In order to qualify for a Phase II exemption, certain customers must frequently engage in transactions in currency with the bank in excess of $10,000. We had an internal audit finding that Identified two of our customers listed as exempt. They are recommending that the businesses be removed from the exempt list until they meet the criteria. We made a decision to keep them on the list because, due to Covid-19, even though they did not meet the criteria in 2022, we knew it was a result of Covid and approved the exemption as an exception. One was our County Fair which was canceled in 2021, for Covid and one was a restaurant that was shut down for Covid. Both have since meet the criteria for exemption this year. Are we in violation of the law for keeping them on?

They either meet the criteria or not. There is no carve out for COVID. You should be contacting FinCEN to request a backfiling determination for any CTRs that you should have filed but did not. If the customer's now meet the criteria you can file a new DOEP citing the date of the first exempt transaction.

Brian is correct. You can't suspend the qualifications based on a reason of your choosing.