This question relates to the filing of a Designation of Exempt Person (DOEP) Report.
Scenario: (1) In 2016, a customer was initially set up with CTR Exempt Status and a DOEP report was filed. (2) In 2017, the customer was revoked from CTR Exempt Status (3) In 2018, the customer met the CTR Exempt criteria again. Does a DOEP report need to be filed again?

Yes.

Agreed. Even if you did not file the optional cancellation of status DOEP, if you filed CTRs while you treated the customer as not exempt, FinCEN will require a new DOEP to reset its record to show that you're exempting the customer again.

Great point, John. I think this often gets overlooked, such as when a bank accidentally files a CTR(s) on an exempt customer.

When that (oops, I filed on an exempt customer) happens, don't forget that the exemption start date on the new DOEP can't be more than 30 days in the past.

I don't think an "oops" invalidates an exemption. I would not call an oops a pattern of reporting.

Question: If a bank ceases to treat a customer as exempt, and begins or intends to begin filing CTRs on that customer for the next reportable transaction, must the bank formally revoke the exemption by filing the DOEP report and selecting the "exemption revoked" box?

Answer: Banks have never been required to formally revoke an exemption using the DOEP report. Generally, examiners or other users of BSA data would be able to rely on a pattern of reporting to know that a customer is no longer being treated as exempt. For purposes of clarity or creating internal documentation, however, many banks voluntarily revoke exemptions using the DOEP report. For example, if during its annual review of an exempt non-listed business customer a bank discovers that the customer conducted no reportable transactions in the previous year, the bank could no longer treat that customer as exempt. If the exemption is not formally revoked using the DOEP report and the customer continues the pattern of not conducting reportable transactions, a law enforcement agent investigating the company would likely conclude incorrectly from the lack of CTR filings that the customer is still being treated as exempt. While revoking an exemption in such instances may benefit both the filing bank and users of BSA data, banks may choose to do so entirely on a voluntary basis.

The problem here, though, is that there isn't any inkling of what constitutes a "pattern of reporting." And as far as I know, FinCEN has never suggested there's a defined number of CTRs, or even number of CTRs in a defined period of time, that will flip its "off" switch. It's a real "loosey-goosey" thing -- when you'd need to file a new DOEP.

What you don't want to hear from an examiner is "you put XYZ on CTR exempt status in June 2018 after you'd filed 10 CTRs last year because the business wasn't completing enough cash transactions of reportable size at the last review to maintain the exemption. But you didn't file a new DOEP and FinCEN assumed you'd canceled the exemption. Since you stopped filing, there have been twenty reportable transactions that you've missed. You need to get a back-filing determination from FinCEN."

One CTR is probably not enough to trigger FinCEN's change of the customer's status. But how can we learn what that "magic number" is? Or, dare I ask it, does FinCEN depend on examiners to catch situations like this, because without the "cancellation" DOEP, FinCEN has no clue that the exemption has been rescinded?

John & Randy,

Curiosity: Do you guys think FinCEN actually "keeps track" of exempt customers; i.e. there really is a data base and they go in and change an entity's status when an exemption is revoked or a CTR is filed on a customer previously classified as "exempt?"

That was sort of my point. In an examination, you would provide the DOEP, the annual reviews (if required) to show that the customer remained properly exempted. If an examiner questioned why one CTR was filed, you would tell them it was an oversight - it does not automatically revoke the exemption.

Phase II exemptions are optional. In the case presented by to OP, the basis for turning the exemption "off" in 2017 and "on" in the preceding and following years could only be the volume of otherwise reportable CTs. Even though we aren't told about the business activity driving the large CTs, it's fair to assume that the depositor passed that part of the Phase II eligibility test throughout the period. Exemptions are supposed to save time, trouble, and cost for both reporters and FinCEN alike. In this case, the reporter seems to be spending more time managing the process than would be needed to file the handful of CTRs and be done with it.

Related to this older thread, would you check the "initial designation" box when reinstating a DOEP? or would it be a "exemption amended"? Our customer shut down during the pandemic so did not have enough qualifying transactions at the time of the annual review. They have now reopened and made enough qualifying transactions to be exempted again. The instructions say that the initial designation should only be filed one time. Thanks!

Probably just overthinking this. I asked the question above because it feels like a revocation would reset everything, hence the initial designation.

You would just start over with a new DOEP filing.

Thank you Sunshine! That is what makes more sense but sometimes regs don't follow logic!