I have an exemption question.

Businesses ineligible for exemption include businesses "serving as financial institutions or agents of financial institutions of any type".

Would non-bank financial institutions (which includes insurance companies) fall into the definition of financial institution?

If the answer is yes, to take it a step further, would an insurance agency be ineligible for exemption (since they would be acting as an agent of a financial institution)?

Is the owning FI "listed"? If so, is the said insurance company owned by at least 51% of the "listed" FI? If both of those criteria are met, then you would be able to exempt. Or if the insurance company is listed on the stock exchanges.
BUT, if the insurance company provides any investment advisory services or investment banking services then they are ineligible for exemption.

pg. 81, 2007 FFIEC BSA/AML Manual - -
Any entity (other than a bank) whose common stock is listed on the New York, American, or NASDAQ stock exchanges (with some exceptions).
Any subsidiary (other than a bank) of any "listed entity" that is organized under U.S. law and at least 51 percent of whose common stock is owned by the listed entity.

The insurance agency sells policies to a specific market - those in need of month-to-month auto policies and Mexico insurance policies. They also do offer renters insurance policies. To be honest, most (not all) of the insurance companies they sell for are not recognized names (at least not by me).

Does the fact that they are an agent selling insurance policies for insurance companies, make them ineligible for exemption? This theory would be based on the fact that insurance companies are listed in the FFIEC manual as non-bank financial institutions and "businesses serving as financial institutions or agents of financial instituions of any kind" are ineligible for exemption (if they meet the 51% rule which obviously they would).

We just talked with a banking expert that says the agency would be ineligible. I'm looking for further confirmation that this is correct.

Assuming your insurance agency is a separate legal entity (easily done since it sells for several different companies), it would make no difference who the insurors were or whether they were publicly traded. Your customer is the agent, not the insuror. Phase I is out.

Phase II would be possible only if no more than 50 per cent of their gross revenues are derived from their activities as an agent for financial institutions. If that's not the case, phase II is out.

It sounds as if you agree with the advice you received. So do I.

Drawing on ancient history, this sounds like what used to be called a "debit agency," they sell to people of limited means and collect their premiums in person every week or month, oftentimes in cash. Even if you determine they are technically eligible, it would be a judgment call to recognize them as an exempt person; I would rather file the CTRs.

Ken,

One final bit of info - we had already exempt them. I plan to immediately revoke the exemption and begin filing CTRs. But you have me curious - what technicality might make them eligible? As you might guess, I feel we are in the position of needing to get a backfiling determination.

Many, many thanks for the input.

Sorry, I now see what you are saying - they may have been eligible if no more than 50% of their gross revenues were derived from their activities as an agent for financial institutions.

Sorry, but I do think you need to explore seeking a backfiling determination.

QUICK SOAP BOX APPEARANCE AND THEN WILL QUICKLY STEP DOWN.

The IRS did determine that we needed to backfile on the insurance agency which is done and over with.

TODAY, this guidance came out and I don't even know if it would change the outcome of my particiular situation (since we were dealing with an insurance agency and not an insurance company) but I'm just amazed at how complicated this stuff can be (I don't think I'm alone)!!! I'm not going to spin my wheels trying to figure out if we were o.k. in the first place (hmm, our customer determined ineligible due to acting as an agent of an FI but wait! If an insurance company is really not an FI, then would the agency possibly be eligible? Oh, but the agency sells for numerous companies...would the bank need to determine if all the insurance companies were eligible hence making the agency eligible???).

Will just continue to file CTRs and move on but hopefully the guidance will prove helpful to some!!!! (maybe those who bank the actual insurance company)

http://www.fincen.gov/statutes_regs/guidance/html/fin-2008-r013.html

Just be aware that the guidance was actually written in December, before the latest revisions to §103.22 were effective. The changes don't affect the guidance itself, but the references in the guidance document to §103.22(d)(6) should really be to §103.22(d)(5) now.