Here is the scenario: We have a seasonal customer who sets up corn/fruit stands in the area this time each year (usually August through early October). Most of their sales are done for cash. Two years ago the customer figured out the threshold for filing CTR's is $10,000. Since then they make daily cash deposits of $9,900 from August - October. This is clearly structuring and we have filed SAR's for the past two years - getting ready to file a third. The customer is now coming to us (they've obviously been doing some research) and wants to know how they can become exempt from CTR filing. In a "good" scenario they would qualify for a Phase II exemption (they've had the account for more than 12 months and frequently engage in cash transactions of more than 8 per year - plus they are not on the list of ineligible businesses).

In the days of growing and maintaining deposits, it's very unlikely the account officer will agree to close the account or terminate the relationship.

My quandry is this - do I deny the exemption due to the fact we are aware of the structuring and in granting the exemption would it look like we are trying to "cover-up" illegal activity? The customer's point is "I will stop making daily deposits of $9,900 and make them all at once if you exempt me." Or do I grant the exemption (assuming they make at least 8 cash deposits over $10,000 in one calendar year) knowing that doing so will stop the structuring?

This customer is on our high risk list (for being cash intenstive and structuring) and will continue to be whether or not we grant the exemption.

Any suggestions would be helpful

I would personally never allow a customer to dictate whether they are exempt or not. Our customers do not even know if they are exempt. No way would I exempt this customer. Inform them that the decision to exempt is an internal bank decision, and continue to file SARs.

I agree, I wouldn't exempt the customer either. He is doing whatever he can to avoid CTR reporting, and that should raise enough red flags to stop any consideration for exemption. Be sure to add the customer's comments to your next SAR.

Thanks for the feedback! Since I am not the BSA Officer I do not have the final say. I can only make a recommendation for a course of action.

I agree that this customer should not be exempt. My recommendation is to have a frank conversation with the customer explaining our reasons for not exempting them (because of the structuring). How do you tell them (sternly yet politely) that this is illegal without having some "incentive/penalty" for them to stop...especially if the account officer will most likely be unwilling to close the account at this time and we can't tell them about the SAR's???

It's up to you how you want to handle the structuring topic, but we have had similar situations at my bank, and we simply told the customer that they do not meet our qualifications for exemption. You are not obligated to exempt any customer from CTR reporting, so the customer doesn't really have a leg to stand on.

Good case study for a BSA School... In the oldest guidance on exemptions published by FinCEN (then Treasury), Publication 1387 indicated it was a "red flag" when a customer requested exemption. It didn't say that you had to file a SAR because there were no SARs at that time.

While I'm distracted by the illogic of asking to be exempted from something that isn't happening, I think you would be better off without this customer. If that's not an option, then neither is the exemption and, as suggested, the request should be quoted in your next SAR.

As far as what you can tell them, I would tell them that they need to stop structuring because it's a waste of time - we have always reported their currency transactions to the proper authorities. I would simply omit an indication of what form I used to report them on.

Obviously, that's personal opinion and reflects more than a bit of annoyance at customers who waste my time with this.

First of all you can not exempt a Phase II customer until they have made at least 8 reportable transactions. You stated they make deposits just below the threshold and are structuring their deposits, or have they every went over 10,000 in a deposit? I would not exempt them by no means. We make a rule not to exempt anyone we have filed a SAR on, just our policy. Hope this helps.

I realize this customer would have to make at least 8 cash transactions over $10,000 before they could ever be considered for exemption.

I just talked to our BSA Officer and she is going to recommend we don't exempt them. Buried in our BSA policy is a statement that we will not exempt anyone who we've filed a SAR on - so there's our answer, but I'm not sure that simply telling the customer that "you don't meet our qualifications for exemption" is going to fly without further questions or explanation such as "what are your qualifications? What do I have to do to meet them?"

I have my own personal comeback, but it's not a very professional one so I'll keep it to myself.

Thanks everyone for the great suggestions and ideas! Whoever said compliance was boring?

Think how simple it would be to tell customers "we don't exempt anyone!" There would be no discussion, no hard feelings, no risk of inadvertently becoming part of the crime, and no wasted time. Continuing on...no procedures, no training, no monitoring or audit, no chance of an exemption violation, and no hassles with your regulator.

I agree with the, "no procedures, no training, no monitoring,...etc." But the no hassles with your regulator part may not be correct. An examiner once asked me why the bank I was working for at the time didn't exempt several customers as they qualified under the letter of the reg, and she was serious and became adamant about it. Fortunately, I just happened to meet someone from the regional office during the course of the exam and questioned him about it. He said he was quite familiar with this particular examiner, and that he would advise her that a bank is not obligated to exempt anyone, and that if we didn't want to exempt anyone, we didn't have to, and didn't need to explain why we didn't. Thankfully, that was the last we heard about not exempting a customer.