A lack of transparency and limited verification processes involved in the U.S. FAA aircraft registry have made it vulnerable to fraud and abuse involving money laundering, drug cartels, and other criminal activity, the Government Accountability Office (GAO) said today. The government watchdog’s results of its investigation into the registry found that the “FAA needs to better prevent, detect, and respond to fraud and abuse risks in aircraft registration.”
Conducted at the behest of the U.S. House national security subcommittee, the GAO study looked into fraud and abuse of the registry and the extent of enforcement involving such activity. Nearly 300,000 civil aircraft are currently in the registry. The FAA relies on self-certification of registrants, and a GAO review found that under the process, the agency typically does not verify applicant identity, ownership, and address information. According to the GAO, other vulnerabilities come with the use of opaque ownership structures such as trusts.
A review uncovered numerous cases of fraud and abuse, some of which were discovered through joint FAA and DEA efforts. These include an aircraft that remained on the registry for a couple of years from entities that had ties to the notorious Sinaloa drug cartel in Mexico. Another case involved an aircraft broker that had fraudulently registered 20 aircraft with forged signatures in a multi-million-dollar bank fraud scheme. Still, other cases involved registrations with phony addresses and falsified identities, among other issues.
While the FAA uses some registry information to detect fraud and abuse risk, the format limits the usefulness of the data, the GAO added. For example, data on trustors and beneficiaries are not easily accessed.
The GAO believes the FAA has an opportunity to strengthen this system as it modernizes its information technology system, including building in data analytics capabilities that could flag potential fraud in abuse. Further, the FAA, which already is coordinating with the Departments of Justice and Homeland Security, can strengthen what the GAO called is now informal cooperation.
In all, the GAO issued 15 recommendations on improvements to the aircraft registry system, from developing risk mitigation actions and adding checks into the system to conducting basic verifications. The watchdog further recommended an increase in the registration fees of $5 (or $10 for dealers) to provide the necessary resources to better vet the registry. The FAA already has begun to address many of the recommendations.