Skip to content
BOL Conferences Top Gun 23
Thread Options
#2165744 - 02/24/18 05:00 PM Revoke Phase I exemption?
Daisy Doodle Offline
Diamond Poster
Joined: Feb 2014
Posts: 1,030
Southern U.S.
From the BSA Exam Manual:

Banks do not need to confirm the continued exemption eligibility of Phase I customers that are banks, government agencies, or entities exercising governmental authority.

But do others revoke their Phase I's if they are not generating much cash anymore so they don't have to do a review? Our examiners always pick some Phase I's to review and they expect a file for them, even if it's pretty skinny.

I'm torn between revoking them and just leaving them be and doing the skinny review. Seems like a big waste of time though.

Return to Top
BSA/AML/CIP/OFAC Forum
#2165750 - 02/26/18 04:29 AM Re: Revoke Phase I exemption? Daisy Doodle
JacF Offline

Power Poster
Joined: Nov 2001
Posts: 6,719
PA
Phase 1 exemptions exist as a matter of statute. The bank has no authority to either grant or revoke a Phase 1 exception- the bank is simply acknowledging the status granted the depositor by the statute.

Return to Top
#2165768 - 02/26/18 02:22 PM Re: Revoke Phase I exemption? Daisy Doodle
Daisy Doodle Offline
Diamond Poster
Joined: Feb 2014
Posts: 1,030
Southern U.S.
Right, but still we have a list of 'acknowledged' 'Phase I' exempt customers. And the customers on that list are cash intensive, or least they started out that way. We don't have every single government agency and sub-agency on our list, (we don't 'exempt' them at onboarding, for example) only the ones which are cash intensive.

Which the examiners always look at a few of (for what exactly I don't know--I've never had them comment on any of them).

Operationally, I'm asking if other banks 'remove' Phase I's from their internal lists for efficiency if their activity becomes less and less cash intensive over time.

Return to Top
#2165771 - 02/26/18 02:28 PM Re: Revoke Phase I exemption? Daisy Doodle
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,329
Galveston, TX
There is no activity requirement for a Phase I customer. If you have them on your list, whether they make any transactions or not, you just have to perform an annual review to make sure they still qualify.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2165827 - 02/26/18 05:04 PM Re: Revoke Phase I exemption? JacF
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,097
Toano, VA
Originally Posted By JacPCB
Phase 1 exemptions exist as a matter of statute.
+1

You have no say in the decision to create or revoke the exemption. Your only role is to properly identify and thereby confirm which customers meet the Phase I definition. If it's not cost-effective to make that determination at the time the relationship begins, you can do it later if the need arises. Operationally, I would leave it to the person who reviews CTRs before they are filed. If one comes in from a branch & the reviewer suspects the customer could be Phase I, the questionable CTR would be passed over to the BSA officer for a final determination. If it turns out to be Phase I, then the customer would be added to the exemption list and the draft CTR would be trashed.
_________________________
...gone fishing.

Return to Top
#2165833 - 02/26/18 05:20 PM Re: Revoke Phase I exemption? Daisy Doodle
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
FIN-2012-G003:

Elimination of designation and annual review for most Phase I customers.

Banks are no longer required to file a designation of exempt person (“DOEP”) report for, or conduct an annual review of, customers who are other depository institutions operating in the United States, U.S. or State governments, or entities acting with governmental authority.


The only thing you are "required" to do with government entities is avoid filing CTRs on them. It is totally irrelevant whether a governmental entity is on any list you might maintain voluntarily. If the sheriff's office conducts its first transaction in excess of $10K in four years you are not going to report it anyway.
_________________________
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

Return to Top
#2165923 - 02/26/18 10:09 PM Re: Revoke Phase I exemption? Daisy Doodle
EB, CAMS Offline
100 Club
EB, CAMS
Joined: Mar 2009
Posts: 133
flyover country
We try to keep our Phase I list for internal purposes fairly current. It obviously includes the Phase I's that will require annual review (publicly traded or subsidiary)...as for the financial institutions, government entities, etc... we keep them on the list until they no longer bank with us. At that point, we remove them.
_________________________
It is actually possible for you and I to have different opinions and yet still live peaceably upon this planet.

Return to Top
#2165926 - 02/26/18 10:19 PM Re: Revoke Phase I exemption? Daisy Doodle
Daisy Doodle Offline
Diamond Poster
Joined: Feb 2014
Posts: 1,030
Southern U.S.
I think what I'm hearing is that I need to ask our examiners exactly what they are looking for, or at on the government bodies and FI's. Sounds like all you maintain is a list, Frog Lady? Heck, that's easy.

Return to Top
#2165934 - 02/26/18 10:55 PM Re: Revoke Phase I exemption? Daisy Doodle
EB, CAMS Offline
100 Club
EB, CAMS
Joined: Mar 2009
Posts: 133
flyover country
Daisy- We do have a list...there is back-up documentation to go with it obviously. If you want more specifics feel free to send me a PM.
_________________________
It is actually possible for you and I to have different opinions and yet still live peaceably upon this planet.

Return to Top
#2165949 - 02/27/18 10:37 AM Re: Revoke Phase I exemption? EB, CAMS
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
At one time, maintaining a current list of exempt persons was a legal requirement. The regulation required that the list contain certain, specific information. The requirement to maintain a list was removed from the regulation in the preceding century.

Now, any list of exempt persons a bank maintains is a compliance management tool of the bank's own design.

Some banks include all government entities on their list and distribute it to frontline personnel so they will know not to file CTRs on the Sheriff's office, et al. Others simply code all exempt persons (including all government entities) as not being subject to CTR filing at the CIF level. Their list of exempt persons does not include government entities and they do not distribute it to fronline personnel because their data processing system knows not to prompt a CTR filing when a debit or credit to cash exceeding $10K is keyed in for an exempt person.

Bank A's list will not look like Bank B's list in terms of the number of names or the detail in the information it includes. One may be distributed, the other, not. Either way, the list can be a helpful compliance management tool in making certain that annual reviews are conducted in a timely fashion and helping third party reviewers analyze overall compliance.
_________________________
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

Return to Top

Moderator:  Andy_Z