The Drug Enforcement Administrationís Handling of Cash Seizures

Audit Report 07-06
January 2007
Office of the Inspector General


Executive Summary

The Drug Enforcement Administration (DEA) enforces the controlled substances laws and regulations of the United States and investigates organizations and individuals involved in the growing, manufacture, or distribution of controlled substances.1 To ensure that criminal organizations and individuals do not benefit financially from their illegal acts, federal law provides that profits from drug-related crimes, as well as property used to facilitate certain crimes, are subject to forfeiture to the government. In carrying out its mission, the DEA seized about $339 million in cash in fiscal year (FY) 2005 from organizations and individuals involved in drug-related criminal activity.

In addition to the DEA, state and local law enforcement agencies also seize cash during their drug enforcement operations. These state and local agencies may transfer seized cash to a federal agency, such as the DEA, for processing through the federal Asset Forfeiture Program (AFP).2 Transferred seizures are referred to as “adopted” seizures because the federal agency adopts the seizures made by state or local agencies.

The DEA Agents Manual requires that DEA staff promptly convert cash they directly seize to a cashier’s check and promptly transfer cashier’s checks, including those adopted from state or local agencies, to the United States Marshals Service (USMS). The DEA is responsible for safeguarding the seized cash from the time it is seized until it is transferred to the USMS. The USMS subsequently manages and disposes of seized and forfeited assets.

Generally, when the DEA seizes cash from organizations or individuals involved in drug-related activities, the agents are supposed to count the cash, if practical, and seal the cash in an evidence bag or container. The agents then take the cash to the local DEA office for safekeeping where the cash is usually stored in the office’s overnight vault or security container controlled by the office’s evidence custodian. DEA agents later retrieve the cash from the evidence custodian and take it to a bank for an official count and conversion to a cashier’s check. The agents then take the cashier’s check back to the DEA office for safekeeping until it is transferred to the USMS. Variations to this process may occur, such as: (1) the DEA agents sometimes take the seized cash directly to the bank, (2) some banks electronically transfer the funds to the USMS instead of issuing the DEA a cashier’s check, and (3) the DEA receives a cashier’s check instead of cash from state and local law enforcement agencies for seizures adopted by DEA.

The purpose of this audit was to evaluate whether the DEA established and implemented effective controls for safeguarding seized cash. As shown in the following chart, from October 1, 2003, through November 3, 2005, the DEA recorded 16,007 cash seizures totaling almost $616 million in its Division offices.

Number and Dollar Value of Cash Seizures
from October 1, 2003, through November 3, 2005
(in millions of dollars)
3

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 Source: Consolidated Asset Tracking System

To assess the adequacy of the DEA’s controls for safeguarding seized cash, we selected a statistical sample of 742 cash seizures valued at $44,980,718 from 7 DEA Divisions. The details of our testing methodologies are presented in our Objective, Scope, and Methodology contained in Appendix I. The statistical sampling techniques we used are presented in Appendix II.

Audit Results

Our audit found that while the DEA had established internal control policies for safeguarding seized cash, some of those policies need to be strengthened. For example, the DEA should: (1) better define situations when seized cash should be counted immediately by the seizing agent or officer, (2) define a timeframe for seized cash to be taken to the bank to ensure that offices minimize the time during which they hold seized cash and particularly seized cash that the offices do not count, and (3) speed the transfer of seized cash to the USMS by mandating the use of wire transfers where possible.

Even more important, our audit testing at 28 DEA offices found that the DEA had not adequately implemented many of its existing internal control policies regarding cash seizures, including maintaining documentation demonstrating compliance with the policies. The results of our testing are discussed in the following sections.

Control Tested:  According to the DEA Agents Manual, when cash is discovered, a witnessing agent or task force officer should immediately be summoned to witness the handling of the cash.

Test Results:  As shown in the following chart, DEA documents did not reflect that a witnessing agent or officer was present in 31 percent of the seizures tested.

Presence of a Witnessing Agent or Officer
when Cash was Discovered
5

Witness Present During Discovery: 69% yes, 12% could not determine, 19% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division tested are presented in Appendix III. Among the 28 DEA offices tested, the compliance rate ranged from 100 percent in 4 offices to 22 percent in 1 office.

DEA officials told us that based on their extensive prior experience in managing investigations they believed a witness was usually present when the cash was discovered, but that the agents failed to document that fact. However, without such documentation, we cannot confirm whether or not a witness was actually present during discovery of the cash in these instances. Moreover, a failure to document the presence of a witness, if one was present, violated DEA policies.

Control Tested:   According to the DEA Agents Manual, if the amount of cash seized is such that an immediate count is practical, a count is to be conducted by the seizing agent and a witnessing agent or officer.

Test Results:  As shown in the following chart, in most cases the documentation we reviewed showed that the DEA agents rarely counted the cash upon seizure.

Counting Seized Cash6

Agents Counted Seized Cash: 16% yes, 15% could not determine, 69% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division tested are shown in Appendix IV. The results showed a wide disparity in the implementation of this control among the 28 DEA offices we tested. The rate at which the control was implemented ranged from 63 percent in 1 office to 0 percent in 11 offices.

While DEA’s written policy in the DEA Agents Manual is to count seized cash when “practical,” many DEA officials we interviewed did not understand this policy. DEA officials in nine of the offices we tested erroneously told us they believed it was the DEA’s policy that agents should not count the seized cash. These officials told us they do not count the cash to avoid any discrepancies between the agents’ counts and the official bank counts that could lead to additional paperwork and could subject the agents to an investigation for possible theft of funds.

However, the DEA’s practice of not counting seized cash when practical significantly increases the risk of loss, theft, and claims by persons from whom the currency was seized.

Control Tested:  The DEA Agents Manual requires agents to issue a Form DEA-12 (DEA-12), Receipt for Cash or Other Items, to the person from whom the cash was seized showing either the amount seized or that “an undetermined amount of U.S. currency pending an official count” was seized.7 When currency is seized as the result of a seizure warrant, agents are not required to issue a DEA-12.8 Instead, the officers are required to either provide a copy of the warrant with a list of the items seized to the person from whom the items were seized; or leave a copy of the warrant and list of items seized at the seizure location if the person from whom the items were seized is not present.

Test Results:  As shown in the following chart, the documentation we reviewed did not indicate that the DEA agents regularly issued a receipt or warrant to the owner of the seized cash.

Agents Provided a Receipt or Warrant
to the Owner of the Seized Cash
9

Agents Provided a Receipt or Warrant: 52% yes, 1% could not determine, 47% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division tested are shown in Appendix V. Among the 28 DEA offices tested, the compliance rate ranged from 100 percent in 3 offices to 0 percent in 3 offices.

DEA officials told us that based on their extensive prior experience in managing investigations they believed a DEA-12 or warrant was usually provided to the owner of the seized cash, but that the agents did not document that action. However, without such documentation we cannot confirm whether or not a DEA-12 or warrant was provided to the owner. Moreover, failing to issue a warrant and maintain this required documentation violated DEA policies.

Controls Tested:  According to the DEA Agents Manual, a DEA agent or Task Force Officer and another witnessing agent should also be present when the seized cash is secured in a Heat Sealed Evidence Envelope and when the cash is transported to the local DEA office or the bank for an official count.10

Test Results:  As shown in the following chart, the DEA did not maintain documentation indicating that a witnessing agent or officer was present, as required by DEA policy at the various stages of the cash handling process.

Presence of a Witnessing Agent or Officer
at Various Stages of the Cash Handling Process
11

Witness Present During Sealing: 21% yes, 75% could not determine, 4% no. Witness Present During Transport to the DEA: 30% yes, 49% could not determine, 21% no. Witness Present During Transport to the Bank: 63% yes, 26% could not determine, 11% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division tested are shown in Appendix VI. Among the 28 DEA offices we tested, we found that:

DEA officials told us that based on their extensive prior experience in managing investigations they believed witnesses were usually present when the cash was sealed in the evidence envelope and that the evidence envelope contained the signature of the witnessing agent. However, the DEA discarded the evidence envelopes after the cash was counted by the bank and usually did not document in other case records that a witness was present during sealing of the cash in the evidence envelope. The DEA officials also told us that they believed witnesses were usually present when the cash was transferred to the local DEA office and to the bank, but the agents did not document this fact. However, without such documentation we cannot confirm whether or not a witness was actually present during sealing of the cash in the evidence envelopes or during transport of the cash to the DEA office and bank.

Control Tested:  Beginning January 1, 2005, DEA required that all high-value seized items, including cash, cashier’s checks, and recovered Official Advanced Funds valued at $1,000 or more be recorded in a High-Value Seized and Recovered Monies (HVSRM) ledger.12

Test Results:  As shown in the following chart, the documentation we reviewed showed that the evidence custodians consistently did not record cash seized in the HVSRM ledger.13

Recording Seized Cash in the HVSRM Ledger14

Seized Cash Recorded in the HVSRM Ledger: 19% yes, 81% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division we tested are shown in Appendix VII. Among the 28 DEA offices tested, the compliance rate ranged from 100 percent in 2 offices to 0 percent in 21 offices.

We found that many cash seizures were not being recorded in the HVSRM ledgers because DEA offices were not using the ledgers as intended. For the 28 DEA offices we tested, we found that only 6 offices (21 percent) used the HVSRM ledger to record all types of high-value seized and recovered items. The remaining 22 DEA offices either used the HVSRM ledger to record some types of high-value items but not others, or did not use the HVSRM ledger at all.

We attribute the disparity in how different DEA offices used the HVSRM ledgers to the evidence custodians not having attended current training on DEA’s cash handling procedures. Not recording seized cash on the ledgers can cloud the chain-of-custody for seized cash and potentially can lead to problems in prosecuting the case. It also increases the risk that seized cash could be lost or stolen without detection.

Control Tested:  The DEA Agents Manual requires agents to transfer seized cash to the bank for an official count and conversion to a cashier’s check as soon as arrangements can be made with the bank.15

Test Results:  As shown in the following chart, in most cases the documentation we reviewed showed that the DEA transported seized cash to the bank in a timely manner. Overall, the average time from seizure to transporting the seized cash to the bank was 3.2 working days. Three of the seven divisions we tested had average times at or below the average and the other four divisions had average times ranging from 3.3 to 4.7 working days. The detailed test results for each office we tested are shown in Appendix VIII.

Average Number of Working Days from Seizure
to Transport of Cash to the Bank (By Division)

DEA Divisions average time: New Orleans-1.4, Detroit-1.6, Houston-1.8, Los Angeles-3.3, Washington-3.5, Miami-4.5, New York-4.7. Average of all 7 divisions tested-3.2.
Source: OIG analysis of DEA records

We found that some offices took seized cash to the bank much sooner than others. As shown in Appendix VIII, for the 28 DEA offices we tested the average working days from when the cash was seized to when it was taken to the bank ranged from a low of 0.5 days in one office to 7.4 days in another office. Seventeen (61 percent) of the 28 offices were at or below the average of 3.2 working days, while 11 offices (39 percent) were above the average. The disparity resulted because some offices required agents to take the cash to the bank daily, while other offices required weekly trips to the bank. Other offices did not have set schedules for taking cash to the bank but instead made impromptu bank trips when agents were available. While most of the offices took the cash to the bank in a timely manner, the DEA should review the cash handling processes in the most timely Divisions – New Orleans, Detroit, and Houston – to determine if those processes can be used in other offices to reduce the time that cash is on hand.

Control Tested:  According to the DEA Agents Manual, seized property that is subject to forfeiture and not retained as evidence must be transferred to the custody of the USMS within 15 working days of seizure.

Test Results:  As shown in the following chart, with the exception of the Detroit Division the documentation we reviewed showed that the DEA generally transferred seized cash to the USMS in a timely manner. Overall, the average time from seizure to transfer of the seized cash to the USMS was 10.6 working days. Four of the seven divisions had average times of 5.6 to 10.2 working days and the other three divisions had average times ranging from 10.9 to 15.6 working days as shown in the following chart. The detailed results for each office we tested are shown in Appendix IX.

Average Number of Working Days from
Seizure to Transfer of Cash to the USMS

DEA Divisions within 15 working day limit: New York-5.6 days, Los Angeles-9.6 days, Houston-9.6 days, Washington-10.2 days, New Orleans-10.9 days, Miami-13.3 days. DEA Divisions that exceeded the 15 day working limit: Detroit-15.6 days. The average for all divisions tested was 10.6 days.
Source: OIG analysis of DEA records

While the overall averages for 6 of the 7 divisions tested were within the 15 working day limit established by the DEA, we found that 10 of the 28 individual DEA offices tested exceeded the limit for the cash seizures we tested. As shown in the chart at Appendix IX, for the sample seizures tested the average time from seizure to transfer of the cash to the USMS for these 10 offices ranged from 15.2 to 28.8 working days. Of the 116 seizures we tested in the 10 offices, 74 seizures were transferred to the USMS after more than 15 working days. Some offices had the banks wire the funds directly to the USMS instead of obtaining a cashier’s check from the bank and then providing the check to the USMS. None of the 10 offices that exceeded the 15-day limit used the wire transfer process. The DEA Agents Manual encourages Divisions to collaborate with the USMS to arrange for wire transfers in cities where this procedure is not already in place. We believe that the use of wire transfers could significantly reduce the amount of time that seized funds remain in the possession of the DEA and reduce the risk of loss.

Control Tested:  According to the DEA Agents Manual, DEA employees are required to use a DEA-12, signed by the transferring agent and witnessed by another law enforcement employee, to document the transfer of any high-value item to the evidence custodian. In some cases, DEA guidance allows the transfer of cash using the DEA-12 or another acceptable form, such as the DEA-7a, or Standard Seizure Form (SSF).16 When cash is seized and taken to the local DEA office during regular duty hours, the agent is to release custody of the seized cash to the evidence custodian using a DEA-12, DEA-7a, or SSF. After regular duty hours, the agent is required to place the cash in temporary overnight storage using a DEA-12 or DEA-7a and make an entry in the temporary overnight ledger.17 Copies of the DEA-12, DEA-7a, and SSF documenting the delivery of the cash are to be put in the case files and preserved as part of the chain-of-custody records.

Test Results:  As shown in the following chart, the documentation we reviewed showed that agents in many of the DEA offices did not use a DEA‑12, DEA-7a, or SSF to document the transfer of seized cash when placing the seized cash into temporary overnight storage for the evidence custodian or when transferring the cash directly to an evidence custodian.

Transfer of Cash to the Evidence Custodian
Using the Proper Chain-of-Custody Form
18

Agents Transferred Cash Using Proper Form: 26% yes, 74% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division we tested are shown in Appendix X. Among the 28 DEA offices we tested, the compliance rate ranged from 100 percent in 1 office to 0 percent in 16 offices.

The evidence custodians and other DEA officials in the offices we tested told us that making an entry in the HVSRM ledger was sufficient to document the transfer of the currency to an evidence custodian. However, we found instances where the transfer of cash to the evidence custodian was not documented on the proper chain-of-custody form and the cash was not recorded in the HVSRM ledger. Therefore, it is critical that the chain-of-custody forms be completed when transferring seized cash to ensure that accountability of the cash is maintained.

Conclusion and Recommendations

In summary, while the DEA had issued comprehensive policies for safeguarding seized cash, we found areas in which the policies needed strengthening. We believe the DEA needs to: (1) better define when seized cash should be counted immediately by the seizing agent or officer, (2) define a timeframe for seized cash to be taken to the bank to ensure that offices minimize the time during which they hold all seized cash and particularly the seized cash that the offices do not count, and (3) speed the transfer of seized cash to the USMS by mandating the use of wire transfers where possible.

In addition, we also found that the DEA did not follow, or did not document that it followed, many established critical internal control policies. For most seizures we tested, we found no documentation indicating that a witnessing agent or task force officer was present at critical stages of the cash handling process. Further, we found many instances in which agents and task force officers generally did not count the seized currency; did not provide a receipt to the subject from whom the currency was taken; did not complete documents transferring custody of the currency to an evidence custodian; and did not record the receipt, transfer, or disposal of the currency in a temporary or permanent control ledger.

The DEA’s failure to either implement these controls, or document that the established controls were implemented, occurred primarily because DEA agents and evidence custodians had not received the DEA’s current training on handling seized cash. In addition, we found DEA agents were in need of additional guidance on how to document that established controls were followed.

Failure to establish effective controls for safeguarding seized cash can lead to discrepancies, accusations of theft, or misappropriation of seized cash. We identified 12 instances where either the DEA’s Office of Professional Responsibility (OPR) or the OIG’s Investigations Division investigated allegations of stolen or missing seized cash and the investigations showed that DEA personnel did not follow established controls for safeguarding the seized cash. Problems identified include agents not counting the seized cash, not providing a DEA-12 receipt to the suspect, and transporting the seized cash without a witness present.

In this report, we make the following recommendations to improve the DEA’s handling of seized cash.



Footnotes
  1. A controlled substance is a drug which has been declared by federal or state law to be illegal for sale or use, but may be dispensed under a physician's prescription.

  2. The AFP is a federal program for managing seized assets, including cash, used in crime until those assets are returned to the owner or forfeited to the government.

  3. This chart presents for each DEA Division office the number and amount of adopted cash seizures (in red), the number and amount of DEA cash seizures (in blue), and the number and amount of total cash seizures (numbers only in black). The totals may differ slightly from the sum of the adopted and DEA amounts due to rounding. All data shown is for the period October 1, 2003, through November 3, 2005, except for the Washington Division data which is for the period October 1, 2003, through September 30, 2005.

  4. Our statistical sample was derived from a sample universe of 3,705 seizures valued at $160,680,618. As previously stated, the overall universe was 16,007 seizures valued at $616 million. Appendix I includes a detailed discussion of why certain cash seizures were excluded from our sample universe based on requests from the DEA or based on the results of our preliminary testing.

  5. “Yes” means documentation showed that a witnessing agent or officer was involved. “No” means documentation showed that only one agent or officer was involved. “Could not determine” means the documentation did not provide sufficient information to confirm whether a witnessing agent or officer was involved. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 5 percentage points of what they would have been if the entire population had been tested.

  6. For the test of whether agents counted the seized cash, “Yes” means documentation showed that agents counted the cash. “No” means documentation showed that agents did not count the cash. “Could not determine” means the documentation did not provide sufficient information to confirm whether the agents counted the cash. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 5 percentage points of what they would have been if the entire population had been tested. This range varies for the statistical results of each control we tested.

  7. The DEA-12, Receipt for Cash or Other Items, is a multipurpose form used to document the following seizure actions: (1) providing a receipt to the owner or person claiming ownership of property that is seized, (2) documenting the return of property held less than 5 working days, (3) placing non-drug evidence into temporary custody, and (4) recording the short-term transfer of non-drug evidence exhibits between agents and evidence custodians or other law enforcement personnel for production in court.

  8. A seizure warrant is a written order by the court authorizing the search or seizure of property.

  9. “Yes” means documentation showed that agents provided a receipt or warrant to the owner of the cash. “No” means documentation showed that agents did not provide a receipt or warrant to the owner of the cash. “Could not determine” means the documentation did not provide sufficient information to confirm whether the agents provided a receipt or warrant to the owner of the cash. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 2 percentage points of what they would have been if the entire population had been tested.

  10. A Heat Sealed Evidence Envelope is a clear plastic bag or other suitable container used to hold seized currency or other property. With limited exceptions, the envelope or other container should not be opened until the currency is transported to a bank for conversion to a cashier’s check, or processed as an evidentiary exhibit. When an evidence container has been opened, the evidence and all parts of the old evidence container should be put in a new evidence bag or container and resealed. Details of the opening and resealing of the container should be recorded on a Form DEA-6, Report of Investigation.

  11. “Yes” means documentation showed that a witnessing agent or officer was involved. “No” means documentation showed that only one agent or officer was involved. “Could not determine” means the documentation did not provide sufficient information to confirm whether a witnessing agent or officer was involved. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus: (1) 6 percentage points of what they would have been if the entire population had been tested for the test of a witness present during sealing of the cash, (2) 6 percentage points for the test of a witness present during transport of the cash to the local DEA office, and (3) 2 percentage points for the test of a witness present during transport of the cash to the bank.

  12. Recovered Official Advanced Funds are DEA-appropriated monies previously expended for the purchase of evidence or lost through theft during undercover or similar operations that was recovered by the DEA.

  13. An evidence custodian is a DEA employee designated to maintain custody and accountability over seized property.

  14. “Yes” means documentation showed that the cash seizure tested was recorded on the HVSRM ledger. “No” means documentation showed that the cash seizure tested was not recorded on the HVSRM ledger. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 5 percentage points of what they would have been if the entire population had been tested.

  15. This control became effective on April 5, 2005. Prior to this date, the DEA’s policy required that for unknown amounts of cash agents were to transport the cash to the bank for an official count and conversion to a cashier’s check on the next business day following the seizure. If the exact amount was known, the agents were to transport the cash to the bank within 5 working days.

  16. The DEA-7a is a form for documenting the acquisition of non-drug property. The SSF is a 5-page form that includes case and asset information, names and addresses of potential claimants, and other details such as probable cause and chain-of-custody information.

  17. According to the DEA Agents Manual, temporary storage refers to a safe, locker, or other secure place. Many DEA offices have bank-style night drops or similar facilities for overnight temporary storage of high-value items such as cash. Agents are not permitted to store seized currency in locked desks, unoccupied vehicles, or hotel rooms.

  18. “Yes” means documentation showed that the agents transferred the seized cash to the evidence custodian using a DEA-12 or other appropriate form. “No” means documentation showed that the agents transferred the seized cash to the evidence custodian without using a DEA-12 or other appropriate form. “Could not determine” means the documentation did not provide sufficient information to confirm whether agents transferred the seized cash to the evidence custodian using a DEA-12 or other appropriate form. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 3 percentage points of what they would have been if the entire population had been tested.



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