Using the new CTR Exemption rules effective 1/5/09, does anyone have any issues with filing a CTR Exemption on a customer on which you are also currently filing SARs? There is a lot of language in the amendment about suspicious activity, and I am concerned that examiners will (perhaps mistakenly?) think that you can't exempt a customer if SARs exist on that customer's activity.

If you suspect their activity is suspicious, why would you wnt to exempt them?

Duchess - Well, because SARs report suspicious activity, and CTR Exemptions remove the obligation to file CTRs...prior to the amendment's inclusion of this new language about suspicious activity, SARs and CTR Exemptions had nothing to do with one another. The CTR guidance is that CTRs cannot be used to report suspicious activity. Still, I think it is a very common misconception that a bank cannot, should not, or would do well not to file an exemption on a customer whose transactions are reported as suspicious.

Old rules for Phase II:
Does the customer have a 1 year+ relationship? Yes
Does the customer frequently engage in reportable transactions? Yes
Is the customer registered to do business in the U.S. or a U.S. state? Yes
= They are exemptible.

It did not mention "Does the customer engage in suspicious activity, if yes, then do not exempt." That is just a commonly held and expressed belief but I do not see what it is based on.

I would be unwilling to exempt a customer that I was filing repeat SARs on. Maybe I'm old school.

Why? Anyone?

We are wrestling with the same issue. We filed SARS because the owner of Bus. A and Bus. B sometime a few years ago heard it was smart to deposit cash of $9000, or $9500. The question always comes up, is really trying to hide anything? We file the SARS solely on the self-imposed definition of structuring...but out and out IRS non-reporting....no. He also has loans with us and we get the IRS reports....etc. We are chicken to exempt at this time, but if anyone has and lived to tell that they've exempted a subject of a SAR, well, let us know.

I would not exempt a customer that is subject to multiple SAR filings because I would be in the process of exiting that customer. And if for some reason I wasn't, I would want the government to have as much info on them as I have so there could be absolutely no question down the road that I assisted them in avoiding any type of required reporting.

Can you imagine if for some reason an examiner found your exemption process flawed on a repeat SAR customer? The examiners would eat you alive. It is just not worth the potential problems.

BrendaC brings up another point: The common practice of "exiting" customer accounts (closing them, right?) just because of the existence of one or more SARs. FinCEN's guidance has been that one or more SARs is not a reason to close an account. I can foresee filing dozens of SARs on this potentially-CTR-Exempt business. I guess I'll find out if the activity is truly suspicious, or if the filings are defensive, when and if their assets ever get seized. I've found that not even the receipt of a grand jury subpoena is an indication that any action will ever happen against the customer's assets. I try to remember that my employer's line of business is providing financial services - not refusing to provide them.

BTW, we have been eaten alive by them previously, and we have been *****'d out the other side, and we are still here to tell about it, and we are still trying to take advantage of our FinCEN-given right to exempt non-listed eligible businesses...

There have been so many sad stories about banks, well-respected banks, with good BSA programs that ended up with problems because of some (often seemingly minor) issue involving CTRs and/or exemptions. We've seen them in the Threads many times. There is even a growing movement convinced that the exemption process should be ignored and CTRs filed on all reportable transactions because, in the end, the exemption process (particularly annual reviews) is just too much trouble.

At the end of the day, we're all focused on the same thing -- effectively managing the risk and protecting our Bank. And if there is one thing we know, it's that it's hard to grow a bank under a BSA enforcement action.

I tend to agree with most of that, but it is also my duty and responsibility to make our program as effective and efficient as possible, and that includes saving money on BSA filing where possible. Just because there is the fear that examiners could potentially dislike something, that is not a good enough reason to avoid it, in my book - especially when there is no regulation to back up an examiner's dislike. Besides, FinCEN's stated intention with the changes, in line with the GAO's recommendation, was to get more institutions to take advantage of the exemption process by making it easier to exempt customers. I think that any banker chosing to file hundreds or thousands of CTRs per year, rather than to file a handful of CTR Exemptions, because the CTR exemptions are "just too much work" and "too risky," is doing a major disservice to the institution, and is a drain on taxpayer dollars. Your taxes (and mine) are helping to pay for the system that eats millions of CTRs a year.

I agree with most of your statements, however, why would you assist in defeating the whole purpose of CTRs and SARs by choosing not to file CTRs on a customer the you feel is suspicious. Also, if you really don't know where the money is coming from, how do you know they are really not an ineligible business.

In the words of ROBERT W. WERNER, DIRECTOR, FINANCIAL CRIMES ENFORCEMENT NETWORK, UNITED STATES DEPARTMENT OF THE TREASURY


It is important to note that SARs and CTRs should not be viewed as duplicative filings by financial institutions. Each provides their own set of value and intelligence that may initiate or assist in an investigation. However, the perception that every BSA filing should eventually lead to a prosecution is simply unrealistic. In addition to their investigative value, SARs and CTRs deter money-laundering activities. We have seen examples of this when criminals structure their deposits in our financial system to avoid filing requirements. Structured transactions designed to hide the movement of illicit funds force criminals to exert more time and energy while providing law enforcement additional information when tracing a pattern of activity. Finally, this data contributes to threat assessments, vulnerability studies and other more strategic analytic products that contribute significantly to our fight against illicit finance.

At some time or another, a bank filing multiple SARs on a customer should analyze the costs and benefits of continuing the customer relationship. It is certainly a bank's mission to provide financial services, but it has to do so at a profit in order to be able to continue providing them. If the costs of the extra monitoring and analysis that is required to file all those SARs outweighs the benefit of having the customer on board, the bank should be considering kicking the customer to the curb.

We were required to add something along those lines to our customers and when we would review the account to close after multiple activities.

In case it leads to any difference of opinion for any of you, I should clarify that we believe we know the source of funds is the retail sale of goods at their three business locations in our area. The SAR'd transactions are as follows: Employee A, B, and C cashing $9,500 checks against the business account, all in one day. No CTR is filed because they are each individually receiving the cash and there is no certain knowledge it is on behalf of the business. A SAR is filed for $28,500 because we suspect it was on behalf of the business or for the personal benefit of its owner. That activity recurred sporadically and caused 3 SARs over a period of several months, and then the activity ceased completely about five months ago. I think the FI should be glad it still has their $400,000 in the bank, rather than a closed account just because of 2 or 3 repeat SARs.

The CTR'd transactions are as follows:
Monday $15,153.45 cash deposited in a single visit, single ticket
Tuesday $12,009.12 cash " "
Wednesday $10,079.08 cash " ", etc.

The transactions I am seeking to exempt are the cash deposits and withdrawals from the business account which result in CTRs. The suspicious transactions never caused a CTR, which is at least a part of why they were suspicious in the first place. I would not be placing an exemption on anything reported as suspicious.

I called FinCEN's helpline on the matter and they said (actually, they whispered conspiratorially) that it may be considered by some banks to be a "best practice" to avoid exempting customers whose activity is suspicious. Then they asked me, "If their activity is suspicious, would you still even want to exempt them?" and I said, "Yes." After he didn't have an answer to that, I continued, "SARs report their suspiciuos activity, and the bank is filing the CTRs at great expense, while the CTRs are not part of the suspicious activity anyway." They concluded by saying that there is nothing in the regulation against filing an exemption on a customer on whom you have filed SARs, and that SARs do not negate an existing exemption or disqualify a customer for a new exemption.

You still say don't go there? I may need to reflect on the theory that, as Randy pointed out, CTRs serve not just the purpose of reporting a transaction in currency, but also, they serve to deter money laundering and related financial crimes.

Well, in your example, I'm not sure why anyone would choose to close this account.

As far as the separate checks are concerned, were they payable to the three separate individuals or made payable to cash. If made payable to cash, your tellers should ask for whom the transaction is benefiting - the individual or business to allow appropriate aggregation. If you turn a blind eye, you are going to be missing a lot of withdrawal that may necessitate a CTR.

I think that you have a unique situation and every such situation needs to be examined. For 99% of customers in which SARs are filed, I would be a little more hesitate to talk about an exemption. The no-never attitude is really aimed at the 99% of the time.

Also remember that just be cause there is no particular regulation for an examiner to state they can still make life h#ll... Been there done that... Why give them something to dig into?