Removing Another "Brick" from the Wall: The New CTR Form
by John J Byrne
In keeping with its promise to reduce unnecessary Bank Secrecy Act (BSA) requirements, Treasury's Financial Crimes Enforcement Network (FinCEN) recently issued the long-awaited revised Currency Transaction Report (CTR) or Form 4789.
In announcing the revision, FinCEN Director Stanley Morris pointed out that in the 25-year history of the BSA, this is the first time that "the form has been revised to reduce the amount of regulatory information required." Thus it removes another "brick" from the wall of regulations banks face.
More importantly, Morris declared that the changes to the cash reporting form are "mutually beneficial to law enforcement and the financial community because [they focus] on the quality of information rather than the quantity."
Just how did these changes occur and what will be the impact of a newer, more streamlined CTR on bankers?
Most readers who have responsibility for BSA compliance know the law was created in 1970, and reporting requirements were instituted in 1972. They know that reporting is required for all cash transactions over $10,000 and that the reports are sent to the Internal Revenue Service in Detroit, Mich. What they also know, however, is that the reporting has become a burden because of the information required to be included - information that too often serves no purpose to law enforcement officers.
By 1996, the number of reports filed in Detroit is projected to top 92 million. This is a situation that has been termed "unacceptable" by bankers, law enforcement and Congress.
In effect, the flood of CTR information is obstructing the ability of the government to investigate and analyze suspicious activity data.
The Mandate to Make Major Changes
While there have been several changes or revisions to the CTR over the years, the need to substantially revamp it became apparent only recently.
In 1992, ABA wrote to Peter Djinis, then-director of the Office of Financial Enforcement, suggesting simplifying the CTR and creating a private sector group "to assist the government in developing a new form."
The group - the Bank Secrecy Act Advisory Group was created by the 1992 Annunzio-Wylie Anti-Money Laundering Act and part of its mission was to offer advice on revising the form.
The need was apparent. The General Accounting Office (GAO), in a statement entitled "The Volume of Currency Transaction Reports Filed Can and Should be Reduced," had told the Senate Banking Committee that "between 30 and 40 percent of the CTRs filed are reports of routine deposits by large, well-established retail businesses."
GAO concluded that these CTRs "impose costs on the government and the nation's banking industry, but they are unlikely to identify potential money laundering or other currency violations." The agency's view was echoed by ABA, many law enforcement field agents and members of Congress. Senator Richard Bryan (D-Nev.), in a March 15, 1994, hearing on what was to become the Money Laundering Suppression Act of 1994, stated that some CTRs "clog up the system so much that law enforcement doesn't have the time to properly scrutinize those transactions singled out as suspicious." With the broad support of everyone involved, Congress passed the 1994 Act with the following provision:
"Streamlined Currency Transaction Reports - the Secretary of the Treasury shall take such action as may be appropriate to redesign the format of reports required to be filed by any depository institution under section 5313 (a) of title 31, United States Code [the Bank Secrecy Act], to eliminate the need to report information which has little or no value for law enforcement purposes and reduce the time and effort required to prepare such report for filing by any depository institution under such section."
The mandate to change the form was clear. After accepting comments from the Bank Secrecy Advisory Group and from various individual bankers, consultants and agency officials, FinCEN unveiled its new CTR in May 1995.
What Are the Changes?
The new CTR reduces by 30 percent the amount of information required to be recorded.
FinCEN believes that information from the existing CTR that was difficult to complete, redundant and/or of limited value to law enforcement was eliminated.
Let us review the major revisions.
- Suspicious Transaction Box Deleted - In response to much concern by bankers about the uncertainty of what the appropriate method to report suspicious currency transactions was, the new form deletes the suspicious transaction box.
According to the instructions, the CTR "should NOT be filed for suspicious transactions involving $10,000 or less in currency OR to note that a transaction of more than $10,000 is suspicious." FinCEN indicates that a new criminal referral form (or whatever title the revised form is eventually given) will be the mechanism for reporting suspicious transactions.
The instructions go on to note, however, that if a transaction is suspicious "and in excess of $10,000 in currency, then BOTH a CTR and the appropriate referral form must be filed."
- Identification Requirements Simplified - The new form changes the identification requirements to state that identity, rather than name and address, be verified.
This change will permit the acceptance of additional identification documents such as passports that do not include addresses.
Acceptable forms of identification are specifically listed in the instructions and include "a driver's license, military, and military/dependent identification cards, cedular card (foreign), non-resident alien identification card, or any other identification document or documents, which contain name and preferably address and a photograph and are normally acceptable by financial institutions as a means of identification when cashing checks for persons other than established customers."
- Multiple Persons - On the new form, item 1b. is to be checked if the transaction is being conducted by more than one person or on behalf of more than one person. The old form contained four separate boxes for noting multiple persons.
- Reversal of Part 1 and Part 2 - One of the major changes that may take some getting used to is the reversal of the Part 1 requirements.
The old form mandated that the identity of the individual who conducted the transaction be recorded first. The new CTR reflects the importance that the government places on knowing on whose behalf the transaction was conducted.
Now, Part 1 covers all of the persons involved in the transaction with Section A to be filled out for the persons) on whose behalf the transactions) is conducted and Section B for individuals) conducting transaction(s) (if other than those noted in Section A).
Section A must be completed but there are several instances where Section B can be left blank (i.e. if an individual conducts a transaction on his own behalf).
- Doing Business As (DBA) - According to the instructions, if a bank has knowledge of a separate "doing business as" name, it must be entered in item 5. For example, Johnson Enterprises DBA PJ's Pizzeria.
- Deletion of Amount in $100 Bills or Higher - One of the major time-consuming requirements deleted by FinCEN is the box (formerly item 36) that instructed banks to enter the amount of a transaction that is in denominations of U.S. currency of $100 or higher.
Treasury Under Secretary Ron Noble has long complained about this onerous requirement, and the Money Laundering Task Force coordinated by the Treasury recommended its deletion in early 1994.
- Explanation of Whether Transactions Meet the Reporting Threshold - The new form will make the process easier for security officers and others responsible for BSA compliance by giving many examples on the instructions of whether or not a particular transaction meets the reporting threshold.
For instance, the first example states that if. A person deposits $11,000 in currency to his savings account and withdraws $3,000 in currency from his checking account, the CTR should be completed as follows:
Cash In: $11,000; No entry for Cash Out. This is because the $3,000 transaction does not meet the reporting threshold.
There also are explanations for how to determine whether account numbers are affected. These kinds of efforts are designed by FinCEN to assist bankers that frequently call with form questions.
- Requiring Only One Signature - Another useful change is elimination of the requirement that the CTR preparer sign the form.
The preparer's name must be listed on the form (and also can be the person to contact with questions) but no longer must the preparer sign the CTR. The only signature required is that of the approving official. However, the form states that the "preparer and the approving official may not necessarily be the same individual."
Overall, the newly revised CTR is shorter, clearer and simpler to fill out.
Pamela Johnson, Assistant Director of FinCEN's Office of Financial Institution Policy has done an excellent job of gathering comments on the form from all interested parties.
As the statement accompanying the form reads "[t]he revised CTR requires only basic information, such as who conducted the transaction, on whose behalf it was conducted, the amount, a description of the transaction, and where it occurred."
Bank security officers and other interested parties can receive copies by calling (800) 829-3676 or by contacting ABA.
It is important to note that this advance copy cannot be used until October 1, 1995. FinCEN is drafting additional guidance on how to complete the form, so if you have questions call FinCEN at (800) 949-2732.
Also, security officers and others considering filing CTRs magnetically should be advised that specifications will be issued by the IRS Detroit Computing Center.
Questions on magnetic filing should be directed to the IRS Detroit Computing Center, ATTN: CTR Magnetic Media Coordinator, P.O. Box 33604, Detroit, MI 48232-5604.
FinCEN's efforts to remove "bricks" from the regulatory wall are continuing to prove the agency's commitment to a more streamlined Bank Secrecy Act.
The new CTR is a prime example of this commitment. It is also a prime example of what happens when the banking industry answers a call by the government for input. We must continue to provide that input whenever and wherever we can.
Copyright © 1995 Bank Security & Fraud Prevention. Originally appeared in Bank Security & Fraud Prevention, Vol. 2, No. 7, 7/95
First published on 07/01/1995