Get Going on Interim Exemptions

A lot of banks are biding their time and watching FinCEN instead of plunging in and exempting customers using the interim procedures. Banks offer a variety of excuses for their delay.

One of the deterrents to implementing the interim procedure is that the new procedure would generate an immediate need for training. The extent to which training issues dictate the choice will depend on the bank's size, structure and resources.

A second reason offered for postponing implementation is: why switch to a system that might change again? This position holds little merit, according to Pam Johnson, Assistant Director, Compliance, at FinCEN. Johnson stresses that the interim exemption procedure is the beginning and core of the process that will become permanent. The interim procedure identifies the "no brainers" that will definitely be part of the final system. She therefore predicts no change from the interim process, only expansion. Johnson also stresses that the next phase in the exemption is not imminent. Waiting for the final rule may be a long wait. In the meantime, the bank that chooses to wait loses the opportunity to use the new streamlined exemption process.

The real drawback to waiting for a "final" rule is that FinCEN is waiting too. The interim rule is a testing period. The final rule will be based on this experience. If not enough banks participate in the interim process, any final rule will be delayed.

Using the new process doesn't cut off the existing procedure. It is not necessary to make a total switch to the new system. Banks may comply with both systems at the same time. The interim exemption process, using a $0 CTR can be used in conjunction with the traditional exempt list procedure. However, when a bank uses the old procedure for exempting a customer, the bank must fully comply with those requirements. That includes setting exempt limits for each account, identifying days of the week for exempt limits, and regularly reviewing the customer's account activity to evaluate the exempt status. In deciding whether a company is exempt or not, FinCEN wants to be as inclusive as possible. The exempt status of many companies will be clear. Identifying the subsidiaries may not be as easy. For these gray situations, Johnson recommends reasonableness and common sense. FinCEN's goal is to be as inclusive as possible. However, the institution should have something to rely on before identifying the company as exempt. This means that there will need to be an established process within the bank and some documentation of what steps were taken to identify a company as exempt.

ACTION STEPS

• Plunge in and file a few $0 CTRs. Test the system and see how it works.
• Determine what procedures you will need for identifying exempt customers, filing $0 CTRs, and maintaining records of companies that are exempt.
• Determine the best way to maintain a current list of exempt customers for staff responsible for filing CTRs.
• Review your existing exempt list. Sort out the customers that can now be treated as automatically exempt and those which must still be treated under the old rule. Measure the extent to which the interim procedure will shorten your list. Look for ways to > Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 13, 8/96