If a customer is Phase I exempted and during the annual review you find that the transaction have slowed down to where you no longer have them exempted, do you file a revocation of exemption? If you find that their transaction pick back up and want to exempt them again, can you by filing another exemption?

Per the instructions to the DOEP Form, you are not required to file it to revoke an exemption. If you simply start filing CTRs they will figure out the exemption was revoked.

In the case of a Phase I exempt person, the presence or absence of large currency transactions is not a factor in meeting the definition. Whatever the frequency of large currency transactions might have reached or fallen to, you would do nothing.

During the annual review I realized that all accounts belonging to one of our "Phase I" customers have been closed. We still maintain a "list of exemptions" and I wanted to see what other banks are doing- do you revise the list and remove this entity?

We review and revise the list annually. If the customer no longer qualifies either because of the number of transactions or account history, I remove them from the list, update our internal tracking system and even though it is not necessary, I file a DOEP form just because I prefer it that way. In addition I document why the exemption has been revoked.

Thanks NewtooBSA. That's what I do on Phase II exemptions. I wanted to see if anybody was doing anything differently with the Phase I exemptions. What do you do on the Phase I?

"If the customer no longer qualifies either because of the number of transactions or account history, I remove them from the list"

There are no requirements that a Phase I customer complete a required number of transactions.

You don't have to minitor cash activity on a Phase I customer, except in the general way that you would monitor any customer based on their risk rating.

I would definetely do an annual review for any publicly traded companies. I would check to insure that they have not changed their name or changed status. I would also check all your Phase I Exemptions for other banks, to insure that the exempted name is correct. That's one of the biggest exceptions that I've found during my audits is that a bank has an exception on file for another bank and the bank has either changed their name or been bought. In this case a new exemption form should be filed.

A Phase I exempt person doesn't even have to be a customer of the bank. For example, other banks and government entities that might have cash transactions with you but don't have accounts are still exempt or exemptible.

Thanks John. The reason for my question was the fact that Phase I exemptions do not have to be a bank customer. Our bank maintains a list of all exemptions. We have on our list a previous customer- Phase I. During the annual review i noticed that their accounts had been closed. My first reaction was to leave them on the list since they do not have to be a customer to qualify but i don't want to get slammed during an internal audit. Wanted to see what other banks were doing. i guess i just didn't ask the question correctly. Thanks again.

Well, it would certainly be acceptable to leave them on your list. But I'd recommend scratching them from the list unless you believe that you'll be doing cash transactions with them from time to time.

An example from prior experience (now THAT is redundant!) --

My bank had branches in supermarkets (they don't any longer. They don't have me, either, but that's another story). The store didn't maintain accounts with the bank. But frequently the store would purchase cashier's checks from the bank in order to help the bank branch out (it was a net user of cash, and the store a net collector of cash). We carefully recorded those transactions so we could review them for AML purposes, but we exempted the store under Phase I and never filed a CTR.

"You don't have to minitor cash activity on a Phase I customer, except in the general way that you would monitor any customer based on their risk rating."

Tell that to my examiners...we are expected to do the same level of due diligence and monitoring of Phase I exemptions as we do on our Phase II exemptions! (Note sarcasm)

OK. Let's rephrase it -- you are not required to review cash activity as part of the review of a Phase I exemption. You are, however, never exempted from the responsibility to monitor activity of customers for suspicious activity, particularly high-risk customers.

I can agree with that...I was just venting and trying to make a point about different regulator's opinions. Not trying to stir up trouble

Not trouble at all! I think we were both trying to throw light on a very dark subject: BSA/AML

Is that possible???? HAHA