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This advisory provides answers to several questions concerning the process by which financial institutions may exempt retail and other businesses from the requirement to report
currency transactions exceeding $10,000.
On September 21, the Treasury Departmentís Financial Crimes Enforcement
Network (FinCEN) published a final rule which will substantially revise
and simplify the manner in which banks and other depository institutions
may be relieved of the obligation to file recurring Currency Transaction
Reports (CTRs) on many of their customers. This rule represents the second
part of FinCENís effort to significantly reduce the number of times depository
institutions must report large currency transactions. An earlier rule was
aimed primarily at larger national and regional customers; this rule further
simplifies the process for retail and other businesses.
Financial institutions have until July 1, 2000, to phase in compliance with the simplified procedures, although they may use the new procedures beginning on October 21, 1998.
The requirement that financial institutions report currency transactions in excess of $10,000 by their customers is a cornerstone of the Bank Secrecy Act. The information provided on CTRs is often vital to investigators. At the same time, the reporting requirement includes recurring transactions by legitimate cash intensive businesses that generally are of little interest to investigators. The Money Laundering Suppression Act (MLSA) asked Treasury to study and implement new programs to encourage banks to take the steps necessary to significantly reduce repetitive currency reporting on these kinds of transactions.
More than 12 million CTRs were filed in 1997. It is anticipated that implementation of the procedures in the two regulations could lead banks to decrease their CTR filings by more than the 30 per cent reduction sought in the MLSA.
The new final rule permits financial institutions to exempt a domestic business that has routine needs for large amounts of currency by simply filing a form stating that the business is exempt, so long as the business has been a customer for at least one year.
The new procedures may be used by all depository institutions, banks, thrifts, and credit unions, but not by other financial institutions. This rule does not exempt financial institutions from reporting suspicious activity involving these exempted entities. In addition, certain categories of businesses, such as real estate brokers, automobile dealers, and money transmitters, may not be exempted.
The exemption of the businesses covered by the new rule must be renewed every two years, but a proposed requirement that financial institutions include information about a customerís total currency transactions on the renewal form has been eliminated as unduly burdensome and unnecessary; now banks must simply indicate that they have maintained a system of monitoring the transactions in the account for reportable suspicious activity and applied the system to accounts at least annually.
FinCEN has worked closely with the American Bankers Association and
other groups to simplify and reform our regulatory programs so that they are
cost-effective, not burdensome. We look forward to continuing these discussions
as we all work together to determine how best to fight money laundering.
The attached guidance is intended to answer general, basic questions concerning the implementation of the new regulations. It is not meant to be comprehensive and does not replace or supersede the regulations.
James F. Sloan
FinCEN Advisory is a product of the Financial Crimes Enforcement Network, Department of the Treasury, Post Office Box 39, Vienna, Virginia 22183. For more information about FinCENís programs, visit the FinCEN web site at http://www.fincen.gov. General questions or comments regarding FinCEN publications should be addressed to the Office of Communications, FinCEN, (703) 905-3773. Information may also be faxed to (703) 905-3885.