Designation of Exempt Person

We have a customer who has two businesses. One business sales cars and their sister business finances the vehicles. The Bank exempted the finance business stating that the business does not sell cars so its an eligible business to be exempted. However, the company transfers money back and forth between the two businesses. Seems funny to me.

Would the finance company fall under the ineligible status of "Serving as a financial institution or as agents for a financial institution of any type"? I can't find a definition for serving as a financial institution and am wondering since the business finances the vehicles if the business would be considered a type of financial institution like a check casher? Thoughts? Thanks.

Do you feel that you could adequately defend the position to treat them as separate businesses with the knowledge that funds are being co-mingled?

If the funds are being transferred only to facilitate the loan part of the business (loan company sends money to car sales company in the form of payment on a vehicle that now has a loan) then you might be able to argue that in your favor.

I'm the auditor and no I don't think they can adequately defend that position...IMHO. :-) That's why I'm trying to figure out if the finance company is serving as a "financial institution" and I can tell them to revoke the designation.

if they are transferring between the two accounts to avoid filing a CTR you have a bigger problem. Most car dealer have to file a 8300 so they are aware of the filing. Just wondering how they transfer between each separate company and of course why?

A finance company is not a financial institution under the BSA regulations.

I agree....why are they transferring the money????

Thanks RLcarey!

I would be using this as a guide to determine whether you can exempt one of these two commonly owned businesses. If you could not in good conscience file separate CTRs on these two businesses, I surely would not be exempting one of them.

https://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-G001.html