Back-filing CTR Instructions
Answer by Ken Golliher, BOL Guru Guru BIOS
Question: Are there instructions and forms for back-filing CTRs and specific information or examples as to when back-filing is required?
Answer: I am not aware of any FinCEN resource that discusses backfiling. FinCEN generally addresses it on a "case by case" basis. The following is compiled from a recent thread to which Retread and others were substantial contributors.
"backfiling" is the term usually used in the circumstance where a bank has failed to file one or more required currency transaction reports. (Failure to file even a single currency transaction report is a significant violation.) In essence, the bank is attempting to decide whether it is necessary to file the forms late (backfile) or whether a formal waiver from backfiling can be obtained.
The possible need for backfiling generally arises in three circumstances:
* Due to an internal error or oversight, a bank fails to file a CTR on a customer that does not meet the definition of an "exempt person" under phase I or phase II of the BSA regulations. Oftentimes the error is discovered in a routine audit.
*A bank has mistakenly recognized a customer as an exempt person by filing a Designation of Exempt Person form under inappropriate circumstances. Accordingly, one or more CTRs required by law were not filed.
*A bank has correctly recognized a customer as an Exempt Person under Phase II, but it has failed to file a biennial renewal of the form. In essence, the exemption lapsed and one or more CTRs required by law were not filed.
In the first example, a simple failure to file where there was no confusion regarding the customer's exemption, backfiling is essential. There is no possibility of a waiver. The missing CTRs should be filed as soon as possible. The general suggestion is that you attach a memo to your file copy explaining how the error occured, how it was discovered and what steps were taken to assure that it will not happen again. (Some would attach the memo to the forms themselves, but in Detroit they are seen only by clerical personnel and my assumption is they do not care - the memo attached to the file copy will be of interest to regulatory personnel and auditors.)
In the second example, there simply was no exemption because the customer never met the example of an exempt person. For example, the customer is a private school, but the bank filed a Designation of Exempt Person Form. Regardless of the filing, the customer is not an exempt person - all of its transactions were reportable and each missing CTR is a violation of law.
In the third example, an exemption was properly granted; i.e. the customer met the definition of an exempt person under Phase II and the Designation of Exempt Person form was properly filed. However, a Phase II exemption must be renewed on a biennial basis. If it is not renewed the exemption expires. The customer is no longer recognized as an exempt person - all of its transactions were reportable and each missing CTR is a violation of law.
In the second and third scenarios, a bank should contact FinCEN at 800.800.2877 and ask for assistance in making a "backfiling determination." FinCEN will send a form with instructions for the bank to follow. The one sent to one of my clients was called "Depository Institution Check List (sic) for backfiling Determination." It showed a Revision date of 8/00. The form is "casual" at best; it is a multi-generation photocopy.
The form asks about the time frame in which CTRs were not filed and asks for an estimate of both the number of CTRs involved and the time that would be necessary to backfile them. It also asks about the accountholder. Questions include a general query on the nature of the accountholder's business, but there are also specific questions about whether the account holder is a Western Union agent, sells money orders, cashes checks, etc.
The bank is instructed to complete the form and file it promptly. In response, Treasury will issue a backfiling determination instructing the bank as to whether backfiling is necessary. Whatever that instruction is, the bank should follow it. Whether the bank is told to backfile or is granted dispensation from backfiling, involving FinCEN in the process is absolutely critical. Acting in accordance with FinCEN's specific instructions should prevent the bank from being criticized in subsequent examinations.
Mistakenly failing to file a CTR might be classified as negligent. Deciding not to file a CTR just because it would be late is not negligence. It is intentional, and triggers considerations of criminality and much larger fines.
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