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"First Wave" Exemptions-Timing Clarified
FinCEN released the rule for the "first wave" of exemptions last year, which specified that under the BSA regulations, if a financial institution wished, it could exempt from the requirement reporting transactions in currency in excess of $10,000 between depository institutions and certain classes of "Exempt Persons." ("Exempt Persons" were defined as: another bank; any Federal, State or local government or government agency; any entity exercising governmental authority within the U.S.; any corporation traded on the New York, American, or NASDAQ stock exchanges;a consolidated subsidiary of any of the publicly traded corporations.)
The Rule went on to state that one "$0" Form 4789 was to be filed for each "person" the financial institution wanted to exempt ".…on or before the later of August 15,1996 and the date 30 days following the first transaction in currency between such bank and such exempt person that occurs after April 30, 1996."
That statement seems to have caused some confusion! The question has arisen as to whether, under this rule, a financial institution is permitted to designate as an exempt account the eligible "person" who was a customer of the exempting institution before May 1, 1996, but did not have the "$0" exempting 4789 filed by August 15, 1996.
In February FinCEN issued a notice that clarified the meaning of the language of 31 CFR 103.22(h)(3)(i), effective retroactively to May 1, 1996, by stating explicitly that the necessary designation, even for existing customers, may be made after August 15, 1996, as long as it is made no later than 30 days after the first transaction in currency that is sought to be exempted from the reporting requirements under the terms of 31CFR103.22(h).
An easier translation might be - File a "$0" CTR within 30 days after you filed the last CTR on an over $10,000 cash transaction. If you still haven't filed the "$0" CTR beyond 30 days after the last filed 'over-$10,000', you may or may not have to file additional CTRs-that will be clarified by FinCEN. For example, if you decide to exempt a customer, file what you considered to be the last 'over-$10,000' CTR for a transaction, and then 50 days later file the "$0" CTR, you may have to file 20 days worth of CTR's (from day 31 to the time you sent the "$0" CTR) not covered by the time frame of the rule. If this should occur, you may have a difficult time with your examiner. FinCEN will more than likely comment on this eventuality in a future release.
However, the message in the current release, clear or not, is that an institution may now decide that it wishes to exempt particular, existing customers, even if it did not do so before August 15, 1996-so long as the criteria are met, and the necessary exemption identification (read "$0" CTR) is filed within 30 days of the time the institution's reliance on the exemption is to take effect.
Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 5, 4/97
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