CTR Exemption - Attestation

Posted By: ElizabethL

CTR Exemption - Attestation - 06/08/17 07:43 PM

Our BSA examiner has recommended that we beef up our annual exemption review process by obtaining a customer signed attestation that no more than 50% of its gross revenues are created by ineligible activities. The ineligible activity is lotto sales at convenience stores.

This seems like a reasonable recommendation, easy to comply, but I am having trouble drafting the letter.

Does anyone have sample language they would be willing to share? Thanks in advance.
Posted By: MScarn6942

Re: CTR Exemption - Attestation - 06/08/17 07:53 PM

"I, ___, (position) of ABC Company, certify that less than 50% of our revenue is created by the ineligible activities listed below

(list of ineligible activities)

(signature line)"

That said, is this really something the regulation requires? I'd hate to see you end up doing more work just because an examiner had to find something in your BSA Department to comment on. We don't have a ton of exempt businesses, but I've never heard of something like this.
Posted By: bcompliance

Re: CTR Exemption - Attestation - 06/08/17 08:04 PM

We do the same thing based on recommendations from audit and examiners. our letter is similar to what is described above.
Posted By: Doug Hendrickson

Re: CTR Exemption - Attestation - 06/08/17 08:24 PM

I think the regulators are trying to make it a "best practice". They never mentioned it in the previous 8 examinations, but in the last one they recommended that we include a customer certification. The "one-line" noted above is probably what will be used.
Posted By: PrimeTime

Re: CTR Exemption - Attestation - 06/08/17 08:43 PM

This is hilarious to me because my institution did exactly what the examiner noted in this post recommended; however during this past year's exam they stated that the attestation we obtained was not sufficient as it did not "prove" anything. To that point, their new recommendation was that we obtain financial statements for all of our lottery sales customers, which would prove the amount of gross sales derived from lottery rather than take the customer's word for it.

Thankfully most of those customers were also loan customers so we had financials on file; but the ones we had to obtain financials from either refused (to which point we had to remove the exemption resulting in more work for my staff) or gave us a real had time about it.

Not in the regulation specifically as another poster already pointed out; but certainly a point of contention with the examiners.
Posted By: thomasj

Re: CTR Exemption - Attestation - 06/08/17 08:49 PM

The next step after the attestation will be how are you monitoring it to make sure that they are not making more than 50% of their gross revenue from restricted activities. I skipped the attestation part and just reviewed this as part of my annual review.

When I did my review of exempt customers who were selling lottery tickets, I would look at the ACH payments to the state lottery, total them up and compare them with gross monthly deposits. In most cases it was fairly easy since retailers often had a separate account for lottery sales. In our state, the agent would make less than 5% of the total sales so it was pretty easy to determine with some quick sorting and simple math that the lottery sales were less than 50%. I documented and moved on.
Posted By: PrimeTime

Re: CTR Exemption - Attestation - 06/08/17 08:57 PM

...unless you get the examiner that questions how you know that your customer doesn't have accounts at other banks, therefore making it possible for you to determine anything
Posted By: MScarn6942

Re: CTR Exemption - Attestation - 06/08/17 09:02 PM

Originally Posted By PrimeTime
...unless you get the examiner that questions how you know that your customer doesn't have accounts at other banks, therefore making it possible for you to determine anything

And in all honesty, is that even possible to know for sure? Or are we going to have to do ANOTHER certification form saying they don't have accounts at another bank?
Posted By: RockChucker, CAMS

Re: CTR Exemption - Attestation - 06/08/17 10:48 PM

This is the risk you run if you cave in to pressure from examiners on little easy stuff. They always come back with more and more and more and more. It is the nature if government entities.... keep adding to the bureaucracy.
Posted By: ElizabethL

Re: CTR Exemption - Attestation - 06/09/17 12:15 PM

Thank you for the replies. My current process is that of thomasj's, and while our examiner did not say that it is insufficient, he did recommend the attestation - and we know how "recommendations" work. If we take that route, it will need to have more meat than a one liner - the customer will have to state what percentage it actually is. Agreed, it is a slippery slope that on the surface, at the time, seemed easy enough to comply.

Thanks all!
Posted By: thomasj

Re: CTR Exemption - Attestation - 06/09/17 12:49 PM

I had not really heard any recommendations or many comments at all regarding this from examiners since the revision of the exemption rules several years ago. There seemed to be a shift at that point where regulators moved from putting exemptions under an extreme microscope to just making sure you were performing your reviews and were not blatantly exempting non-eligible businesses.

Honestly, unless all the customer does is sell lottery tickets - which should be blatantly obvious with basic due diligence - this should not even be an issue. I remember before the changes in exemption rules having a discussion about this with an examiner and I told them that we were very close to dropping all of our exemptions because it would be easier and more cost effective to just file the CTRs than to jump through the hoops of creating and maintaining exemptions. The examiner did not bring it up again.
Posted By: rlcarey

Re: CTR Exemption - Attestation - 06/10/17 09:22 AM

Additionally, if all they are doing is selling lottery tickets - revenue from lottery sales is only the net profit from the sale of lottery tickets and not the gross amount of sales. Most lottery outlets only get a small percentage for sales of lottery tickets, so they would have to be selling a heck of a lot of lottery tickets to make up 50% of revenue.

Posted By: Elwood P. Dowd

Re: CTR Exemption - Attestation - 06/10/17 11:16 AM

You are discussing the 218th inning of a game that's gone on for 30 years.

A few thoughts:
* Examiners who want a customer statement are reverting back to a "tool" that was removed from the exemption structure in the previous century.
* For a customer statement to mean anything, anything at all, it would need to say what percentage of sales was derived from lottery ticket sales, not just that it was less than 50%.
* There is a point where filing CTR's is a better compliance management tool than maintaining exemptions. As Thomas J points out, mentioning that to an examiner is entirely appropriate. As for asking for income tax returns or attempting to "verify" the related income as a percentage of sales, I feel I'll need to account for my time someday and would prefer to say I was digging holes in the beach at low tide.
* If the business makes more than half of its revenues that way so what? Unlike when the game began, the current rules are that the proceeds of lottery ticket sales are not subject to CTR filing because they belong to the state. They don't care that selling lottery tickets generates cash, but it's relevant how much a business makes from selling lottery tickets? Stupid, just plain stupid, but that's what happens when you change one rule and fail to consider its effect on others.