Answer:
Bank examiners tried this foolishness in the mid-80's (their fabricated theory of non-compliance was dubbed "malicious compliance") until John Byrne (ABA staff at the time) challenged the agency BSA heads who promptly shut this down.
Your decision about exemptions should be based on cost savings and customer service.
There is a cost to creating, maintaining, and defending exemptions. That cost is higher for Phase II than Phase I, and you probably have lots more Phase II candidates than Phase I. There is also a significant exam risk if you make any mistakes or allow them to expire accidentally.
Filing mindless repetitive CTRs is an annoyance, but banks have become adept in filling out these forms and filing them properly. If you have automated the filing process, your per-item costs for CTRs are not large.
After you have a rough idea of the costs of managing an exemption vs. filing the number of CTRs appropriate to each candidate, you can make a preliminary decision. Further consideration of customer convenience may tip the balance, too.
First published on BankersOnline.com 1/30/06
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