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FinCEN Issues Final Rule On Exemptions
October 21, 1998 is "Hooray Day!"
The Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) gave us a final rule in September that represents the second part of the effort to significantly reduce the number of times depository institutions must report large currency transactions. Like an earlier rule aimed at larger bank customers, this rule further simplifies the way banks can exempt large currency transactions by retail and other businesses from the reporting requirements. The two rules reflect a major effort to re-engineer rules that have been in place for over 25 years.
Many times the reporting requirement of all transactions over $10,000 includes those transactions that are not of interest to government investigators. The reporting on cash intensive businesses has long been a frustrating chore for bankers, and one on which we have been vocal in our objections. This rule is aimed at exemption of non-public companies, especially smaller businesses, which represent the majority of reports filed today.
Has To Be Your Customer One Year
It permits financial institutions to exempt a domestic business that has routine needs for large amounts of currency by simply filing a form stating that the business is exempt, so long as the business has been that bank's customer for one year. The rule thus eliminates earlier cumbersome and costly procedures (annual reviewing of balances, monitoring, etc.) that required a great deal of paperwork before an exemption could be authorized.
This rule does not exempt us from reporting suspicious activity involving exempted entities. In addition, certain categories of businesses, such as real estate brokers, automobile dealers, and money transmitters, may not be exempted.
The rule applies to all depository institutions, banks, thrifts, and credit unions - but not to other financial institutions. Banks have until July 1, 2000, to phase in compliance with the simplified procedures, although they may adopt the procedures for customers beginning on October 21, 1998.
Renew Exemption Every Two Years
The exemption of the businesses covered by the new rule must be renewed every two years. But remember the proposal that said we had to know exactly how much cash was going in and out of the account every year? Gone! The proposal that banks include information about a customer's total currency transactions on the renewal form has been eliminated as unduly burdensome and unnecessary. Now financial institutions must simply indicate that they have maintained a system of monitoring the transactions in the account for reportable suspicious activity.
The first phase created a streamlined exemption procedure that eliminated from reporting all transactions in currency between banks and certain classes of exempt persons. That rule exempts banks from reporting transactions in currency involving (1) other banks operating in the United States; (2) government departments and agencies, and other entities which exercise governmental authority; (3) companies listed on the major national stock exchanges; and (4) subsidiaries of such listed companies. This second phase now expands the exemptions to our local, small, cash intensive businesses.
There were over 12 million Currency Transaction Reports filed in 1997. FinCEN anticipates that the implementation of the procedures in the two exemption regulations could lead to decreasing the CTR filings by more than 30% - which would mean about 4 million fewer forms to be completed by our people. That really calls for a "Hooray Day!"
Copyright © 1998 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 8, No. 10, 9/98
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