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#20478 - 06/12/02 12:47 PM BSA Exemption

Is a Phase II exempt-customer exempt for ALL transactions or only for cash deposits and cash withdrawals. What about cash-back on a deposit? or purchase of official checks for cash? Does FinCEN or the regulators address this anywhere?

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Operations Compliance
#20479 - 06/12/02 02:25 PM Re: BSA Exemption
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Last question first: Look in §§103.22(d)(2)(vi) and 103.22(d)(6)(ix) of the "BSA Regs."

Persons you have designated as exempt under "Phase II" (§103.22(d)(2)(vi)) are exempt only to the extent of their domestic operations and only with respect to transactions conducted through their "exemptible accounts." The term "exemptible accounts" is defined in (d)(6)(ix) as transaction accounts (DDA, NOW) and MMDAs maintained in connection with a commercial enterprise.

So that limits the exemption to cash deposits and withdrawals to and from their business checking and MMDA accounts. I would not include cash-back transactions (if you permit them) just to be on the safe side. And large cash transactions resulting from anything else would be subject to CTR reporting. I'd include large cash transactions like (examples and certainly not exhaustive):
  • currency exchanges
  • cashing of checks other than from their exemptible accounts
  • cash deposit to an MMDA held as trustee for employee benefits trust
  • savings account transactions
  • loan payments
  • cash purchases of monetary instruments
  • cash purchase of wire transfer
  • cash receipt of wire transfer
  • any transaction in any account if done on behalf of another person
  • anything else that doesn't tightly fit the restriction.

Of course, you should direct all cash activity, if possible, through deposits and transfers to the exemptible accounts to avoid having to do any CTRs. This is not structuring, since you're helping to maintain a record of the cash transaction, not trying to avoid recordkeeping or reporting.

And, of course, this couldn't be complete without the overall warning that you have a continuing responsibility to report any suspicious activity, notwithstanding the exemption.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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