
(See figure in printed edition.)
In another example of currency being smuggled across a land border, Customs stopped an
individual crossing into Mexico as a pedestrian at Otay Mesa, California. When asked if he
had currency to declare and informed of the CMIR requirement, the individual told the
Customs agents he was carrying $9,000. A search of the individual disclosed $14,010 in a
portfolio, $2,126 in his pants pockets, and $200 in his wallet. After he refused once more
to complete a CMIR, Customs seized the currency--except for $200 he was allowed to keep in
order to continue on to his stated destination--and allowed the individual to leave the
country. A follow-up investigation revealed that this individual had submitted CMIRs
during previous crossings, proving that he was aware of the reporting requirement.
In another case, four individuals were crossing the border at Hidalgo, Texas, in a van.
Asked by Customs if they had currency to declare, they responded that they did not. After
a search located two suspicious envelopes, they again were asked and again responded that
they had nothing to declare. A search of the envelopes led to the seizure of $18,657 and
the arrest of two of the occupants.
In November 1990, Customs inspectors and Border Patrol agents located in Holland,
Vermont, seized $1,289,700 destined for Canada. The violators were arrested for attempting
to transport unreported currency out of the United States using heavy-duty all-terrain
vehicles on a back road.
SEA
-------------------------------------------------------- Chapter 2:3.3
Smuggling money by commercial shipping is even more cumbersome than by land, since (1)
it may require the use of other parties such as exporters or ship personnel and (2) the
smuggler may be physically separated from the currency for long periods. At the same time,
however, shipping offers certain advantages for smuggling. Ships leave U.S. harbors bound
for countries around the world, and ship cargo typically involves such large containers
that currency is very easy to conceal and difficult to detect.
Customs recently has begun to target sea shipments for outbound inspections, and
several large dollar value seizures have been made. In September 1989, for example,
Customs inspectors in Newark seized $763,240 that had been concealed beneath the floor of
a refrigeration unit in a ship bound for Colombia.
In July 1992, Customs inspectors at the Newark seaport seized $7,175,161 from two
20-foot containers loaded with dried peas on board a vessel destined for Colombia. The
violator, a packing and shipping company, had freshly painted each container in order to
conceal the false front walls. A subsequent investigation led to the seizure of an
additional $4,000,000 when a suspect was apprehended at his residence, bringing the total
seizure amount to over $11 million. According to Customs, the violator said the seizure
represented approximately 1 month's drug profits.
In March 1992 the press reported that Panamanian authorities had seized $7.1 million
from two containers on a ship inbound from Miami. The money had been scheduled for deposit
in a Spanish bank in Panama. The money launderer was believed to have been using a U.S.
paper company as a front for his operations.
A report prepared by Customs Office of Intelligence in January 1989 noted that
smugglers were likely to continue their use of commercial shipping due to the minimal risk
involved.
MAIL
-------------------------------------------------------- Chapter 2:3.4
Federal law enforcement agencies agree that a significant amount of currency is being
sent out of the country through the U.S. mail and commercial carriers without being
reported. Officials at Customs, the U.S. Postal Inspection Service, and FinCEN said that
although the extent of the problem could not be measured, the U.S. mail and private mail
couriers are being used to send currency (primarily money orders) out of the country
without the required CMIR being filed. The volume of mail and packages leaving the country
each day--as well as the large amount of currency that a single package can hold--makes
this a relatively easy and safe means of smuggling money out of the country.
An intelligence report issued by Customs in January of 1989 cited several cases that
lend credibility to the belief that smugglers use mail and international air courier
companies to smuggle currency overseas. In March 1988, for example, Customs officials in
Los Angeles reported that they were working a joint investigation with Newark, New Jersey,
involving the shipment of cashier's checks for amounts under $10,000 to Panama in which
the smuggler used three private delivery services and the U.S. Postal Service.
More recently, a Customs inspection at a private carrier's hub in Memphis found large
amounts of currency in packages supposedly carrying business documents. One of the
packages contained $30,000 in money orders, the second $30,000 in traveler's checks, and
the third $16,800 in money orders. Although the packages were sent by two separate
entities, all were bound for Colombia.
Similarly, the Postal Inspection Service has seized currency being mailed to overseas
locations during its own money laundering investigations. Specific data on the number and
dollar amount of seizures made by the Inspection Service are unavailable, but the Service
estimates that as many as 25 separate criminal organizations are involved in sending
unreported currency and money orders out of the country through 1 major airport on the
East Coast alone.
CUSTOMS HAS HAD SOME SUCCESS IN COMBATTING CURRENCY SMUGGLING
============================================================ Chapter 3
In order to collect revenues and interdict illegal imports, most Customs resources are
dedicated to inspecting passengers and cargo entering the country. Even so, the Service
does have a nationwide effort under way to interdict illegal exports. Included in this
initiative is one program specifically aimed at the interdiction of currency being
smuggled out of the country.
In the 4-year period ending in September 1992 Customs seized over $170 million in
unreported currency. Although this is a substantial amount, Customs officials acknowledge
that it is small in comparison to the amount that is probably leaving the country
undetected.
Recent Customs initiatives have increased the direction and emphasis given to efforts
to curb currency smuggling. Given a limited pool of resources, however, any increase in
outbound inspection programs is generally at the expense of Customs' inbound interdiction
efforts.
OUTBOUND INSPECTIONS FOR UNREPORTED CURRENCY AND OTHER ILLEGAL EXPORTS
---------------------------------------------------------- Chapter 3:1
The Customs Service has traditionally emphasized those programs directed at inspecting
the flow of persons and cargo into the country. Relatively few resources have been devoted
to outbound inspections. Customs performs its outbound currency interdiction program as a
part of an overall outbound enforcement effort that includes other contraband items, such
as precursor chemicals for the manufacture of illegal drugs, stolen vehicles,
high-technology equipment, guns and weapons, and any material being exported to embargoed
nations.
Customs does not collect data for measuring how much time and effort are spent on
outbound inspection efforts as opposed to inbound inspections. Based on the following
statistics, however, outbound inspections appear to receive less emphasis than inbound
inspections:
Only 85 of the more than 300 ports have dedicated outbound enforcement teams. However,
these 85 ports include many of the major ports, including international airports.
Of the 6,228 Customs inspectors nationwide, only 130 have been assigned to outbound
inspections on a full-time basis as of fiscal year 1993.
Although no records are available on the level of outbound inspections, Customs
officials said the rate was much lower than for inbound traffic, where about 8 percent of
cargo is subject to inspection.
Of the various Customs programs targeting illegal exports, one program--"Operation
Buckstop"--is specifically intended to prevent the unreported export of currency from
the United States. Historically, outbound inspections for the purpose of interdicting
currency were done at only a few locations and as special operations. The locations chosen
for the inspections were limited to suspected routes of unreported currency destined for
narcotic producing and bank-haven countries. Operation Buckstop was initiated as a
nationwide special operation in February 1986, and between 1988 and 1991 it was expanded
and incorporated with other national outbound enforcement programs.
Today, Operation Buckstop is the generic term for all Customs Service efforts to
inspect outgoing passengers and cargo to interdict currency being smuggled out of the
country. In general, these efforts mirror inbound inspections. Individuals and cargo
shipments are screened and some are chosen for more detailed examination based on the
judgment of the Customs inspector. Because of limited resources and the emphasis on
inbound inspections, however, outbound inspections are the exception rather than the rule.
Consequently, Customs is very selective when targeting ports for implementing a Buckstop
operation.
According to Customs officials, there is no typical Operation Buckstop inspection
effort. Participation and specific operating procedures are left to the discretion of
individual Customs district offices and ports. Some Operation Buckstop efforts are port
initiatives, while others are coordinated at the district level. Some districts and ports
have inspectors specifically dedicated to Buckstop inspections on a full-time basis.
Others have a cadre of inspectors dedicated to outbound inspections, some of whom
participate in Buckstop efforts. Finally, some locations use whatever inspectors are
available at the time.
Districts and ports also vary in the number of inspectors involved and the frequency
with which they perform Buckstop inspections. For example:
The San Diego district has a designated team of inspectors for Buckstop operations that
rotates among the seven ports within the district. One day the team may be at the San
Ysidro land border crossing, the next at the international airport, and the next at the
seaport.
Some large airports, such as Los Angeles International (LAX) and New York-JFK, have
dedicated teams of Buckstop inspectors that work selected flights but differ on the
frequency of inspections. Inspections at LAX are performed 8 hours a day, while outbound
inspections at New York's JFK are performed from 6 a.m. to midnight. Only a limited number
of flights can be targeted for inspections, based on the workload and the availability of
the dedicated inspectors.
In the St. Albans, Vermont, district, an outbound inspection that includes Buckstop
efforts is performed at land border crossings for a 24-hour period once every 6 months.
There are no full-time outbound or Buckstop teams; rather, the inspectors available at the
time perform the inspections.
To augment these efforts, Customs headquarters and some of the ports involved in
Operation Buckstop have developed special initiatives from time to time. For example, we
identified the following during our site visits:
Operation Million Air. This effort specifically targeted private aircraft. In San
Diego, it included Customs' Office of Enforcement agents, personnel from Customs' Command
Communication Intelligence Unit, and special agents from the Federal Aviation
Administration. The first operation resulted in five seizures, two of them involving a
total of $223,786 in currency.
Operation Pistachio. In this effort, Chicago O'Hare inspectors specifically targeted
weekend flights, because Operation Buckstop normally is restricted to the regular work
week. Currency seizures totalling over $350,000 from previous inspections prompted this
initiative.
Operation Backdoor. The Nogales, Arizona, district targeted two land border crossings
and seized nearly $400,000 from motorists over an 8-month period. This effort was similar
to one known as "Operation Pipeline" in Blaine, Washington.
Operation Cyclops II. This initiative resulted in the seizure of over $1 million in
negotiable monetary instruments passing through Los Angeles International Airport. Five
arrests were also made.
As with all inbound or outbound inspections, Operation Buckstop inspections are
performed by port personnel working under the authority of Customs' Office of Inspection
and Control. If the inspectors determine that an individual is in violation of the
reporting requirements during their examinations, the individual is detained and the local
Office of the U.S. Attorney is contacted to determine the likelihood the case will be
prosecuted and what action to take. For various reasons--including an extensive caseload
of higher priority offenses--the U.S. Attorney may decline to prosecute. In this event,
Customs can still seize the currency and seek civil forfeiture of the funds. If the amount
in question is less than $500,000, the forfeiture may be pursued administratively.
Resource constraints contribute significantly to determining when and where Buckstop
inspections are performed. At the ports visited, we found that the staffing on outbound
enforcement teams ranged from a minimum of 3 to a maximum of 20 persons. To supplement
their staffing, some districts and ports obtain assistance from the National Guard, state
and local authorities, and special task force operations. However, the extent to which
these resources were used varied, and no records were kept to determine the level of
effort expended.
Customs officials said the lack of resources was not merely a matter of personnel. They
noted that much of the traffic leaving the country is bulk cargo, which is difficult to
inspect without large and sophisticated equipment. Customs has a shortage of such
equipment and the equipment it does have--like the personnel-tends to be devoted to
inbound inspections.
To illustrate the level of Buckstop inspections, we obtained statistics from Chicago
O'Hare, one of the country's busiest international airports. As of September 1992, an
average of 1,888 flights a month left O'Hare for foreign destinations. The number of
flights inspected each month averaged 64, from a low of 18 to a high of 135. An average of
32.17 percent of the passengers on these flights was interviewed or otherwise subjected to
inspections. These inspections resulted in 59 seizures of outbound currency totaling
$1,759,328.
Table 3.1
Operation Buckstop Inspections at Chicago O'Hare Airport, Calendar Year 1992
Number Number of Number of
of Number of passengers checked
flights passengers interviewe bags
Month targeted departing d examined
-------------- -------- ---------- ---------- ----------
January 18 2,095 1,087 1,090
February 27 3,281 1,455 2,414
March 21 3,160 1,413 427
April 33 5,120 1,570 458
May 104 19,127 10,712 1,011
June 57 11,152 1,976 638
July 92 14,443 3,716 5,418
August 87 14,199 4,498 2,802
September 135 22,490 7,864 2,451
October 57 9,124 2,199 1,393
November 72 10,962 2,098 536
December 65 10,397 1,806 1,648
============================================================
Totals 768 125,550 40,394 20,286
------------------------------------------------------------
Source: U.S. Customs Service.
In June 1992 Customs dedicated 10 full-time inspector positions to outbound inspections
at O'Hare. While this has increased coverage, the team typically works overlapping shifts
through the regular work week. These shifts result in coverage for 13-1/2 hours daily. At
the time of our visit, almost no inspections were made at other hours during the day or on
Sundays, except for special operations.
SEIZURES OF CURRENCY BEING SMUGGLED OUT OF THE COUNTRY
---------------------------------------------------------- Chapter 3:2
In fiscal year 1989 Customs began to accumulate statistics for all seizures of currency
resulting from all outbound interdiction efforts, including those seized as a result from
Operation Buckstop inspections. From fiscal year 1989 through fiscal year 1992, Customs
made 2,940 outbound currency seizures totaling $171.3 million. Customs officials said that
this figure represents only that amount that can be attributed to the direct interdiction
of currency being smuggled out of the country. We were also told that on a number of
occasions currency has been seized during an investigation and it was later determined
that an attempt to smuggle it out of the country had been planned. In these cases,
however, the seized currency is not counted as resulting from interdiction efforts.
Table 3.2 shows the number and dollar values of outbound seizures since fiscal year
1989 compared to all currency seizures made by Customs over the same period.
Table 3.2
Outbound and Total Currency Seizures, Fiscal Years 1989 Through 1992
Percentage of seized rrency
Amount All Amount attributable
Fiscal Outbound (millio seizures (millio to outbound
year seizures n) \a n) seizures
------ -------- ------- -------- ------- --------------
1989 595 $ 22.0 4,102 $ 225.0 9.78
1990 821 52.5 4,222 446.0 11.77
1991 662 54.4 3,600 272.2 19.99
1992 862 42.4 3,507 220.6 19.22
============================================================
Total 2,940 $171.3 15,431 $1,163. 14.72
8
------------------------------------------------------------
\a Includes all seizures of currency by Customs including seizures resulting from
inbound, outbound, and other enforcement programs Source: GAO analysis of Customs data.
Due to the lengthy forfeiture process and the methods used to maintain statistics, we
were unable to determine the percentage of the above seizures actually resulting in
forfeitures to the government. Customs officials said that many of the smaller seizures
are returned during the administrative adjudications after a fine has been levied.
However, most of the seizures exceeding $100,000 are eventually forfeited. Figure 3.1
describes the number and value of seizures of $100,000 or more made since 1989.
Figure 3.1: Number and Dollar Amount of Outbound Seizures of $100,000 or More
(See figure in printed edition.)
A relatively small number of ports account for the bulk of currency seizures. However,
as shown in figure 3.2, 10 of these ports accounted for about 85 percent of the $42.4
million seized during the year. New York-JFK alone accounted for more than a third of the
seizures. (See app. II for a list of the 52 ports that reported seizures in fiscal year
1992.)
Figure 3.2: 10 Ports Accounted for Most of the Outbound Currency Seizures in Fiscal
Year 1992
(See figure in printed edition.)
Customs does not maintain overall statistics on the number of outbound inspections
made, so there is no readily available way to determine the frequency with which
violations are identified during a Buckstop inspection. Customs officials at the ports we
visited told us that most outbound currency seizures result from labor-intensive
"cold hit" examinations rather than long-term investigative actions. They also
said that seizures come from individuals of varying nationalities and headed for
destinations around the world, which makes it even more difficult to profile any
particular suspects or target specific flights. Table 3.3 summarizes Customs' outbound
currency seizures as determined by the violators' nationalities for fiscal years 1991 and
1992.
Table 3.3
Outbound Currency Seizures by Violator Nationality, Fiscal Years 1991 and 1992
Number Number
of Dollar of Dollar
Violator seizures amount seizures amount
nationality FY 1991 FY 1991 FY 1992 FY 1992
------------------ -------- --------- -------- ---------
North America 163 $10,460,1 267 $11,895,2
40 74
Central America 11 344,645 18 491,229
South America 99 10,194,25 185 9,620,764
6
Caribbean 16 394,262 51 1,092,771
Europe/Russia 27 1,828,738 56 1,537,783
Middle East 45 1,698,771 70 1,910,750
Far East 107 3,229,151 112 3,856,227
Africa 153 5,369,641 81 2,662,549
Unknown 41 20,860,19 22 9,371,172
3
============================================================
Totals 662 $54,379,7 862 $42,438,5
97 19
------------------------------------------------------------
Source: U.S. Customs Service.
For fiscal years 1991 and 1992, smuggling attempts on commercial airlines yielded the
most seizures by dollar value. As discussed in chapter 2, Customs officials believe that
commercial air travel is a favored means for smuggling currency because the travel time is
short, the individual stays close to the money, and almost any destination is readily
accessible. For this reason, Customs tends to perform more outbound inspections at
airports. Customs officials were not sure whether the large volume of seizures on
commercial airlines was due to this being the most prevalent type of conveyance or to this
being the area where Customs devoted more resources. Table 3.4 shows the seizures for
fiscal years 1991 and 1992 by method of conveyance.
Table 3.4
Outbound Currency Seizures by Method of Conveyance, Fiscal Years 1991 and 1992
FY 1991 FY 1992
percent percent
FY 1991 of FY 1992 of
dollar dollar dollar dollar
Type of transport value value value value
------------------ --------- -------- --------- --------
Commercial $34,352,8 63.17 $30,109,4 70.95
aircraft 35 31
Land vehicles 3,895,267 7.16 3,822,489 9.01
Commercial vessels - - 7,372,766 17.37
Pedestrians 48,824 0.09 371,699 0.88
Private vessels - - 20,000 0.05
Bicycle - - 18,871 0.04
Unknown 7,765,299 14.28 - -
Other 8,317,572 15.30 723,263 1.70
============================================================
Totals $ 100.00 $42,438,5 100.00
54,379,79 19
7
------------------------------------------------------------
Source: GAO analysis of Customs data.
Customs officials believe that the impact of Operation Buckstop is much greater than
the actual seizures appear to show. They said that the program is also resulting in
additional compliance with CMIR requirements. They pointed out that in performing the
inspections, the inspectors often require travelers to complete a CMIR on the spot rather
than seizing the currency. For example, Chicago-O'Hare made 59 seizures of outbound
currency totaling $1,759,328 during calendar year 1992. Customs officials told us that
during this same period, they caused an additional $4,747,288 to be reported on CMIRs.
PORT FACILITIES MAKE OUTBOUND INSPECTIONS DIFFICULT
---------------------------------------------------------- Chapter 3:3
The physical location of outbound inspections can pose a problem for Operation Buckstop
that has no parallel for inbound inspections.
When performing inbound inspections, Customs can keep individuals or goods from being
released until Customs officials have conducted the necessary examinations. At each port,
Customs maintains a facility for these purposes.
Outbound inspections are much harder to perform. One reason is that individuals and
businesses traditionally have been allowed to leave the country without having to be
inspected and are resistant to the delays and inconvenience involved in outbound
inspections. This difference is obvious in the aerial photograph of the border crossing at
San Ysidro, as shown in Figure 3.3. Note the backup on the inbound (Mexican) side compared
to the no traffic backup on the outbound (U.S.) side. During Operation Buckstop
inspections, the same type of backup would take place on the outbound side.
While conditions at seaports and airports are somewhat different, the principle is the
same. Outbound searches add to the departure time. Customs officials said that even if
they had sufficient resources to perform the same level of outbound searches they perform
for inbound traffic, the resistance from industry and international passengers would be
another factor that would have to be considered.
Figure 3.3: Aerial Photograph of the U.S.-Mexican Border Crossing at San Ysidro,
California (Outbound Lanes at Top, Inbound Lanes Below)
(See figure in printed edition.)
Source: U.S. Customs Service.
OUTGOING U.S. MAIL IS PRECLUDED FROM OPERATION BUCKSTOP INSPECTIONS
---------------------------------------------------------- Chapter 3:4
As we noted in chapter 2, federal law enforcement agencies agree that a significant
amount of currency is being sent out of the country through the U.S. mail and commercial
carriers without being reported. Customs performs warrantless searches of parcels being
sent out of the country by commercial carriers, but the legal authority of Customs to
inspect outgoing U.S. mail without a search warrant is a matter of dispute between Customs
and the Postal Service.
\4 Consequently, Customs inspects outbound mail only after it has determined through an
investigation that there is probable cause for obtaining a search warrant.
As discussed in a previous report,\5 the Postal Service believes that Customs does not
have the statutory authority to inspect outgoing mail without a search warrant. As a
result, the Postal Service has precluded Customs from initiating routine and random
inspection efforts such as Operation Buckstop for U.S. mail being sent out of the country.
Without the ability to perform warrantless searches, Customs cannot conduct outbound
inspection programs such as Operation Buckstop when the U.S mail is involved. Customs
officials told us they believe that if there were Operation Buckstop searches done on the
U.S. mail--even on the limited basis as done at other border crossings--millions of
dollars in unreported currency would be seized as well as the country's borders made more
secure against other types of illegal exports.
Customs and the Postal Service are aware of this problem and have been working toward a
solution. In July 1992, the agencies began drafting proposed amendments to the Bank
Secrecy Act and Title 39 statutes governing postal operations under which Customs would
perform warrantless searches of outbound mail. They also began working on an agreement to
implement warrantless search procedures should the amendments be enacted. However, as of
November 1993, Customs and the Postal Service had been unable to reach an agreement on
either the proposed amendments or the working arrangements.
--------------------
\4 The authority of Customs to perform certain warrantless searches of mail coming into
the country was upheld in a 1977 Supreme Court decision (United States v. Ramsey, 431 U.S.
606 (1977).
\5 Export Controls: Use of the Mail to Illegally Export Sensitive Technology
(GAO/C-NSIAD-90-31, May 18, 1990).
CUSTOMS IS INCREASING THE EMPHASIS GIVEN OUTBOUND INSPECTIONS
---------------------------------------------------------- Chapter 3:5
The Customs Service is aware of the impact of currency smuggling on efforts to combat
money laundering and has implemented several initiatives to emphasize the importance of
outbound inspections to interdict unreported currency. These efforts are also designed to
increase and improve management of outbound inspections on a nationwide basis.
In its 1991 U.S. Customs National Financial Enforcement Strategy and Implementation
Plan, Customs cited as a key objective the need to continue exploring and developing new
and innovative outbound operations in the private aircraft, cargo, passenger, land border,
and courier areas. This directive also instructed the district directors to integrate
outbound currency interdiction initiatives into their district drug strategies.
In an effort to increase the overall effectiveness of outbound currency searches
through greater uniformity and coordination, a Customs' survey team of headquarters and
regional staff visited seven major airport locations participating in the Operation
Buckstop initiative during 1991. The survey team's objective was to determine whether the
success experienced in outbound currency interdiction at Miami and New York-JFK was
attributable to a greater incidence of smuggling or to personnel, procedures, or
strategies in place at these locations.
In its report, the survey team acknowledged that each location was facing increased
pressures on inbound processing as the number of flights and arriving passengers and cargo
workload ontinued to rise. This workload, coupled with the ever-present narcotics threat,
had caused Customs headquarters to direct local ports to allocate resources accordingly.
Fewer and less-intensive Operation Buckstop operations resulted. The survey team made the
following conclusions and recommendations in order to increase the overall effectiveness
of Operation Buckstop:
The outbound currency threat is "as great as ever" and Customs is not
addressing the problem on a continuing basis. The ports should establish dedicated
outbound teams that would concentrate on Operation Buckstop.
Resources are available that are not being fully used in support of Operation Buckstop.
Ports need to increase their use of such resources as the National Guard, state and local
law enforcement authorities, and joint task forces. Also, ports should conduct special
outbound initiatives using asset forfeiture funds when appropriate.
The use of specialized equipment such as X-ray vans for outbound currency interdiction
under Operation Buckstop has received lower priority than for incoming cargo. Customs
needs to purchase more of this equipment.
There are no national directives on training, procedures, intensity, or regularity of
inspections required under Operation Buckstop. Program standards, such as a national
directive, are needed to resolve inconsistencies and reemphasize the importance of
Operation Buckstop.
As a result of the airport survey report, Customs is developing a national directive
and establishing a National Task Force to develop a handbook to ensure that minimum
uniform standards are adhered to during Buckstop operations. The drafts of these documents
emphasize the factors management feels are crucial for a successful outbound program,
including effective targeting and thorough port threat assessments and good working
relationships with Customs' Office of Enforcement. Customs districts were informed of
these plans in May 1992, but, as of November 1993, the directive and handbook had not yet
been issued in final form.
On March 1, 1993, Customs initiated a joint operation involving the Service's Office of
Inspection and Control and Office of Enforcement. "Operation Outlook" is a
sustained outbound enforcement operation that emphasizes currency interdiction. Its
purpose is to assess the threat of outbound contraband, including unreported currency, on
a district-by-district basis and determine the resources required to address the threat.
Under Operation Outlook, Customs has taken several steps designed to enhance its ability
to combat currency smuggling. These include the following:
Several dogs have been specially trained to detect concealed U.S. currency and are on
duty at several ports on a test basis. These dogs have also been used to assist other
ports in special outbound enforcement efforts.
Certain conveyances, such as commercial parcel shipments, have been targeted and
certain areas of the borders have been "blitzed" with additional staff and
equipment resources temporarily assigned.
Several efforts have begun to explore the feasibility of increasing the use of
intelligence sources, both in Customs and other agencies, to better target specific cargo
shipments and carriers for outbound inspections.
On the basis of the results of the first 6 months of Operation Outlook, Customs is
optimistic about the operation. A total of 599 outbound currency seizures were made from
March through August of 1993, a substantial increase from the 499 seizures made during the
same time period in 1992. The 599 seizures represented $26.6 million in currency. In the
5-month period prior to Operation Outlook, October 1992 through February 1993, 314
seizures totaling $12.6 million had been made.
The Customs Service has also increased the significance of currency smuggling in its
strategic plan. The Customs 5-year plan, released in September 1993, identified four goals
that must be addressed in order for the Service to achieve its mission: Trade, narcotics,
money laundering, and outbound enforcement. The interdiction of unreported currency is
specifically highlighted under both the money laundering and outbound enforcement goals.
CONCLUSIONS
---------------------------------------------------------- Chapter 3:6
Certain criminal activities, such as illegal drug sales, produce a tremendous amount of
currency that would be regarded as suspicious unless it is disguised as legitimate.
Consequently, U.S. efforts to combat money laundering rely heavily upon the reporting of
transactions involving large amounts of cash. To avoid these requirements, individuals
have resorted to smuggling the currency out of the country to spend or deposit it.
The Customs Service is responding to the growing threat posed by currency smuggling by
increasing national oversight of and emphasis on its outbound inspection programs. In
general, however, any increase in outbound inspections reduces the level of effort given
inbound inspections. Determining the appropriate balance between inbound and outbound
interdiction efforts is an extremely difficult task. Moreover, the solution is unlikely to
remain constant and will require periodic adjustments to reflect changing circumstances.
The Customs Service has demonstrated that it is aware of the overall problem and the
constraints it must deal with to address it.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 3:7
We provided a draft of this report to the Customs Service to review and asked for oral
comments. On January 14, 1994, we met with the Assistant Commissioner, Inspection and
Control, and his staff, who told us that they agreed with the data and information in the
report. They also said that the report was an objective and balanced presentation of the
problems Customs faced in combatting currency smuggling and accurately described the
agency's plans to increase these efforts in the future. They offered several editorial
suggestions to clarify certain information, and we made these changes where appropriate.
DISTRICTS AND PORTS VISITED BY GAO
=========================================================== Appendix I
Regions Districts Ports Type
------------ -------------- ------------------------ ----
Pacific Seattle, WA Seattle/Tacoma Air
International
Blaine Land
Seattle Harbor Sea
Los Angeles, Los Angeles Air
CA International
Los Angeles Seaport Sea
Long Beach Sea
San Diego, CA Brownfield Air
San Diego International Air
San Diego Sea
San Ysidro Land
Otay Mesa Land
North Chicago, IL O'Hare International Air
Central
Detroit, MI Detroit Metropolitan Air
Canadian Tunnel Land
Ambassador Bridge Land
Northeast St. Albans, VT St. Albans Rail
Burlington Air
Derby Line Land
Norton Land
Highgate Springs Land
Alburg Land
New York Newark, NJ Newark International Air
New York, NY JFK International Air
Southeast Washington, DC Dulles International Air
Miami, FL Miami International Air
Miami Seaport Sea
Southwest Nogales, AZ Nogales Land
Tucson International Air
============================================================
Totals 6 11 28
------------------------------------------------------------
CUSTOMS OUTBOUND CURRENCY AND
MONETARY INSTRUMENT SEIZURES BY
REPORTING LOCATION FISCAL YEAR
1992
========================================================== Appendix II
Number of Domestic
reporting District Reporting dollar Total by
locations name location value district
--------- ------------ ------------ ---------- ---------
01 JFK Airport, JFK $14,516,34 $14,516,3
NY 3 43
02 Newark, NJ Newark 9,062,944 9,062,944
03 Los Angeles, LAX 4,903,782 4,903,782
CA Internationa
l Airport
04 Miami, FL Miami 385,748 2,153,462
05 Fort Pierce 45,595
Miami
06 Internationa 1,722,119
l Airport
07 San Diego, San Diego 88,430 1,898,889
08 CA Calexico 283,433
09 San Ysidro 604,272
10 Otay Mesa 922,754
11 Chicago, IL Chicago 1,757,477 1,757,477
12 Laredo, TX Brownsville 714,842 1,355,631
13 Laredo 209,550
14 Hidalgo 340,221
15 Rio Grande 79,900
16 City 11,118
Roma
17 Houston - Houston 1,293,033 1,293,033
Galveston, Internationa
TX l Airport
18 Nogales, AZ Naco 51,600 933,456
19 Nogales 535,983
20 San Luis 20,000
21 Tucson 325,873
22 Detroit, MI Detroit 844,705 896,272
23 Sault St. 51,567
Marie
24 Seattle, WA Sea-Tac 538,481 538,481
Internationa
l Airport
25 Honolulu, HI Honolulu 52,000 468,523
Honolulu
26 Internationa 416,523
l Airport
27 San San 390,885 390,885
Francisco, Francisco
CA
28 Washington, Washington 314,687 314,687
DC
29 Ogdensburg, Massena 141,908 298,513
30 NY Alexandria 12,220
31 Bay 144,385
Champlain/
Rouses Pt.
32 Boston, MA Logan 281,337 281,337
Airport
33 San Juan, PR Mayaguez 19,432 257,150
San Juan
Internationa
34 l 237,718
Airport
35 Portland, OR Portland 197,140 197,140
36 Dallas-Fort Dallas-Ft. 77,269 188,788
37 Worth, TX Worth 111,519
San Antonio
38 Tampa, FL Port 165,000 165,000
Canaveral
39 Baltimore, Baltimore, 133,676 133,676
MD MD
40 St. Albans, Highgate 116,000 116,000
VT Springs/
Alburg
41 Buffalo- Buffalo- 84,824 84,824
Niagara Niagara
Falls, NY Falls, NY
42 Philadelphia Philadelphia 34,141 48,269
43 , PA Pittsburgh 14,128
44 El Paso, TX El Paso 47,694 47,694
45 New York, NY New York 26,915 26,915
Seaport
46 Anchorage, Anchorage 24,977 24,977
AK
47 Minneapolis Minneapolis 24,451 24,451
-St. Paul, -St. Paul
MN
48 Great Falls, Salt Lake 12,752 12,752
MT City, UT
49 Pembina, ND Dunseith 12,592 12,592
50 Savannah, GA Atlanta, GA 12,475 12,475
51 Portland, ME Bangor $11,801 11,801
52 Cleveland, Louisville, 10,300 10,300
OH KY
============================================================
Total $42,438,5
19
------------------------------------------------------------
Source: U.S. Customs Service.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
------------------------------------------------------- Appendix III:1
Edward H. Stephenson, Assistant Director
Michael L. Eid, Assignment Manager
OFFICE OF GENERAL COUNSEL,
WASHINGTON, D.C.
------------------------------------------------------- Appendix III:2
Geoffrey R. Hamilton, Attorney/Advisor
ATLANTA REGIONAL OFFICE
------------------------------------------------------- Appendix III:3
Frankie Fulton, Regional Management Representative
Clarence Tull, Evaluator-in-Charge
Cheri White, Senior Evaluator
Veronica Mayhand, Site Senior
Bonnie Wrenn, Evaluator
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