Bank Secrecy Act
Objective. Assess the bank’s compliance with statutory and regulatory requirements for exemptions from the currency transaction reporting requirements.
1. Determine whether the bank uses the Currency Transaction Report (CTR) exemption process. If yes, determine whether the policies, procedures, and processes for CTR exemptions are adequate.
Phase I Exemptions (31 CFR 1020.315(b)(1)-(5))
2. Determine whether the bank files the Designation of Exempt Person report electronically through FinCEN's E-Filing System to exempt eligible listed public companies and their subsidiaries from CTR reporting as defined in 31 CFR 1020.311. The report should be filed within 30 days of the first reportable transaction that was exempted.
3. Assess whether ongoing and reasonable due diligence is performed, including required annual reviews to determine whether a listed public company or subsidiary remains eligible for designation as an exempt person under the regulatory requirements. Management should properly document exemption determinations (e.g., with stock quotes from newspapers and consolidated returns for the entity).
Phase II Exemptions (31 CFR 1020.315(b)(6)-(7))
Under the regulation, the definition of exempt persons includes "non-listed businesses" and "payroll customers" as defined in 31 CFR 1020.315(b)(6)-(7). Nevertheless, several businesses remain ineligible for exemption purposes; refer to 31 CFR 1020.315(e)(8) and the "Currency Transaction Reporting Exemptions Overview" section of this manual.
4. Determine whether the bank files a Designation of Exempt Person report electronically through the FinCEN E-Filing System to exempt a customer, as identified by management, from CTR reporting.
5. Determine whether the bank maintains documentation to support that the "non-listed businesses" it has designated as exempt from CTR reporting do not receive more than 50 percent of gross revenue from ineligible business activities.
6. Assess whether ongoing and reasonable due diligence is performed, including required annual reviews, to determine whether a customer is eligible for designation as exempt from CTR reporting. Customers must meet the following requirements to be eligible for exemption under the regulation:
- Have frequent95FinCEN has noted that when interpreting the term "frequently" for purposes of 31 CFR 1020.315(b)(6)(ii): "[Banks] may designate an otherwise eligible customer for Phase II exemption after the customer has within a year conducted five or more reportable cash transactions." Refer to 73 Fed. Reg. 74010, 74014 (December 5, 2008). currency transactions in excess of $10,000 (including withdrawals to pay domestic employees in currency in the case of a payroll customer).
- Be incorporated or organized under the laws of the United States or a state, or registered as and eligible to do business within the United States or a state.
- Maintain a transaction account at the bank for at least two months (or prior to the passing of two months' time if the bank has conducted a risk-based analysis of a customer that allows it to form and document a reasonable belief that the customer has a legitimate business purpose for conducting frequent large currency transactions).
7. On the basis of a risk assessment, prior examination reports, and a review of the bank’s audit findings, select a sample of Designation of Exempt Person (DOEP) reports from the bank to test compliance with the regulatory requirements (e.g., only eligible businesses are exempted and adequate supporting documentation is maintained).
8. On the basis of examination procedures completed, including transaction testing, form a conclusion about the ability of policies, procedures, and processes to meet regulatory requirements associated with currency transaction reporting exemptions.