How Long Do We Track Reg D Violations? by Ken Golliher and Andy Zavoina, BOL Gurus Guru Bios
Question: Should the occurrence of Reg D violations be tracked 'forever'? Or is the occurrence wiped out after a period of time, let's say for 13 months? An example: an account has one Reg D violation that happened in 2002. Are we required to retain that information in case a 2nd violation may occur in 2006?
Answer by Ken Golliher: I know of no written guidance, but have been told repeatedly that FRB examiners expect the bank to track violations of the rules against excessive activity on a rolling 12 month basis.
Answer by Andy Zavoina: The closest I have found to a written opinion is the Federal Reserve Regulatory Service. In part, it says in the Monetary Policy And Reserve Requirements —Board Rulings And Staff Opinions Interpreting Regulation D —Savings Deposits:
"Ideally, controls on excess transfers should be sufficiently flexible to address both excess transfers in nonconsecutive months as well as the level of excess transfers in a particular month. Such controls would help depository institutions distinguish inadvertent violations of the transfer limits from abuses of the transfer limits. Thus, when a customer ignores the transfer limits applicable to an MMDA, the depository institution should take steps to close the account more quickly than it would an account from which the depositor inadvertently, and occasionally, exceeds the transfer limits by a single transfer. Nevertheless, a monitoring system that would detect and prevent all excess transfers may be costly to administer. For this reason, the staff has applied a general rule that an institution may continue to consider an account an MMDA even if there are excess transfers so long as those excess transfers are not the result of an attempt to evade the transfer limits, and if the excess transfers occur in not more than three months during any 12-month period. This working rule is not absolute, however, and the facts and circumstances must be considered in each case."
Following Ken's recommendation, retaining your records for at least a 12-month period should be a requirement if you monitor on an ex-post basis. If you audit this less often than annually, I would retain your records from audit to audit. This provides a paper train so that you can follow your procedure, and verify that it was done correctly.
[Editors Note: As of 7/2/09, the separate limit of three per month for checks, POS debit card transactions, etc., has been eliminated, and those transactions are now only subject to the 6/month limit that applies to other restricted transfers and withdrawals.]
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