Based on the below, we are in a bit of a quandary in how this process would work or what requirements/guidelines there are to follow…
We have a customer that previously made cash withdrawals from their business account at our institution, and now wants to contract an ACS for their cash needs. An explanation of this service from the customer indicates that an ACH withdrawal from the customer's business account would be made as payment to the ACS, and the ACS would make the cash shipment(s) to the customer's location (the ACS never visits our institution and cash transactions would not be made at our institution). The ACS would be contracted independent of our institution, with the relationship directly between the ACS and our customer. The ACS informed the customer that a CTR would not need to be filed if the transactions were conducted this way.
We contacted FinCEN and were provided a response indicating that, as part of our KYC, our institution is responsible for proactively and retroactively knowing that a customer has a contract with an ACS, and we are responsible for obtaining ‘receipts of delivery’ on which CTRs would be filed by our institution. When asked for guidance or a ruling for reference none was given except that it was part of the institution’s KYC responsibility and that ACS’s are not FIs.
Has anyone else encountered a similar situation? If so, what processes do you have in place and how do you obtain the information from your customer or the ACS regarding the cash pick-ups or deliveries?
Any feedback would be greatly appreciated!

I may be out in left field here, but wouldn't this activity negate the ACS exemption from being a money transmitter under 1010.100(ff)(5)(ii)(D), because they no longer have a strictly custodial interest in the currency? They are in fact accepting funds that substitute for currency and then providing currency. As such, they would be an MSB.
Beyond that objection it sounds like a great way for the ACS and the customer to facilitate money laundering. And you state they are advising the customer a CTR would not have to be completed; thats sets all kind of alarm bells off in my head.

How in the world would you file CTRs for cash transactions when the cash is coming from a different source? I could see if the ACS were under contract with the bank to deliver cash to the customer - but the way you've stated it, you are so far removed from the transaction it makes little sense for you to be completing the CTR. Is this a reputable ACS or is it Walt and Jessie's ACS? I'll be interested to hear what others have to say about this...

Thank you both for your replies. We came to the same conclusions as you did when doing our analysis. I specifically brought up the ACS money transmitter exemption to FinCEN, as well as, the fact that no cash comes in or leaves our institution, both to which I received the answers I described above. FinCEN's response perplexed us because we cannot find anything to substantiate our institution filing a CTR on a cash transaction that does not happen through our institution. Also, the red flags certainly went up on our end which is another reason why we were digging to find if/where a CTR would be filed on these transactions. I can appreciate the Breaking Bad reference, but the armored car service is a reputable one.

The FIN-2014-R010 Ruling on their website seems to be quite clear about the scope of the exemption provided to armored cars. Actually they state it's a narrow one and give very specific qualifications in the ruling. It's too long of a ruling to post here, but it seems rather clear that this sort of activity is not part of the exemption.

As a follow-up, I reached back out to FinCEN yesterday and pointed out another section of the FIN-2014-R010 Ruling: "Because the scope of the exemption is narrow, a currency transporter would be deemed a money transmitter, under a variety of models, including the following circumstances... The currency transporter combines the physical transportation of currency with other means of transmission, such as an electronic transmittal of funds..." This is exactly the situation that has been explained to us by our customer and it would appear the ACS has put themselves in position to be considered a money transmitter. We have not heard back from FinCEN yet.