Vitter Releases GAO Reports: Huge Oversight Failures with Illegal Immigrants Sending Money to Foreign Countries

Vitter legislation cracks down on money wired out of the U.S. by illegal immigrants

(Washington, D.C.) – Today, U.S. Sen. David Vitter (R-La.) released two new reports he requested from the Government Accountability Office (GAO), the federal government’s watchdog, which show the major problems with how the U.S. government tracks foreign remittances, particularly from illegal immigrants. One of the reports also underscores the importance of passing Vitter’s legislation, S. 79, The Remittance Status Verification Act, also known as the Wire Act.

In January 2013, Vitter first introduced his legislation that requires a fee on remittances for customers who wire money to another country but cannot prove that they are in the United States legally. The fee would be used to enhance border security. In July 2014, Vitter and U.S. House Budget Chairman Tom Price M.D. (R-Ga.) requested a full audit from the GAO to study the problems. Vitter re-introduced his legislation this Congress in January 2015.

“The Obama administration has shown a complete lack of both competence and interest when it comes to securing our borders and enforcing our immigration laws. And that’s costing us a lot of money. Billions, in fact,” Vitter said. “The GAO reports I have requested and made public today help us determine how massive the remittances problem is with illegal immigrants sending billions out of the U.S. – money they likely haven’t paid income taxes on. What my legislation would do is basically improve on our border security while making illegal immigrants pay for it.”

The GAO produced two concurrent reports upon Vitter’s request. You can access them here:

  1. Money Laundering Risk and Views on Enhanced Customer Verification and Recordkeeping Requirements (GAO-16-60)
  2. Actions Needed to Address Unreliable Official U.S. Estimate (GAO-16-65)

In 2006, GAO noted that the United States was the largest remittance-sending country in the world. Foreign-born residents in the United States remitted nearly $38 billion to households abroad, and estimates from the Center for Immigration Studies (CIS) have shown that $25 billion each year comes from illegals.

Today’s newly released GAO report includes updated estimates from 2014, which confirms that the U.S. is still the largest remittance-sending country in the world. In 2014 alone, foreign-born residents sent an estimated $54.2 billion in remittances, most of it going to Mexico. The GAO, citing the World Bank’s Bilateral Remittance Matrix, estimates that $25 billion was sent to Mexico, $15 billion to China, and $10 billion to India as the top three beneficiaries.

Key Findings from the GAO:

► Accounting for remittances is completely insufficient. GAO recommends updated accounting and enforcement measures. Below are excerpts from the report:

  • “Remittance Transfers Pose Money Laundering Risks” (Pg 31, 16-65)
  • “…According to IRS data, the results of examinations of money transmitters from fiscal years 2013 and 2014 showed that the top three most frequently cited violations were failure to comply with AML program requirements, failure to file suspicious activity reports, and inadequate recordkeeping of funds transfers.” (Pg 51, 16-65)
  • “…limited information exists on how many of these individuals (illegal immigrants) remit or the extent to which they rely on regulated methods.” (Pg 12, 16-60)
  • “We found shortcomings in BEA’s model, specifically with regard to the assumptions BEA made about the percentage of income remitted and the percentage of foreign-born persons who remit.” (Pg 36, 16-60)

►Vitter’s legislation could raise up to $1 billion for border security according to GAO scenarios. Excerpt on estimates below:

  • “…if 18 billion in remittances are sent by individuals without legal status before the implementation of S.79 … under a scenario with no change in the amount of remittances $1.29 billion in potential net revenue for border protection.” (Pg 15, 16-60)

►Vitter’s legislation would create a disincentive for illegal immigrants to send money to their home countries, resulting in that money likely staying in the U.S. economy. Excerpts below:

  • “Representatives from almost all of the organizations we spoke with, including providers, researchers, federal agencies, and community groups, stated that remitters without legal status may be deterred by the final and the additional scrutiny around their immigration status…” (Pg 11, 16-60)
  • In 2015 the Department of Treasury found that illegal immigrants were encouraged by human smuggling rings to use remittance service providers to repay. (Outlined on Pg 36, 16-65)

A large portion of the estimated $54 billion of remittances exiting the U.S. is sent by illegal immigrants, and more research is required.

  • “With regard to the likelihood of remittances, one study of Mexican migrants finds that unauthorized immigrants are more likely to remit, …” (Pg 13, 16-60)

►The federal government’s lack of accountability and enforcement of current remittances laws could mean money being sent to terrorist, drug trafficking or human tracking organizations is going unnoticed.  Excerpts below:

  • “…a large percentage of human smuggling fees were sent using money transmitters because these providers offered a quick and reliable method of transfer with some degree of perceived anonymity for the smugglers…” (Pg 37, 16-65)
  • “…over $12 million in suspected illicit human smuggling proceeds were sent to Texas border cities through money transmitters in the 4-month period between January and April 2015.” (Pg 39, 16-65)
  • Many law enforcement officials supported a requirement for reporting information on remittances. … Furthermore, DHS and DOJ officials we spoke with for this report said that information on remittance senders that could be collected in a centralized database could be analyzed to help identify illicit activity and would be useful in AML efforts.” (Pg 41, 16-65)
  • FinCEN is still evaluating ways to implement the 2010 proposed rule…” (Pg 42, 16-65)
  • DHS officials did say that knowing senders’ legal immigration status could be beneficial if DHS was looking at potentially removing illegal immigrants from the country. But they added that the verification requirements could drive remitters to informal remittance systems. One official noted that although criminals could turn to alternative methods of transferring money to avoid being identified, it could take several years to establish a new criminal financial network, and could result in a positive AML effect for a time—at least until the criminals identified alternative networks.” (Pg 44, 16-65)
Posted on February 23, 2016 and filed under David Vitter.