Thread Options Tools
#46621 - 12/03/02 04:19 PM FinCEN "Clarification" - Monetary Instrument Sales
Anonymous
Unregistered

What's other's feeling on FinCEN's recent statement on recordkeeping for sales of monetary instruments.

http://www.fincen.gov/monetaryinstrumentsales3a.pdf

I believe many banks like us had instituted a practice to alleviate the recordkeeping burden by a 2 step approach:

1 - Don't sell to non-customers; and
2 - Have customers presenting currency to purchase an item first deposit the funds into the account and then make a withdrawal.

FinCEN is saying they want everyone to understand that they still treat the the latter practice as subject to the recordkeeping requirement of 103.29.

They toss in: "FinCEN anticipates that, in selling monetary instruments to deposit account holders, a financial
institution will already maintain most of the information required by 103.29 in the normal course of its business, and therefore the requirement to fully comply with the
regulation should not be overly burdensome."

I'm thinking this removes the benefit of the deposit the funds first policy?



Return to Top
General Discussion
#46622 - 12/03/02 05:21 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
RVFlyboy Offline
Power Poster
RVFlyboy
Joined: Oct 2000
Posts: 5,978
Soaring over Georgia
Wow, talk about a sleeper. This is absolutely why we need an Official Staff Commentary for BSA regs, with an opportunity to provide comment before something becomes the governing rules.

While I agree with FinCEN that we do maintain most of the information required by 103.29 for our deposit account holders, we do not maintain the information on monetary instrument purchases conducted through the account in a manner that would lead them to be retrievable except by looking at each specific transaction and seeing what the offsets are to see if it was for a cashier's check purchase. Also, how long of a time has to elapse between the deposit of cash and the purchase of the instrument for it to be considered a non-covered transaction - an hour? a day? a month? I see a lot of unanswered questions hidden in this interpretation. Maybe we need to get the regulators and ABA to start hammering on FinCEN again (it worked for the 314a requests).
_________________________
Jim Bedsole, CRCM, CBA, CFSA, CAFP
My posts - my opinions

Return to Top
#46623 - 12/03/02 10:33 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
LiL Bit Moore Offline
Platinum Poster
LiL Bit Moore
Joined: Nov 2002
Posts: 624
Texas
After reading the guidance issued, I revisited the amendments to 31 CFR 103.29 date 10/17/94 issued to reduce the regulatory burden while enhancing the utility of information. The AML task force (established to review the 103.29 requirements) found that while Sec 103.29 was a useful deterrent, the records were infrequently used by law enforcement. Based on this and other initiatives, they modified the recordkeeping requirements (to what we have now), and determined that retention of required information could be maintained in the ordinary course of business, and in a manner consistent with the record system that may already exist.

The amendment then further states that information required formerly to be kept on a chronological log, is available generally in accounts or other records, or on the orginal copies of the monetary instruments, and that these copies, along with other records kept in the ordinary course of business, may satisfy the requirements of this final rule.

IMO - We are not required to maintain separate records for monetary instrument sales $3M-$10M, but we do need to make sure that our system and copies of monetary instruments sold include, in some sort of format, information required by the regulation.

Required information for deposit account holder:
(1) name of purchaser (on the account and most instrments)
(2) date of purchase (corresponds to the db/cr to acct, and date on instrument sold)
(3) type & s/n of instrument sold (should record on debit and, copy of instrument indicates type and s/n)
(4) amount (indicated on db, separate note if in excess of sale, and (obviously) found on copy of instrument)
(5) verification that individual is a deposit account holder - (deposit to an account is positive verification, type of ID obtained s/b on signature card)

If the '94 amendment recinds the orginal requirement to maintain a log of cash sales, and the new rule only requires that a bank retain,in any format, the above referenced information, and, that information is available through the normal course of business whether cash is involved or not, are additional burdens implied by this new interpretation? And, doesn't processing the trans thru a deposit account further assist this requirement?

Last note, the amendment also states..As with all records required to be maintained under the BSA, the records must be filed or stored in a way as to be accessible within a reasonable period of time. (Sec 103.38) The nature of the record and the time expired since the record was made is taken into consideration.

If our policy to deposit cash remains in effect, but log is still not maintained, what part of 103.29 is jeopardized
_________________________
An error is not a mistake until you refuse to correct it

Return to Top
#46624 - 12/04/02 12:39 PM Re: FinCEN "Clarification" - Monetary Instrument S
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,056
Toano, VA
Jim- Good point about the push for a Commentary. You probably recall our last effort. Steve Kroll was FinCEN General Counsel at the time & he whined endlessly about the difficulty and time required to create and maintain this important document. In spite of the fact the the ML Suppression Act of 1994 REQUIRES FinCEN to issue a Commentary and ABA coordinated a volunteer effort to parse the body of regs & interpretations for FinCEN, nothing happened.

This has been a disgrace for years and FinCEN just laughs it off.

Kroll's been replaced and BSA has moved even higher in federal priorities, so maybe now's the time to push for this again. If FinCEN doesn't want to discuss it, maybe members of the new Congress will.
_________________________
...gone fishing.

Return to Top
#46625 - 12/04/02 05:15 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
Lestie G Offline

Power Poster
Joined: May 2002
Posts: 3,606
Near the Land of Enchantment
In addition, wasn't the original 'purpose' of these rules to stop smurfing? Policies to require deposit of cash into an account effectively eliminated smurfing.

I don't think the regulators are on the same page as FinCEN on this one - several examiners over the years have praised our policy as exactly what the feds hoped would happen with the implementation of the recordkeeping requirements.
_________________________
Opinions my own.

Return to Top
#46626 - 12/09/02 04:40 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,485
On the Net
From an ABA e-mail today:

FinCEN issues Guidance that differs from previously understood policy

The Financial Crimes Enforcement Network (FinCEN) announced an interpretation of the recordkeeping requirements under 31 C.F.R. 103.29 that is a change from how the that section had been previously interpreted. Section 103. 29 of the Bank Secrecy Act (BSA) requires financial institutions to verify a customer's identity and retain records of certain information prior to issuing or selling bank checks and drafts, cashier's checks, money orders and traveler's checks when purchased with currency in amounts between $3,000 and $10,000 inclusive.

FinCEN pointed out that many institutions, in response to this requirement, have implemented a policy requiring customers who are deposit accountholders and who want to purchase monetary instruments between $3,000 and $10,000 with currency, "to first deposit the currency into their deposit accounts." After that has occurred, a debit is made to the customer's account to pay for the monetary instrument. This policy had been accepted as a means to avoid the 103.29 recordkeeping requirements until last week.

While FinCEN admits that there "nothing within the BSA, or its implementing regulations, prohibiting a financial institution from instituting the policy" the Treasury bureau "takes the position that when a customer purchases a monetary instrument between $3,000 and $10,000 using currency that the customer first deposits into the customer's account, the transaction is still subject to the recordkeeping requirements of 103.29."


The following are two examples of the new interpretation:

Examples

Example 1: Customer X enters a branch of Bank Y with $4,000 in currency with the intent to purchase a cashier's check. In accordance with the policy of Bank Y, the teller requests that Customer X deposit the $4,000 into the customer's checking account. The teller then prepares a debit ticket to offset the purchase of the cashier's check. Bank Y is required to maintain records in accordance with 103.29.

Example 2: At 10:00 AM, Customer X enters Bank A with $2,000 in currency and purchases a money order from Teller 1 with a face value of $2,000. Later the same business day, Customer X goes back to Teller 1 at Bank A with an additional $2,000 in currency to purchase a cashier's check. Teller 1 at Bank A has knowledge that these purchases occurred on the same business day. Multiple purchases of the same or different types of monetary instruments on the same business day totaling between
$3,000 and $10,000, in which the financial institution has knowledge, should be treated as one purchase. Therefore, Bank A is required to maintain records in accordance with
103.29.

To view the entire guidance, go to:

http://www.fincen.gov/monetaryinstrumentsales3a.pdf
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#46627 - 12/09/02 04:50 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
straw Offline
Power Poster
straw
Joined: Nov 2002
Posts: 9,121
Funny thing is that we actually started requiring cash deposits into accounts when purchasing monetary instruments to satisfy recordkeeping requirements. By having cash go into an account, we created a paper trail that otherwise would have had to be kept manually at each branch.

I never thought that the cash deposit would vitiate the recordkeeping requirements.

Return to Top
#46628 - 12/10/02 11:41 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
Anonymous
Unregistered

Perhaps FinCEN lost its sole voice of reason with the departure of Peter Djinis. I certainly hope this is not a trend developing here.

Return to Top
#46629 - 12/11/02 08:35 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
Anonymous
Unregistered

FinCEN says "the requirement to fully comply with the regulation should not be overly burdensome."

I say, while It may be true that banks do already obtain and retain most of this information, the need to react to an abrubt change such as this, published without any previous announcement or request for comments regarding such a long held position cannot be anything other than burdensome.

I, for one, am very dissapointed in the seemingly small amount of thought that the agency put into releasing this guidance. I am also very dissapointed to know (from Richard's comment on this thread) that the agency's attitude has been so cavalier with regard to upholding its responsibilibies to develop a staff commentary.

Return to Top
#46630 - 12/12/02 12:02 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
RVFlyboy Offline
Power Poster
RVFlyboy
Joined: Oct 2000
Posts: 5,978
Soaring over Georgia
The collection of the data in this regard is not necessarily the overly burdensome part. The part that scares me is the expectation that we will be able to easily search through those records looking for name matches. Because we keep these records on a transaction by transaction basis, it is not readily conducive to a search (like say a 314(a) search) and my fear is that is what is going to be expected. This is why I would have liked to have had an opportunity to comment on this guidance.
_________________________
Jim Bedsole, CRCM, CBA, CFSA, CAFP
My posts - my opinions

Return to Top
#46631 - 12/12/02 02:40 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
Anonymous
Unregistered

We never did away with our log and it has actually simplified my life when the examiners come in and also when searching names for the control list. The logs are all maintained in a binder, which I just hand to the examiners when they ask about 3K recordkeeping. When seaching for names, it is just a matter of pulling out the binder and going down the list of names. We don't sell bank checks to non-customers and we have found very few of our customers actually pay in cash, so continuing the log hasn't been an issue. Sometimes what seems to be a burden really isn't when you do some investigating and consider the alternatives.

Return to Top
#46632 - 01/06/03 06:31 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
Summer101 Offline
Platinum Poster
Joined: Jun 2001
Posts: 644
Has anyone heard any more on this issue? We also have the policy of depositing the cash before purchasing a bank instrument. Yes we would have the necessary information on file, however, we would not be able to create a list of who made cash deposits prior to making a purchase. To go back to the log would be time consuming and inefficient. What's everyone else doing? Heard anything from the regulators?

Return to Top
#46633 - 01/06/03 08:25 PM Re: FinCEN "Clarification" - Monetary Instrument Sales
BrendaC Offline
Power Poster
BrendaC
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
One of the banks in our holding company had a policy of requiring customers to deposit the money prior to allowing the purchase of a monetary instrument. (Since this had long been suggested by compliance "experts" as a way to avoid having to keep records of the sales.) Policy has not been changed, the bank still requires deposit of the money prior to purchase with exceptions by officer approval only. Procedures have been changed to require the appropriate monetary instrument form to be completed to document the purchase if the amount qualifies ($3,000-$10,000).

This particular bank does not currently require the forms to be sent to the BSA Officer to be held in a central file location; however, I have recommended they do so. I have found the monetary instrument records to have value in identifying attempts to structure transactions. I have filed more than one SAR based on information from investigations triggered by monetary instrument sales records.
_________________________
Life without Jesus is like an unsharpened pencil - it has no point.

Return to Top
#46634 - 01/06/03 11:45 PM Re: FinCEN "Clarification" - Monetary Instrument S
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
I need to plead guilty as one of the "experts" Brenda mentions. I have encouraged thousands of bankers to do exactly what the Treasury guidance initially appears to question. (I'm not being mean to her, I'm sure she wasn't talking about me. Anyway, she's a friend.)

First, my advice would not change - the practice still makes sense. Second, Mr. Bedsole's comments hammer away at a hook buried in the guidance that makes debating the practice a non issue: This is true whether the transaction is conducted in this manner as required by a financial institution's established policy, or at the request of the customer. This guidance affects all banks, not just those that do not directly accept cash in payment for official checks. You are expected to have all the information the record retention requirements indicate, regardless of whether the transaction actually triggered the record retention requirements.

Now that you're thinking about just how ridiculous this is, I want to underscore the fact that this announcement anything but a clarification, it is a reversal of Treasury's previously logical position.

L Moore's willingness to research for the benefit of the group is exemplary and I can offer some anecdotal support. First, what Treasury really wanted to accomplish when it established the requirements was put an end to smurfing. Their first thought was to prohibit banks from selling official checks to noncustomers from whom they would obviously only accept cash. That was not politically feasible, so instead they imposed record retention requirements which were indirectly intended to convince cost-conscious bankers that selling official checks for cash was a lousy idea. (Obviously, the subtlety was lost on us.) Nevertheless, as lglover points out, they never did want the records. The records may have incidental value in some situations, but any cost/benefit analysis would indicate they are garbage.

Second, Treasury routinely indicated it had no problem with the practice. Back when Amy Rudnick was Treasury's designated speaker, I asked her in a taped general session at the ABA's AML conference if the practice represented a compliance issue. She said, "No." She added that Treasury expected two things of the banks that refused to sell official checks for $3,000 or more in currency. First, they would have to include the prohibition in their written BSA policy. Second, they could not make any exceptions.

I know that the practice was discussed in examiner training for both the FDIC and OTS for years and, even in rooms full of experts, I never heard a challenge or complaint. As the transaction was not reportable, structuring was not an issue. As the bank is required to note on any deposit slip or credit ticket whenever there is more than $100 in currency involved, the cash was still traceable. Who needed the stupid records?

If the proposed CIP regulation's failure to make appropriate cross references and use existing definitions was not persuasive enough, this "guidance" makes it clear that Treasury has no institutional memory. I'll take Richard's advice and write to my representatives asking why Treasury is spending its time writing drivel instead of following a nine year old Congressional mandate to develop an official commentary.
_________________________
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
#46635 - 01/07/03 01:19 AM Re: FinCEN "Clarification" - Monetary Instrument S
Princess Romeo Offline

Power Poster
Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
WARNING - RANT POST!!!!

Ken - that WuMu commercial with bank customers standing in line waiting for the bar code on their forehead to be scanned is looking more and more prophetic.....

I get the feeling that the reason Treasury has reversed themselves was the nasty revalation that the 9/11 terrorists had almost seemlessly blended with American society. Unless every party to every transaction was on an instantly searchable database (bar codes anyone?), the attempt to piece together their financial trail became a long and arduous process.

So - again it appears that banks need to correct for mistakes and excesses that other areas of the government committed, the War on Drugs and War on Poverty being two more shining examples.

*sigh** (....stepping off soapbox.....)
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

Return to Top
#46636 - 01/07/03 02:43 AM Re: FinCEN "Clarification" - Monetary Instrument S
Ann Offline
Platinum Poster
Joined: Jul 2001
Posts: 554
South Carolina
Bonnie and Ken, you're singing my song. We haven't changed anything at this point. We just recently changed our policy within the last year to require the deposit of cash by customers for the purchase of monetary instruments ($3,000-$10,000). We believed this was a wise decision at the time and we had to convince higher-ups to go along. Now this FinCEN clarification comes out and it is baloney! We will continue our practice and if we are asked to provide records, we will hire temps to do a name search. It is a question of cost/benefit/risk analysis. In all my years of banking, we have never been asked to retrieve this required information.

My opinions are my own and not those of my employer.

Return to Top
#46637 - 01/07/03 02:53 PM Re: FinCEN "Clarification" - Monetary Instrument S
BrendaC Offline
Power Poster
BrendaC
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
You're right, Ken, I wasn't casting any shadows on any compliance "expert". But you raise an interesting point which could eventually evolve into a problem for all of us, even if we don't have a "deposit before you purchase" policy. Are we expected to ask customers whether they have recently deposited cash into their accounts at the time they purchase monetary instruments? What will the consequences be if an examiner happens to identify a monetary instrument purchase paid for with a check after the customer deposited cash into his account? I certainly haven't modified any of my training materials to instruct my branch personnel to examine an account for recent cash transactions when a monetary instrument is purchased.

To coin Lucy's phrase here...we could be seeing an "invent-a-reg" at work.
_________________________
Life without Jesus is like an unsharpened pencil - it has no point.

Return to Top
#46638 - 01/08/03 12:24 AM Re: FinCEN "Clarification" - Monetary Instrument S
Princess Romeo Offline

Power Poster
Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
In reply to:

To coin Lucy's phrase here...we could be seeing an "invent-a-reg" at work.




More like - "Examiner second-guessing everything that you did or did not do" at work!
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

Return to Top