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#2060593 - 01/26/16 06:49 PM CTR Exemption - Common Ownership
MJNoone Offline
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We have a customer that recently converted 2 sole proprietorships into 2 LLC's (LLC1 and LLC2 dba XYZ). Under the sole proprietorship setup we filed CTR's on any cash deposits over $10K since they were benefitting the sole owner. Under the new LLC set up, I am still filing CTR's due to a common transactor (usually the owner or his wife).

After reading the Fincen guidance on related entities (FIN-2012-G001), I "think" I may be able to exempt them due to common ownership, same address of operation, and the documented comingling of funds between entities.

Question 1: What about the 5 or more transaction rule - does it apply to the aggregate or does it apply to each LLC individually?

Question 2: What about a common transactor? Does it matter that owner or wife deposits more than $10K in one day if the entities are considered exempt?

Thank you in advance for the help!
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#2060608 - 01/26/16 07:34 PM Re: CTR Exemption - Common Ownership MJNoone
rlcarey Offline
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Don't confuse the guidance regarding when you should or should not aggregate transactions for CTR reporting and any possibility of combining multiple entities into a single CTR exemption.
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#2060947 - 01/28/16 03:50 PM Re: CTR Exemption - Common Ownership MJNoone
MJNoone Offline
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So in other words I continue filing CTR's on these entities based on aggregating rules, BUT for exemption purposes I would look at each entity individually?
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#2060970 - 01/28/16 04:38 PM Re: CTR Exemption - Common Ownership MJNoone
Elwood P. Dowd Offline
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Look at the DOEP. It only allows you to list one exempt person; "aggregation" is not relevant to that process. For exemptions, every barrel stands on its own bottom; the LLC's either qualify individually or they don't.

Before wheels were round (before FinCEN even existed) there was a process for creating an exemption for multiple entities. It went the way of the dodo.
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#2062669 - 02/05/16 03:47 PM Re: CTR Exemption - Common Ownership Elwood P. Dowd
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Originally Posted By Ken_Pegasus
Look at the DOEP. It only allows you to list one exempt person; "aggregation" is not relevant to that process. For exemptions, every barrel stands on its own bottom; the LLC's either qualify individually or they don't.

Before wheels were round (before FinCEN even existed) there was a process for creating an exemption for multiple entities. It went the way of the dodo.


I was under the impression that the form filing was strictly administrative; but the exemption eligibility determination process encompasses all applicable CTR aggregation rules, including common ownership aggregation.

So while the DOEP only allows one entity, the Bank's internal records of a common ownership group would contain DOEP's for each entity along with evidence that, using the allowed common ownership aggregation rules, each entity had met the minimum CTR standards for eligibility.

Is that an incorrect understanding?
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#2062707 - 02/05/16 04:54 PM Re: CTR Exemption - Common Ownership MJNoone
rlcarey Offline
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IMHO - yes.
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#2062728 - 02/05/16 05:15 PM Re: CTR Exemption - Common Ownership rlcarey
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Originally Posted By rlcarey
IMHO - yes.


Ok. In that case, which aggregation rules do apply for determining what constitutes a "reportable transaction"?
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#2062734 - 02/05/16 05:17 PM Re: CTR Exemption - Common Ownership MJNoone
John Burnett Offline
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PPA - Unless you can point to a ruling that allows aggregation for the purpose of meeting the "frequently engages in transactions in currency with the bank in excess of $10,000" requirement in 31 CFR 1020.315(b)(6)(ii) across more than one entity (assuming common ownership of those entities), I have to throw a penalty flag on your understanding.
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#2062738 - 02/05/16 05:36 PM Re: CTR Exemption - Common Ownership John Burnett
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Originally Posted By John Burnett
PPA - Unless you can point to a ruling that allows aggregation for the purpose of meeting the "frequently engages in transactions in currency with the bank in excess of $10,000" requirement in 31 CFR 1020.315(b)(6)(ii) across more than one entity (assuming common ownership of those entities), I have to throw a penalty flag on your understanding.


Haha. Fair enough; however, I'll liken it to a Gronk OPI call.

But can you, or anyone else for that matter, point to the guidance that allows for multiple transaction CTRs to be used to establish eligibility for exemption but specifically excludes aggregation permissible under FIN-2012-G001?

Or am I completely wrong and should go back to counting up an entity's single transactions over $10,000?
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#2062749 - 02/05/16 05:53 PM Re: CTR Exemption - Common Ownership MJNoone
rlcarey Offline
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Let me ask you this question. If you have someone co-mingling funds through various business accounts in a manner that you cannot tell one from the other - is that really a group of entities that you want to attempt to exempt from filing??

Otherwise, I am not sure of your question. FIN-2012-G001 deals with aggregating for reporting responsibility. There is no relationship to that and the ability to exempt a single entity from CTR reporting. The exemption rules indicate:

The designation must be made separately by each bank that treats the customer as an exempt person

Customer is defined as "An entity that is not a legal person".

No where is there support to aggregate multiple customers for exemption.
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#2062768 - 02/05/16 06:26 PM Re: CTR Exemption - Common Ownership rlcarey
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Originally Posted By rlcarey
Let me ask you this question. If you have someone co-mingling funds through various business accounts in a manner that you cannot tell one from the other - is that really a group of entities that you want to attempt to exempt from filing??


That's a question of risk appetite rather than whether it is permissible by regulation. I'd never exempt a payroll customer either, but I technically can.

Originally Posted By rlcarey

Otherwise, I am not sure of your question. FIN-2012-G001 deals with aggregating for reporting responsibility. There is no relationship to that and the ability to exempt a single entity from CTR reporting. The exemption rules indicate:

The designation must be made separately by each bank that treats the customer as an exempt person

Customer is defined as "An entity that is not a legal person".

No where is there support to aggregate multiple customers for exemption.


My point is that the support is based within the interpretation of the guidance. Sure, if you're a strict constructionist, then yes, common owned entity CTRs shouldn't be considered for exemption eligibility; however, for the sake of consistency, you should also be limiting what you consider eligible to single currency transactions greater than $10,000. Conversely, if you allow for an interpretation beyond literal, as many do, then you include CTRs triggered only due to aggregation. So why stop at common ownership?

I can understand the hesitancy to aggregate common ownership because the form doesn't allow it to be filed that way. But IMHO - "FIN-2012-G003" uses the phrase "reportable transactions" to clarify their interpretation of the 31 C.F.R. §1020.315(b)(6)(ii) requirement to be consistent with how all CTRs are aggregated.

Lastly, the spirit of guidance post-2008 GAO Report has been loosening the restrictions. Examiners I've spoken to on the topic have encouraged more exemptions with less overhead. I'm not sure they're looking to draw an arbitrary line in the sand here.

To me - either aggregate everything or aggregate nothing.
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#2062860 - 02/05/16 09:10 PM Re: CTR Exemption - Common Ownership MJNoone
John Burnett Offline
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You are free to interpret those rules as you wish, and we've done our part by tossing out the penalty flag. You've tossed the red appeal flag. For me, I'm going to say that after further review, the ruling on the field will stand -- You don't aggregate transactions of commonly-owned entities for the purpose of qualifying for the "frequent reportable transactions" criterion for an exemption.

If you want to take it to the Commissioner of the League (not my favorite person, by the way) to get a ruling, contact FinCEN and ask.

Football analogies are exhausting. I'm putting myself on the injured reserve for the rest of the afternoon.
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