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FinCEN'S CTR First Exemption Rule Final
Second Rule Proposed-Bankers Urged To Comment!
Tier One: Final
FinCEN has finally closed the regulatory process related to the "first tier" of Currency Transaction Report (CTR) exemptions, previously known as "mandatory exemptions."
The final rule exempts banks and customers who fall into one of the classes of exempt persons-defined as banks whose transactions and banking domestic operations are in the U.S.; departments and agencies of U.S. governments-federal or state-or any government authority; and corporations whose common stock is listed on the NYSE, ASE or has been designated NASDAQ, including franchises if at least 51% of the common stock is owned by the listed entity.
In order to exempt a customer, the financial institution has to file a one-time "$0" CTR, and ensure that Suspicious Activity Reports (SARs) are still filed on possible violations of law by these exempt persons.
Tier Two: The Proposal
The second phase of FinCEN's attempt to further reduce the number of CTRs filed is now out for comment.
First it proposes two classes of "exempt persons."
- "Non-listed businesses"-basically commercial enterprises that were formally eligible for either a unilateral or special exemption under the current system.
- "Payroll customers"-meaning those U.S. residents who regularly withdraw more than $10,000 cash to pay their U.S. employees in currency.
As in Tier One exemptions, Tier Two customers must also have been your customer for at least 12 months before being considered eligible for exemption.
Additional Paperwork
There are three new paperwork requirements for any financial institution wishing to take advantage of the new Tier Two exemption system.
First is the filing of a "Designation of Exempt Person" form ("$0" CTR filing) as is the case with Tier One exemptions.
Second is the filing of a projection of the customer's annual currency needs-literally "guessing" how much cash your customer will deposit and withdraw during the next year.
Third, and the most cumbersome, is an annual filing covering three areas: (1) a confirmation of the continuing eligibility of the customer to be exempt; (2) a listing of the aggregate actual currency deposited AND the actual total amount withdrawn in cash by that customer during the last year; and (3) any changes you know of (or should know on the basis of your records) regarding the ownership or control of the account.
(Note from editor: At one conference we asked what range would be allowed on the "accu-guess" of the amount deposited or withdrawn…and if it would be considered a violation if the projections were too far out of range. The answer from the regulators and from FinCEN was they didn't know what the "range" might be, and certainly there would be a possibility that if it was too far out of range…well…they'd have to look into that…)
There are other operating rules, illustrated in more detail in the proposal, that are important to financial institutions and should be reviewed. The proposal is available through FinCEN (Phone: (202) 622-0400) or is in the Federal Register Vol. 62, No. 173, page 47156, Monday, September 8, 1997.
90 days and counting…
Once the 90 days comment period is up on December 8, FinCEN will issue a final rule on the Tier Two exemptions. Once that final rule is issued, your present discretionary exemptions will not be allowed. You must exempt under the new requirements.
The initial reaction to the Tier Two proposal we're getting from all over the country is, "No way!" The proposal solves no regulatory reduction, it involves more paperwork and time, and almost unanimously, bankers tell us they're not going to use this system for exemption. They'll just file the CTRs. Worse yet, many of the agents working in the agencies pushing for this information tell us they really don't want it and won't use it!
But make no mistake-if you don't speak up, object, complain, suggest, whatever-what you just read is what you'll have to work with! BANKERS' HOTLINE advisor John Byrne has offered his services as ombudsman for our readers. Let him know what you think about the proposal! The best way, of course, is to write.
Fax, if you wish. Email…or at least call!
John J. Byrne, Sr. Counsel & Compliance Mgr.
American Bankers Association
1120 Connecticut Ave. N.W.
Washington DC 20036
FAX: (202)828-5052
Phone: (202)663-5029
email: jbyrne@aba.com
CORRECTION
We said, "As in Tier One, Tier Two customers must be your customer for twelve months before being eligible to be exempt. Tier One customers, those listed on the stock exchanges, etc., DO NOT have to have a twelve month history to be eligible. They are eligible at the time of opening. The proposal for Tier Two is that you have the twelve month relationship. We apologize for the error.
Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 10, 8/97
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