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FinCEN
Provides Guidance on Exemptions
Guidance
has been issued by the Financial
Crimes Enforcement Network (FinCEN) to assist financial
institutions in determining whether a customer is eligible for
exemption from currency transaction reporting requirements. The
Guidance was precipitated by frequent questions FinCEN receives and
the report issued last year by the Government
Accountability Office (GAO).
GAO’s
report concluded, among other things, that the information provided
on currency transaction reports (CTRs) provides unique and reliable
information that is essential to a variety of efforts, including law
enforcement investigations and regulatory and counter-terrorism
matters. The report also recommended several changes to the
exemption requirements. FinCEN addressed those in the final rule it
issued in December 2008, which went into effect January 5, 2009, and
included the CTR exemption requirements Q&A.
Final
Rule
The final rule made a number of substantive changes to the
previous CTR exemption system, including:
·
Elimination of designation and annual review for
most Phase I customers – institutions no longer must file a
designation of exempt person (DOEP) form for, or conduct an annual
review of, customers who are other depository intuitions operating
in the U.S., State or U.S. governments, or entities acting with
governmental authority. The DOEP filing and annual review are still
required for businesses listed on a major national stock exchange
(listed businesses), non-listed businesses, and payroll customers.
·
“Frequently” decreased to five reportable
transactions – financial institutions may now designate an
otherwise eligible non-listed business customer/member for exemption
if it has conducted five or more reportable transactions in currency
within a year (previously eight or more reportable transactions were
required).
·
Decreased waiting time for eligibility –
financial institutions may designate an otherwise eligible customer
for a Phase II exemption after two months (formerly 12 months) after
maintaining a transaction account or the customer may be eligible
for exemption in less than two months if the institution conducts a
risk-based analysis of the member’s transactions.
·
Eliminating of Biennial renewals – financial
institutions are no longer required to file a biennial renewal or
record and report a change of control for an exempt Phase II
customer.
The rule includes a chart for quick reference
to make the process more efficient. Also, the final CTR exemption
rule does not relieve institutions for their separate obligation to
conduct suspicious activity monitoring and reporting for both I
and II exempt customers.
FAQs
Since the publication of the final rule in December 2008,
FinCEN has received questions regarding various provisions. In this
Guidance, it issued answers to assist in the understanding of the
scope and application of that final rule. The questions cover
Timing; Frequency; Corporate Structure and Reorganization;
Ineligible Businesses; Customers No Longer Eligible for Exemption;
Suspicious Activity of an Exempt Customer; Completing the
Designation of Exempt Person form; Exemptible Transaction Accounts;
and Revoking an Exemption. A sample of questions is provided below:
·
Frequency
– Question: using the risk-based approach, can an institution
exempt a non-listed business customer prior to the two month mark
even if the customer has conducted fewer than five transactions?
Answer:
No (an explanation follows in the document).
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