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#10787 - 02/22/02 09:50 PM BSA
Anonymous
Unregistered

I have a customer who has three businesses each with a separate EIN. If I aggregate all of the accounts (as a single account) to apply the exemption provisions to the non-listed eligible customer, am I correct to file an exemption form for each business with its distinct EIN? Thanks a lot.

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General Discussion
#10788 - 02/22/02 10:28 PM Re: BSA
BrendaC Offline
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BrendaC
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Sweet Home AL
If they have separate EINs, it would appear to me that they are separate businesses and should not be aggregated for exemption purposes. Each should be exempted on its on merits.
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#10789 - 02/22/02 11:05 PM Re: BSA
Anonymous
Unregistered

Didn't FINCEN say that a bank may aggregate all customer accounts to apply the exemption provisions to a customer?

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#10790 - 02/22/02 11:12 PM Re: BSA
BrendaC Offline
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BrendaC
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Sweet Home AL
Yes. The way I understand the rule is that you could combine all three accounts if they were for the same "person" (that is, the same business). If each business has a different EIN, I don't think they are the same business.
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#10791 - 02/23/02 04:22 PM Re: BSA
Anonymous
Unregistered

So are you saying that if John Smith has three businesses with different names then a single exemption could not be made for all accounts?

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#10792 - 02/24/02 02:00 AM Re: BSA
Elwood P. Dowd Offline
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Elwood P. Dowd
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Next to Harvey
BSA regulations at 31CFR 103.11 (z): Person. An individual, a corporation, a partnership, a trust or estate, a joint stock company, an association, a syndicate, joint venture, or other unincorporated organization or group, an Indian Tribe (as that term is defined in the Indian Gaming Regulatory Act), and all entities cognizable as legal personalities.

So, if one individual owns two corporations and an LLC, that makes a total of 4 "persons" under the law. If one individual operates three sole proprietorships, there is only one "person" under the law. Multiple EINs seem to indicate different persons, however, an individual may use her SSN or a single EIN for an unlimited number of sole proprietorships. Alternatively, she may use a different EIN for each.

Account names and TINs are not reliable indicators as to the number of entities involved. Look at the documentation for each account.

Brenda is right. Each person must be meet the definition of an "exempt person" under its own merits. You cannot aggregate the activity of separate entities solely because they are commonly owned. Each corporation, LLC, partnership or individual either meets the definition of an exempt person or it doesn't.

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#10793 - 02/24/02 05:50 AM Re: BSA
Anonymous
Unregistered

I found this on Kirchman.com. It is titled
"Rules For Business CTRS Clarified. In the last paragraph they give a statement of the ruling that appears to explain how multiple businesses are not operated separately for CTR purposes.

I can't remember if I found this under Hot Issues or Executive Alerts.

I'm interested in how others view this.
Thanks


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#10794 - 02/24/02 02:31 PM Re: BSA
Elwood P. Dowd Offline
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Next to Harvey
The reference is to FinCEN ruling 2001-2: http://www.treas.gov/fincen/fincenruling2001-2.pdf

While the ruling concerns filing, not exemption from filing, the concepts are the same: "The mere fact that separately incorporated businesses are owned by the same person does not itself trigger the requirement to aggregate currency transactions involving multiple businesses for the purpose of 31 CFR 103.22."

The ruling goes on to say that if the businesses are not actually operated "separately and independently," aggregation may be appropriate. Please note, the ruling only provides guidance on an exception - it clearly indicates that the rule is that activities of separate entities are not subject to aggregation solely due to common ownership.

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#10795 - 02/24/02 02:55 PM Re: BSA
Richard Insley Offline
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Toano, VA
I agree with Ken--you have different aggregation standards for exemptions than for CTRs. The exemption rules hinge on the entities owning the accounts. The CTR rules begin there, but also include any "umbrella" entity that owns or controls the others--this could even include the person who walks the deposits into the bank.

Taking this a step beyond CTRs & exemptions, for SAR purposes, you would certainly be expected to monitor the behavior of a group of businesses under common ownership or control.

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#10796 - 02/25/02 04:12 PM Re: BSA
David Dickinson Offline
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David Dickinson
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Central City, NE
I think that Ken and Richard are correct. For instance if I own 2 S-corporations, you must look at each separately for exemption purposes. However, if I come into your bank and deposit $6000 cash into my personal account and one of the corporate accounts, you should aggregate this info (if you have "knowledge" of it) for CTR filing purposes. See the FDIC's FIL 70-95 (10/12/95) for more information on aggregating multiple transactions.
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#10797 - 02/25/02 06:41 PM Re: BSA
Anonymous
Unregistered

I was thinking of FINCEN's operating rules from 98 that said "a bank may aggregate all customer accounts to apply the exemption... to that customer. It continued with "the word shall has been changed to may, to provide a bank with the option of exempting a customer on a bank-wide basis and counting all accounts to determine, for example, whether a customer's cash cash withdrawals or deposits exceed $10,000." 103.22 (d)(6)(v)
What I hear you saying is that this would translate into to a customer's account (an individual, corporation, etc.) instead of customers' accounts.

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#10798 - 02/26/02 12:17 PM Re: BSA
Elwood P. Dowd Offline
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Next to Harvey
The key to the original question on exemptions focuses on what is the definition a "person."

Your customer's 3 businesses, what is each one, a corporation, partnership, LLC, or sole proprietorship?

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#10799 - 02/26/02 02:52 PM Re: BSA
Anonymous
Unregistered

The restaurant is incorporated and uses a trade name. The other two appear to be sole proprietorships. The CTRs have been filed by recording each business separately in section A and the owner in section B.

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#10800 - 02/26/02 04:01 PM Re: BSA
Elwood P. Dowd Offline
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Next to Harvey
For the restaurant, the corporation is the potential exempt person. Conduct a documented review of all of the corporation's accounts to establish the frequency of large currency transactions. Per the regulations, document the fact that it has had a transaction account with you for more than 12 months and that it is authorized to do business in a state or the United States. If it meets the standards, you can file the Designation of Exempt Person on the corporation. All of the corporate accounts you review are covered by the exemption.

On the other two accounts, the individual is the potential exempt person. Verify that the business activities are not on the ineligible list. Conduct a documented review all of his sole proprietorship (business purpose) accounts to establish the frequency of large currency transactions. Per the regulations, document the fact that the individual has had a (business) transaction account with you for more than 12 months and that the businesses are authorized to do business in a state or the United States. If it meets the standards, you can file a Designation of Exempt Person on the individual. (Per your original post, you will have two DBAs and two EINS, so you will attach a second sheet.) All of the business accounts you reviewed are covered by the exemption.

Please note, it is the individual who is being exempted in the second example; e.g. the instructions to the form ask for the individual's last name as the exempt person. Thus, if he opens a third sole proprietorship you can amend the second exemption to include that activity as well. If he establishes a new corporation and it opens an account with you, you will analyze it as a potential third exempt person, completely separate from the other two.

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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

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#10801 - 02/26/02 04:27 PM Re: BSA
Richard Insley Offline
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Richard Insley
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Toano, VA
It's important to note that individuals are not exemptable, but sole proproprietorships are. Make it clear that you will be exempting "Joe Blow, sole proprietor."
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#10802 - 03/07/02 09:08 PM Re: BSA
Anonymous
Unregistered

Ken, you state "it is the individual who is being exempted in the second example; e.g. the instructions to the form ask for the individual's last name as the exempt person. Thus, if he opens a third sole proprietorship you can amend the second exemption to include that activity as well." How would you amend this? Would you simply just complete a a new exempt form and indicate the third dba in item 4?


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#10803 - 03/07/02 09:22 PM Re: BSA
BrendaC Offline
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BrendaC
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Sweet Home AL
FinCEN indicated to me that we could use one designation form to exempt multiple dbas if they were all the same type of business, such as all convenience stores. I was told I could select one of the trade names to enter on the form, I did not have to list them all. They further instructed me to use separate forms for exemption if the businesses were not similar in nature, such as Joe dba The Shoe Store and Joe dba The Restaurant.
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#10804 - 03/07/02 09:46 PM Re: BSA
Anonymous
Unregistered

Gee, I am confused guys. If all the different business operated under the same tax ID number I can see exempting all under the same exemption. If different business names have different tax ID numbers wouldn't they have to be looked at seperately?

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#10805 - 03/08/02 11:26 AM Re: BSA
Elwood P. Dowd Offline
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Yes, I would file an amendment and note the new DBA as "additional".

Please note Brenda's post where it appears FinCEN's telephone advice was to file a new exemption (not an amendment) if the new business is unrelated. If you compare the two approaches, mine suggested one exemption (naming the individual) with a listing of each DBA. FinCEN's seems to be one filing for each type of business (naming the individual). In effect, the latter gives FinCEN exactly the same information and multiple exemptions, but still only one exempt person. I find no logic in that approach, but it isn't me we are all trying to please. If I got the same advice on the phone I would document it and take it.
Last edited by Ken/Pegasus; 03/08/02 11:40 AM.
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

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#10806 - 03/08/02 11:37 AM Re: BSA
Elwood P. Dowd Offline
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Elwood P. Dowd
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Next to Harvey
A sole proprietorship is a legal fiction - it does not exist. The legal entity is the individual who operates the sole proprietorship.

If "Joe dba The Shoe Store" wants to open the "Joe dba The Restaurant" account he has three legitimate choices for a TIN to give you:
*his SSN,
*the EIN he uses for "The Shoe Store" and
*a new EIN he obtains for "The Restaurant."

The IRS prefers he use his SSN for all three. Some banks wisely do not allow him to choose otherwise. Sole proprietor's have EIN's for wage withholding. They have no effect on income taxes; i.e. they do not create separate entities for income tax purposes. All the income is going on the schedule C for Joe's 1040.

The sole legal entity here is the individual, Joe.

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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

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#10807 - 03/08/02 08:11 PM Re: BSA
Michele Petry Offline
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Joined: May 2001
Posts: 7
Earlier in this string there were several comments about amending an exemption filing in order to add other sole proprietorships owned by an already exempted sole proprietor.

It's interesting to note that someone (that great disembodied "they") at FinCEN offered suggestions on amendments when different types of businesses are being added, but there was no need to amend if another business of a type already listed was being added.

The problem with all this is that none of this advice from FinCEN ever sees the printed page. Not only are "they" reluctant to issue formal opinions in response to questions, they are positively pertinacious in their refusal to publish any sort of commentary, guidance, or similar help for those laboring in the BSA vineyards. The directions for completing the Designation of Exempt Person form are laughably incomplete -- how much of the form needs to be filled out when recertifying, for instance?

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#10808 - 03/08/02 09:12 PM Re: BSA
BrendaC Offline
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BrendaC
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Posts: 6,029
Sweet Home AL
You are so right about the exemption form instructions. They were so ambiguous that I have put together an entire instruction page for banks in our holding company documenting various aspects of the form. I have the name and date of each individual at FinCEN who provided the answers documented on the list. Examiners don't warm to the "great disembodied they". (By the way, it was Dawn Adams at FinCEN that gave the multiple DBA instructions for the exemption form.)

I was also told by FinCEN that they were going to give us more specific instructions. Shortly after that, they release a FAQ listing; however, I was disappointed that it covered some but not all of the questions I asked. They should be more specific.

A couple of the other questions clarified for me were 1) address should be the address of one of the locations depositing into the account not a headquarters address (Bob Long); 2) a phone card is not considered a stored value card at this time for the purpose of determining whether a business is operating as a money services business (Anna Fotias); 3) FinCEN would like to see exemption forms filed when the bank decides to remove the existing customer from the exemption list but not necessarily when a customer is removed because the account closed (Anna Fotias). Maybe we should formulate a list of questions and submit it to FinCEN for clarification. We could be heros!
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Life without Jesus is like an unsharpened pencil - it has no point.

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#10809 - 03/08/02 09:30 PM Re: BSA
Anonymous
Unregistered

I'm long past any hopes of being a hero. Just want to be saved!! Hey.......it's Friday (doing a little dance here)I AM going to make it!

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