bank secrecy act examination manual · currency and banking reports system ... 101 workprogram for...

Bank Secrecy ActExaminationManual

Second Printing, September 1997 Inquiries or comments relating to the contents of thismanual should be addressed to:

Director, Division of Banking Supervisionand Regulation

Board of Governors of the Federal Reserve SystemWashington, D.C. 20551

Copies of this manual may be obtained from:Publications ServicesDivision of Support ServicesBoard of Governors of the Federal Reserve SystemWashington, D.C. 20551

The price is $20.00 per copy. Remittance shouldbe payable to the Board of Governors of the FederalReserve System by check or money order, drawn ona U.S. bank; or by VISA or Master Charge. Updatesare available at an additional charge. For informa-tion about updates or to order by credit card, call202-452-3244.

Checklist of Supplements

This manual is kept up-to-date by periodic sup-plements. Use the following checklist to record

the filing of supplements. A break in continuitywill indicate a missing supplement.

SupplementNumber

SupplementDate Initials

SupplementNumber

SupplementDate Initials

Bank Secrecy Act ManualSupplement 1—September 1997

The following is a summary of the revisionsand/or additions that have been made to theFederal Reserve’s Bank Secrecy Act Exam-ination Manual since its initial distribution inJanuary, 1995. You may replace the entire con-tents according to Tabs.

TAB 100—WORKPROGRAM

Anti-Money Laundering Procedures

The examination workprogram has been revisedand is now entitled the ‘‘Financial Recordkeep-ing and Reporting Regulations Anti-MoneyLaundering Examination Workprogram.’’ Thechanges were made as a result of the MoneyLaundering Suppression Act of 1994 thatrequires the examination procedures of bankregulators to be enhanced to determine whethermoney laundering schemes are being utilized atthe financial institutions being examined. Spe-cific examination procedures lead the examinerto determine whether the institution maintainsadequate policies and procedures to identify andwhere appropriate, to report suspicious trans-actions related to possible money launderingactivities.

Exemptions

The Treasury’s interim exemption rules andassociated examination procedures are detailedin the Workprogram.

Funds Transfer Rules

The Workprogram incorporates the examinationprocedures regarding the recordkeeping rulesissued jointly by the Federal Reserve and theTreasury effective May 28, 1996. Procedures forexamining the Treasury’s travel rule, effectiveMay 28, 1996, are also included.

Monetary Instruments

Effective October 17, 1994, the Treasury nolonger requires the maintenance of a ‘‘monetaryinstrument log’’ for certain cash sales/purchases

of monetary instruments. The examination pro-cedures have been revised to reflect the changes.

Office of Foreign Assets Control

The Treasury’s Office of Foreign Assets Control(‘‘OFAC’’) administers laws that impose eco-nomic sanctions against, including the restric-tion of transactions with, certain foreign coun-tries, their nationals, or ‘‘specifically designatednationals.’’ The Workprogram includes exami-nation procedures to determine whether insti-tutions are complying with the OFACrequirements.

TAB 200—BANK SECRECY ACT

Regulation

The manual reflects the changes and/or amend-ments made to the Bank Secrecy Act throughAugust 31, 1997.

TAB 400—REPORTING FORMS

Currency Transaction Report

The revised Currency Transaction Report(‘‘CTR’’), effective October, 1995, has beenincluded to replace the rescinded CTR.

Report of International Transportationof Currency or Monetary Instruments

The revised Report of International Transpor-tation of Currency or Monetary Instruments(‘‘CMIR’’) effective September, 1997, has beenincluded to replace the rescinded CMIR.

Suspicious Activity Report

The new Suspicious Activity Report (‘‘SAR’’),effective April, 1996, is included in the Manual.

Bank Secrecy Act Manual September 1997Page 1

TAB 500—EXEMPTIONS

Interim Exemption Requirements

The Treasury’s ‘‘interim exemption rule,’’ effec-tive May, 1996, but not yet finalized, is included.

TAB 900—DATABASES

Currency and Banking ReportsSystem

Changes made effecting the Internal RevenueService’s Currency and Banking Reports Sys-tem are included.

Suspicious Activity Report System

Information pertaining to the access by regula-tory staff of the Suspicious Activity ReportSystem is included.

TAB 1000—SUSPICIOUSACTIVITIES

Suspicious Activity Reporting

The rules regarding the reporting of suspiciousactivity or fraud related matters using therescinded Criminal Referral Form have beenreplaced by the new Suspicious Activity Reportrules, effective April, 1996.

TAB 1100—PAYABLE THROUGHACCOUNTS

Information and examination procedures previ-ously unavailable at the January, 1995 printingof the Manual, is now included in this version.

TAB 1200—FOREIGN ACCOUNTS

U.S. Overseas Offices

Examination procedures for reviewing theoperations of U.S. overseas offices for anti-money laundering compliance are included.

TAB 1300—PRIVATE BANKING

A new section detailing sound practices inprivate banking has been added to this manual.

TAB 1400—SUPERVISORYDIRECTIVES

Private Banking

A new directive regarding private banking issueshas been added.

TAB 1500—OTHERINFORMATIONAL AREAS

Financial Action Task ForceRecommendations

Effective November, 1996, the Financial ActionTask Force (‘‘FATF’’) revised the 40 recommen-dations. The revised document is included.

Currency Transaction ReportQuestions and Answers

The Treasury’s document utilized to answercertain questions related to the revised CTRform, effective October, 1995, is included.

Funds Transfer Rules Questions andAnswers

The Federal Reserve’s/Treasury’s document uti-lized to answer certain questions related to thenew funds transfer recordkeeping and travelrules, effective May, 1996, is included.


Information regarding the Office of ForeignAsset Control is included.

Supplement 1—September 1997

September 1997 Bank Secrecy Act ManualPage 2

Interim Exemption Rule Questionsand Answers

The Treasury’s comments regarding the interimexemption rule are included.

Supplement 1—September 1997


Table of Contents

Section Section

000 INTRODUCTION

001 Introduction

100 WORKPROGRAM

101 Workprogram for FinancialRecordkeeping and Reportingof Currency and ForeignTransactions Examinations(Cover Page)

102 Financial Recordkeeping andReporting of Currency and ForeignTransactions Examination(Summary of Findings)

103 Financial Recordkeeping andReporting RegulationsExamination Workprogram

200 BANK SECRECY ACT ANDRELATED MATERIALS

201 Bank Secrecy Act

300 ADMINISTRATIVE RULINGS

301 Administrative Ruling 88-1302 Administrative Ruling 88-2303 Administrative Ruling 88-3304 Administrative Ruling 88-4305 Administrative Ruling 88-5306 Administrative Ruling 89-1307 Administrative Ruling 89-2308 89-3 Rescinded309 89-4 Rescinded310 Administrative Ruling 89-5311 Administrative Ruling 92-1312 Administrative Ruling 92-2

400 REPORTING FORMS

401 Currency Transaction Report (4789)402 Report of International Transportation

of Currency or MonetaryInstruments (4790)

403 Report of Cash Payments Over $10,000Received in Trade or Business(8300)

404 Currency Transaction Reportby Casinos (8362)

405 Report of Foreign Bank andFinancial Accounts (90-22.1)

406 Suspicious Activity Report

500 EXEMPTION HANDBOOK

501 Currency and ForeignTransactions Reporting Act—Exemption Handbook

502 Interim Exemption Rule

600 KNOW YOUR CUSTOMER

601 Know Your Customer

700 WIRE TRANSFERS

701 Operations

800 REGULATION H

801 Amendment to Regulation H—Procedures for Monitoring BankSecrecy Act Compliance

802 Internal Compliance Program

900 DATABASES

901 Internal Revenue Service Currencyand Banking Retrieval System

902 Suspicious Activity ReportDatabase

903 Federal Reserve EnforcementActions

904 FinCEN Advisories

1000 SUSPICIOUS ACTIVITIES

1001 Check List to Identify PotentialAbuses

1002 SAR Regulation

1100 PAYABLE THROUGHACCOUNTS

1101 Introduction1102 Examination Procedures


Section Section

1200 FOREIGN ACCOUNTS

1201 Report of Foreign Bank and FinancialAccounts

1202 Bank Secrecy Act Review for U.S.Overseas Examination Procedures

1300 PRIVATE BANKING

1301 Sound Practices Paper

1400 SUPERVISORYDIRECTIVES

1401 AD 93-56 (FIS) Treasury Rulings1402 SR 95-10 (FIS) Payable Through

Accounts1403 SR 97-19 (SUP) Private Banking

Activities

1500 OTHER INFORMATIONALAREAS

1501 Basle Committee Statementof Principles

1502 Financial Action Task Force 40Recommendations

1503 Currency TransactionReport Guidance

1504 Funds TransferQuestions/Answers

1505 Office of Foreign AssetControl (OFAC)

1506 Interim ExemptionQuestions/Answers

1600 WORKPAPERS

1601 Workpaper Content andRetention

Table of Contents


IntroductionSection 001

Federal Reserve System personnel prepared theBank Secrecy Act Examination Manual. Themanual contains Federal Reserve policies andprocedures designed to assist Federal ReserveBank examiners in the review of financial rec-ordkeeping practices and procedures of statemember banks and foreign financial institutionsoperating within the United States.

The manual reflects amendments to the BankSecrecy Act through 1997. Periodically, the

manual will be updated to reflect changes insupervisory policies and procedures. Accord-ingly, we solicit the input and contributions ofall supervisory staff and others in refining andmodifying its contents. Please address all corre-spondence to: Director, Division of BankingSupervision and Regulation, Board of Gover-nors of the Federal Reserve System, Washing-ton, D.C. 20551.


Workprogram for Financial Recordkeeping and Reporting ofCurrency and Foreign Transactions Examinations Section 101.0

Financial Institution

Location

Date of Examination

Bank Secrecy Act Examiner

Assisting Examiner(s)

Examination Opened

Examination Closed

Bank Secrecy Act ExaminerSignature Date

Examiner-In-ChargeSignature Date


Financial Recordkeeping and Reporting of Currencyand Foreign Transactions ExaminationSummary of Findings Section 102.0

Work ProgramProcedure Number Findings Institution Response

Findings Discussed With: Date:

Examiner Present:


Financial Recordkeeping and Reporting Regulations Anti-MoneyLaundering Examination Workprogram Section 103.0

Introduction

The Workprogram serves as a guide for theexamination of compliance with the BankSecrecy Act (31 USC 5311, et seq. and 31 CFRPart 103, et. seq. (‘‘BSA’’)); Regulation H,Section 208.14;1 and other related rules andregulations. In addition to ensuring that theinstitution is in compliance with applicable laws,rules, and regulations, an examiner should becognizant of any unusual or suspicious activi-ties. Activities of this nature, such as illegal actsor transactions conducted by employees or cus-tomers, may be an indication of general non-compliance in the institution.

The Money Laundering Suppression Act of1994 requires regulatory authorities to developexamination procedures to determine whethermoney laundering schemes are being conductedat the financial institutions being examined. TheWorkprogram serves as a tool to determinewhether financial institutions not only are incompliance with the technical reporting andrecordkeeping requirements of the BSA, but thatthe institutions have developed policies andprocedures to detect, deter and report unusual orsuspicious activities related to money launderng.2

While the Workprogram is designed to maxi-mize the efficiency of the review process (byusing a sampling or by requiring the institutionto perform an analysis), it is not designed to beall inclusive; therefore, specific situations orproblems identified while conducting examina-tions may require additional procedures thatwould not otherwise be required.

The Workprogram includes examination pro-cedures applicable to most situations that exam-iners encounter during a BSA and Regulation H,Section 208.14 compliance review. It is designedto lead an examiner through the compliance

review; therefore, the procedures must be fol-lowed numerically. Many procedures in theWorkprogram need to be performed only if anexaminer discovers problems or internal controlweaknesses. Consequently, if the Workprogramprocedures are not completed in numerical order,an examiner may perform more work than isnecessary to adequately assess an institution’soverall compliance.

Several procedures in the Workprogram requiresampling, which is either completed by anexaminer or by an institution at the direction ofthe examiner. Because the Workprogram wasdeveloped for use in examinations of varioussizes and types of banking organizations underFederal Reserve supervision, the time-frame ofthe sampling period varies depending on factorssuch as the type and size of the institution,the number of transactions the institution typi-cally performs in the normal course of business,whether there have been previous complianceproblems or problems are suspected, the strengthof internal controls and the audit function, andwhether the institution or its branches are lo-cated in an area known for money launderingactivities. The sample should be large enoughthat the examiner can adequately answer theWorkprogram procedure. For example, in alarge institution that handles a considerablenumber of transactions, a short sample time-frame that includes numerous transactions maybe sufficient to answer the Workprogram proce-dure. Likewise, in a small community bank, alonger sample period may be necessary to find asufficient number of transactions to sample. Theexaminer should document in the workpapersthe sampling time-frame along with support onhow it was determined.

In the column on the right hand side of theWorkprogram, provide a ‘‘yes,’’ ‘‘no,’’ or ‘‘notapplicable’’ response. Some instances may re-quire that you assign a ‘‘not reviewed’’ response.Additional space is also available in the columnto provide comments. Comments are typicallyrequired to provide additional information aboutthe deficiency when a ‘‘no’’ response is given.Providing a ‘‘no’’ answer in the column does notnecessarily signify that a violation must becited. However, numerous ‘‘no’’ responses maybe indicative of internal control weaknesses orother problems that may evidence noncompli-ance with the BSA and/or Regulation H, Section

1. On March 31, 1997, the Board published in theFederalRegistera notice of proposed rulemaking relating to Regula-tion H (see 62 FR 15272, 15280). In the proposal, the existingnumbering of 208.14 is to be renumbered to 208.63. As theproposal is not final, 208.14 will be used throughout thismanual.

2. The Department of Treasury’s Financial Crimes Enforce-ment Network (‘‘FinCEN’’), is providing to regulatoryauthorities and the financial community alike, periodic circu-lars regarding patterns and trends involving money launderingschemes. The FinCEN advisories are available via the Internetat the following address:

http://www.ustreas.gov/treasury/bureaus/fincen/advis.html


208.14. Numerous ‘‘no’’ responses should bediscussed with the examiner in charge to deter-mine an appropriate course of action.

Regulation H, Section 208.14 requires allbanks to develop a written compliance programthat must be formally approved by an institu-tion’s board of directors. The compliance pro-gram must (1) establish a system of internalcontrols to ensure compliance with the BSA;(2) provide for independent compliance testing;(3) identify individual(s) responsible for coordi-nating and monitoring day-to-day compliance;and (4) provide training for appropriate person-nel. Numerous ‘‘no’’ answers in the Workpro-gram may indicate noncompliance with one ormore of the Regulation H, Section 208.14requirements. For example, if numerous largecurrency transactions are discovered that werenot reported as required, it may indicate that theinstitution does not have effective internal con-trols, an effective compliance testing program,or an adequate training program. Violations ofRegulation H, Section 208.14, in most instances,will necessitate that formal supervisory actionincluding Cease and Desist Orders and civilmoney penalties, be initiated against the institu-tion as required by 12 U.S.C., Section 1818(s).

In situations where the institution has failed totake corrective action for deficiencies cited inprevious examinations, formal supervisory actionmay also be warranted. All instances of ‘‘repeat’’deficiencies or noncompliance with Regula-tion H, Section 208.14 compliance proceduresshould be discussed with an appropriate Officerat the Federal Reserve Bank after consultationwith the examiner in charge.

The first section of the Workprogram involvesoff-site planning. The remaining sections of theWorkprogram involve on-site examinationprocedures.

Off-Site Examination Planning

The purpose of the Examination Planning Sec-tion is to determine if the subject institutionexhibits a risk profile suggestive of: 1) noncom-pliance with the BSA; 2) ineffective internalcompliance procedures (Regulation H, Sec-tion 208.14); or, 3) engaging in possible moneylaundering activities. Identifying institutions withsuch profiles should enable the examiner to useresources more effectively.

Y N Comments

1. Do the findings in the previous examination reportindicate a general compliance with the BSA orRegulation H, Section 208.14? If not, briefly iden-tify the deficiencies.

2. If violations or serious deficiencies were noted,does correspondence indicate that corrective actionwas taken? If, because of previously noted deficien-cies, the institution was required to perform analy-ses of: (a) currency flows and the reporting of largecash transactions; (b) exemption limits; (c) salesof monetary instruments; (d) funds transfers; or(e) suspicious activities, were such analysesadequately performed and documented? Be sure toreview documentation.

3. Do the findings in the previous examination report,in areas other than BSA compliance, indicateadequate internal controls and audit procedures? (Ifnot, this may be indicative of deficiencies in theBSA compliance program).

Financial Recordkeeping and Reporting Regulations Anti-Money Laundering Examination Workprogram 103.0


Y N Comments

4. Does a check of the Suspicious Activity Reportdatabase reveal that there is suspicious or allegedillegal activity surrounding this institution? If not,determine whether such information should alterthe scope of the BSA examination. (Refer toBSAManual—Databases).

5. Does a listing of Currency Transaction Reports(CTRs) obtained from the Internal Revenue Service(IRS) database indicate that the institution or anybranch had a significant change in the total volumeof CTR filings compared to the previousexamination? (Refer toBSA Manual—Databases).

6. If cash services are provided to the institution by theReserve Bank, are Cash Flow Reports and/or Intel-ligence Analysis available? If so, do the reportsreveal unusual trends in volume and/or compositionof cash shipments to and from the Federal ReserveBank? (Refer toBSA Manual—Databases).

103.0 Financial Recordkeeping and Reporting Regulations Anti-Money Laundering Examination Workprogram


Internal Compliance Programs andProcedures

Regulation H, Section 208.14, requires thatfinancial institutions establish and maintainadequate internal procedures to assure and moni-tor compliance with the BSA (Refer toBSAManual—Regulation H).

Advisory #1

You should be aware that, even if an institutionmaintains in books and documents what appearsto be a viable internal compliance program, theinternal compliance program is, possibly, notfollowed by the institution. Specific violationsof the BSA, as may be discovered during thecourse of this compliance review, may evidencea lack, or the complete omission, of adequateinternal compliance procedures.

Advisory #2

The sophistication and comprehensiveness of

the institution’s internal compliance programshould be gauged by the type of activitiesengaged in by the institution and the quantity oftransactions subject to the BSA and related rulesand regulations. As an example, a ‘‘wholesale’’institution that conducts no cash transactionsneeds only to have an internal complianceprogram that ensures that should a coveredtransaction be presented to the institution, theinstitution’s employees will have sufficient edu-cation to understand that the transaction may besubject to Bank Secrecy Act requirements andthe employee has the means to obtain additionalinstructions from manuals or employees at otherbranches of the institution. As an alternative, aninstitution that conducts a retail operation needsto have specific and comprehensive internalcompliance procedures. It is your responsibilityto determine the appropriateness of the internalcompliance program based on the institution’sactivities. Keep in mind that all institutions,throughout the organization, should maintain aprogram to detect, and where necessary, reportunusual or suspicious activities possibly relatedto money laundering.

Y N Comments

7. As of the previous examination, had the institutionestablished adequate internal compliance programsand procedures as required by Regulation H, Sec-tion 208.14? If not, list the violations cited ordeficiencies noted.

8. Has the institution developed a written complianceprogram as required by Regulation H—Section208.14?

9. If applicable, does the written BSA complianceprogram, as required by Regulation H, provide forthe following:

a. A system of internal controls to ensure ongoingcompliance (Section 208.14(c)(1)).

b. Independent testing for compliance to be con-ducted by either bank personnel or an outsideparty. List person(s) designated to conductindependent testing (Section 208.14(c)(2)).



Y N Comments

c. Designation of a qualified individual(s)responsible for coordinating and monitoringday-to-day compliance. List individual(s)responsible for compliance and the appropriate-ness of qualifications (i.e. training, experience)(Section 208.14(c)(3)).

d. Training for appropriate personnel (Section208.14(c)(4)).

10. Was the compliance program approved by theinstitution’s board of directors and approval notedin the minutes? If a foreign institution, was thecompliance program approved at the highest levelof United States management as well as by thehome office board of directors?

11. Does the institution’s written compliance programinclude procedural guidelines for the detection,prevention and reporting of suspicious transactionsrelated to money laundering activities?

12. Does the institution’s compliance program includewritten procedural guidelines for meeting thereporting and recordkeeping requirements of theBSA regulations and provide for the following, asapplicable?

a. The filing of a report of each deposit, with-drawal, exchange of currency or other paymentor transfer, by, through or to the financialinstitution, which involves a transaction incurrency of more than $10,000 (CTR, IRSForm 4789) (31 CFR 103.22(a)(1)).

b. The maintenance of a centralized list containingeach exemption granted, with the supportinginformation prescribed in 31 CFR 103.22(f).Each exemption granted after October 27, 1986,shall be accompanied by the required statementand attendant language in 31 CFR 103.22(d)(31 CFR 103.22(b)(2)). (Refer to Advisory #5for further information regarding exemptions.)



Y N Comments

c. The filing of a report (U.S. Customs Form 4790)of each shipment of currency or other monetaryinstrument(s) in excess of $10,000 out of theUnited States or into the United States on behalfof the institution (not its customers), exceptvia common carrier, by, or to the institution,(31 CFR 103.23(a)). In most cases, this refers tothe institution’s cash shipments. (Refer toBSAManual—Administrative Ruling 88-2).

d. The filing of an annual report, Report of ForeignBank Financial Accounts, (Treasury Form 90-22.1) by the institution, where the institutionhas a financial interest in, or signature authorityover, bank, securities or other financial accountsin a foreign country prior to April 8, 1987.(Settlement between branches and affiliates viaDue To/Due From (‘‘Nostro’’) accounts areexempt from filing 90-22.1) (Section 103.24).(Refer toBSA Manual—Foreign Activities.)

e. The maintenance of required records for eachmonetary instrument purchase/sale for currencyin amounts between $3,000 and $10,000 inclu-sive, with the supporting information prescribedin 31 CFR 103.29 (31 CFR 103.29(a)).

13. Do the procedural guidelines include provisions forthe retention of either the original, microfilm, copyor other reproduction of the items listed below, andis each item retained for a period of at least fiveyears:

a. Each Currency Transaction Report (CTR, IRSForm 4789).

b. Documentation to support each exemption anda requirement to retain such documentation fora period of five years from the date it wasdiscontinued (31 CFR 103.22(d)).

c. Each extension of credit in an amount over$10,000, except when the extension is securedby an interest in real property (31 CFR103.33(a)).



Y N Comments

d. Each advice, request, or instruction receivedregarding a transaction which results in thetransfer of funds, currency, checks, investmentsecurities, other monetary instruments or credit,of more than $10,000, to a person, account orplace outside the United States (31 CFR103.33(b)).

e. Each advice, request, or instruction given toanother financial institution or other personlocated within or outside the United States,regarding a transaction intended to result in atransfer of funds, currency, checks, investmentsecurities, other monetary instruments or credit,of more than $10,000, to a person, account orplace outside the United States (31 CFR103.33(c)).

f. Each payment order that a financial institutionaccepts as an originator’s, intermediary, or ben-eficiary’s bank with respect to a funds transferin the amount of $3,000 or more (31 CFR103.33(e)).

g. A list of each individual, including the name,address and account number, who holds adeposit account for which the bank has beenunable to secure a taxpayer identification num-ber from that person after making a reasonableeffort to obtain the number (31 CFR103.34(a)(1)(ii)).

h. Each document granting signature authorityover each deposit account (31 CFR 103.34(b)(1)).

i. Each statement, ledger card or other record ofeach deposit account showing each transactioninvolving the account, excepting those itemslisted in 31 CFR 103.34(b)(3) (31 CFR103.34(b)(2), (3) and (4)).

j. Each document relating to a transaction of morethan $10,000 remitted or transferred to a person,account or place outside the United States (31CFR 103.34(b)(5) and (6)).

k. Each check or draft in an amount in excess of$10,000 drawn on or issued by a foreign bankwhich the domestic bank has paid or presentedto a nonbank drawee for payment (31 CFR103.34 (b)(7)).



Y N Comments

l. Each item relating to any transaction of morethan $10,000 received on any one occasiondirectly and not through a domestic financialinstitution, from a bank, broker or dealer inforeign exchange outside the United States(31 CFR 103.34(b)(8) and (9)).

m. Records prepared or received by a bank in theordinary course of business which would beneeded to reconstruct a demand deposit accountand to trace a check in excess of $100 depositedin such demand deposit account (31 CFR103.34(b)(10)).

n. A record containing the name, address andtaxpayer identification number, if available, ofany person presenting a certificate of deposit forpayment, as well as a description of the instru-ment and the date of the transaction(31 CFR 103.34(b)(12).

o. Each deposit slip or credit ticket reflecting atransaction in excess of $100 or the equivalentrecord for direct deposit or other wire transferdeposit transactions. The slip or ticket shallrecord the amount of any currency involved(31 CFR 103.34(b)(13)).



Internal Audit/Independent Review

Regulation H, Section 208.14, requires thatfinancial institutions provide for independent

testing for BSA compliance to be conducted bybank personnel or an outside party (Refer toBSA Manual—Regulation H).

Y N Comments

14. Review the institution’s written internal audit/independent review procedures and determine thatthe internal audit function provides for review forcompliance with the BSA and related anti-moneylaundering laws and regulations. If the institutiondoes not have an internal audit function, determinethat a program of management reviews or selfaudits has been established which include therequirements of the BSA. Do the audit procedures/independent reviews:

a. confirm the integrity and accuracy of the systemsfor the reporting of large currency transactions?

b. include a review of tellers’ work and Forms4789 and 4790?

c. confirm the integrity and accuracy of the insti-tution’s recordkeeping activities, as detailed inWorkprogram procedure 12?

d. encompass a test of adherence to the in-houserecord retention schedule, as detailed in Work-program procedure 13?

e. include steps necessary to ascertain that theinstitution is maintaining documentation ofexempt customers as required by the regulations?

f. provide a test of the reasonableness of theexemptions granted? (non-interim)

g. include steps necessary to ascertain that theinstitution is conducting an ongoing trainingprogram?

h. require the auditor to ascertain that the institu-tion has filed a Report of Foreign Bank Finan-cial Accounts, (Treasury Form 90-22.1) declar-ing interests in foreign financial accounts?



Y N Comments

i. include steps necessary to ascertain that theinstitution has procedures in place for obtainingand maintaining required information for thesale/purchase of monetary instruments for cashin amounts between $3,000 and $10,000 inclu-sive, and that appropriate customer identifica-tion measures are in place?

15. If there were any violations or deficiencies notedfrom the previous examination, has your reviewdetermined that the violations or deficiencies havebeen corrected?

Advisory #3

Evidence of violations of, or noncompliancewith, specific provisions of the BSA may beindicative of a systemic failure of the internalaudit program. As you complete the followingexamination procedures, you must determinewhether apparent violations were caused bymisinterpretations, oversight, or technical mat-ters rather than by an inadequate complianceprogram. If you feel the institution’s complianceprogram is inadequate, you may want to enhance

your BSA examination (i.e. use a larger sam-pling of transactions).

Education

Regulation H, Section 208.14 requires that finan-cial institutions provide BSA training for appro-priate personnel, including, but not limited to,tellers, customer service representatives, lendingofficers, private and personal banking officersand all other customer contact personnel (Referto BSA Manual—Regulation H).

Y N Comments

16. Review the institution’s program for educatingappropriate employees regarding the BSA to deter-mine if the established program includes thefollowing:

a. Reporting of large currency transactions.

b. Exemptions from large currency transactionreporting.

c. Identifying and reporting of suspicious activityor alleged criminal conduct.

d. Record retention requirements.

e. Sale/purchase of monetary instruments.

f. Review of internal policies/procedures.



Y N Comments

g. Examples of money laundering cases and themethods in which activities can be detected/resolved/reported.

h. Overview of the different forms that moneylaundering can take (deposit accounts, wiretransfer loans, etc.).

i. Wire (fund) transfer activity.

j. ‘‘Know Your Customer’’ procedures.

17. Review the scope and frequency of training meet-ings to determine what importance managementplaces in ongoing education and training. In review-ing the institution’s policies and procedures, deter-mine the:

a. Appropriateness of the scope and frequency.

b. Level of compliance.

18. Question the BSA compliance individual(s) andother operations personnel (i.e., tellers, platformofficers, branch managers) to determine whetherthey are sufficiently knowledgeable concerning theBSA and operating procedures to assure compliance.Does this training address money launderingschemes?

19. Interview personnel from other areas of the institu-tion which deal in currency such as trust, loan andinternational departments, private banking units,discount brokerage units, cash control centers andspecialized foreign exchange units to determine thatthey are knowledgeable regarding the BSArequirements, possible money laundering schemes,and the identification of suspicious or unusualactivities. List in the ‘‘Comments’’ section of thispage the personnel interviewed in both Workpro-gram procedures number 18 and 19, and documenttheir level of knowledge of BSA-related issues andhow they acquired this knowledge.

20. If there were any violations or deficiencies regard-ing education noted during the previous examina-tion, has your review determined that the violationsor deficiencies have been corrected?



Anti-Money Laundering Program

Advisory #4

A financial institution’s compliance with theBSA should include a thorough understandingof money laundering and its implication on the

institution. In the review of the BSA complianceprogram, the examiner should determine whetherwritten policies and procedures have been imple-mented covering the detection and prevention ofmoney laundering activities. If no such policiesand procedures exist, make reference to this inthe report of examination.

Y N Comments

21. If applicable, do the anti-money laundering policiesaddress the following:

a. define money laundering in its different forms(e.g. placement, layering, integration).

b. provide compliance with BSA and related anti-money laundering laws and regulations.

c. establish a ‘‘Know Your Customer’’ program.

d. identify high risk activities, businesses andforeign countries (those commonly associatedwith money laundering).

22. If applicable, do the anti-money laundering policiesextend to the following institution operations:

a. retail operations.

b. trust department.

c. loan department.

d. private banking operation. (Refer toBSAManual—Private Banking.)

e. sale of monetary instruments.

f. wire transfer room.

g. teller and currency operations.

h. safe deposit box activity.

i. international department.

j. correspondent banking area.

k. discount brokerage department.

l. subsidiary activities (i.e. money transmitter/check cashier).

m. section 20 operations.



Y N Comments

23. Determine whether management has implemented ahigh level of internal controls to minimize the riskof money laundering. These controls should include,but not be limited to, the following:

a. money laundering detection procedures

b. identification and monitoring of non-bank finan-cial institutions that are depositors of the insti-tution and that engage in a high volume of cashactivity (i.e. money transmittors and check cash-ing businesses).

c. periodic account activity monitoring.

d. internal investigations, monitoring and report-ing of suspicious transactions.

Exemptions

Advisory #5

As of July 1, 2000, new Treasury exemptionprocedures allowing financial institutions to

exempt transactions of certain businesses fromthe requirement to report transactions in cur-rency in excess of $10,000 (Currency Transac-tion Report (CTR)) became fully effective. AfterJuly 1, 2000, only exemptions granted pursuantto the new exemption procedures will be valid.

Y N Comments

24. Has the institution designated any ‘‘exempt per-sons’’ as defined in the regulations?

If no, the examiner should waive the following stepsand proceed to the next section of the Work Pro-gram. If yes, answer the following questions:

25. Does the bank have sufficient procedures related toexemptions?

26. Does the bank have adequate and knowledgeablepersonnel sufficient to maintain the exemptionprocess?

27. Does the bank maintain appropriate and sufficientdocumentation to support each exemption?


Bank Secrecy Act Manual July 2000Page 13

Y N Comments

Answer the following questions with respect to eachexempt person. If the bank has more than 50 exemptpersons, a reasonable sample should be selected.

28. Does the bank take appropriate steps to adequatelydetermine and verify the eligibility of exemptions?

29. Do all Phase I exemptions meet the establishedcriteria?

a. Bank

b. Government Agency

c. Listed Business

d. Subsidiary of a Listed Business

30. Do all Phase II ‘‘non-listed business’’ exemptionsmeet the established criteria?

a. Maintained a transaction account with the bankfor at least 12 months?

b. Frequently engaged in currency transactions inexcess of $10,000?

c. Is incorporated or organized under US or Statelaw or is registered and is eligible to do businesswithin the US or a State?

31. Do all Phase II ‘‘payroll customer’’ exemptionsmeet the established criteria?

a. Maintained a transaction account with the bankfor at least 12 months?

b. Operates a firm that regularly withdraws morethan $10,000 in order to pay its US employeesin currency?

c. Is incorporated or organized under US or Statelaw or is registered and is eligible to do businesswithin the US or a State?

32. For each exempt person, has the bank filed a‘‘Designation of Exempt Person’’ form completelyand within 30 days of the first reportable transactionthat was exempted?


July 2000 Bank Secrecy Act ManualPage 14

Y N Comments

33. For Phase II exemptions, has the bank filed a‘‘Designation of Exempt Person’’ biennially byMarch 15 beginning the second calendar yearfollowing the original designation?

34. Does the bank review and verify each exemption atleast annually?

35. Are the volumes, amounts and frequency of thelarge currency transactions for each exempt personconsistent with what is normal and expected andcommensurate with lawful activity?

36. Does the bank have a system to monitor thecurrency transactions of exempt persons for suspi-cious activity?

37. Is the monitoring system adequate to identify sus-picious activity?

38. Has the bank’s internal audit department reviewedthe exemption process?

39. Have there been any outstanding issues involvingexemptions and if so, have they been resolved?


Bank Secrecy Act Manual July 2000Page 15

Advisory #6

If the answers to Workprogram procedures 24through 39 are substantially unsatisfactory, you(or you may direct the institution to do so)should perform Workprogram procedures 40 to42. As an alternative, you may wish to perform

a sampling of the Workprogram procedures 40to 42 and then instruct the institution to com-plete the remainder of the review for thesetwo Workprogram procedures. If answers to 24through 39 are generally satisfactory, you mayproceed to the Know Your Customer section.

Y N Comments

40. Review of Statements of Accounts

a. Obtain customer statements of account for asixty day period for all exempted customers.

b. Review customer statements of account to deter-mine whether any daily deposit or withdrawalamounts (either individual amounts or aggre-gated amounts) exceed $10,000. (The amountson the statements of account may include cashand/or checks).



Advisory #7

If a customer’s cash deposit or withdrawalamounts on the statements of account do notexceed $10,000 on a regular and frequent basis(refer to BSA Manual—Exemption Handbookfor meaning of ‘‘regular and frequent’’) thecustomer does not qualify for an exemption

status. (Note that the $10,000 limitation refers tocash only. The information may not be readilyavailable when reviewing the statement ofaccount). Discuss the customer’s status withinstitution management. Workprogram proce-dures 41 and 42 regarding Review of Depositsand Withdrawals is not required for these ineli-gible customers.

Y N Comments

41. Review of Deposits

a. Obtain a hard copy of deposit tickets for cus-tomer accounts to be tested. Actual deposittickets may be available if the institution doesnot mail the deposit tickets back to the cus-tomer. If actual deposit tickets are not available,request that the institution print a hard copy ofdeposit tickets from microfilm or microfiche.

b. Determine whether the cash portion of thedeposits is sufficient to qualify the customer foran exemption based upon the Internal RevenueService’s ‘‘regular and frequent’’ requirementfor a deposit exemption.

c. Determine whether established dollar limits arereasonable by reviewing the customer’s cashdeposit activity. Discuss any unreasonable dol-lar limits with institution management.



Advisory #8

Exemption procedures permit unilateral exemp-tion withdrawals for payroll purposes from anexisting account by an established depositorwho is a United States resident and operates afirm that regularly withdraws more than $10,000

in order to pay its employees in currency. Theexemption is limited to withdrawals by employ-ers that actually pay employees with the cur-rency withdrawn. The exemption is not avail-able to employers who pay employees by checkand then offer a check cashing service to theemployees.

Y N Comments

42. a. Determine the method used by exempt custom-ers to withdraw currency in excess of $10,000.

• If checks payable to ‘‘cash’’ are used, reviewcanceled checks cleared during the currentstatement cycle and identify those items andamounts.

• If counter currency withdrawal tickets orcounter checks are used, review tickets orchecks and identify those items and amounts.

b. Determine whether the cash portion of thewithdrawals is sufficient to qualify the customerfor an exemption based upon Treasury’s ‘‘regu-lar and frequent’’ requirement for a withdrawalexemption.

c. Determine whether established dollar limits arereasonable by reviewing the customer’s cashwithdrawal activity. Discuss any unreasonabledollar limits with institution management.



Advisory #9

Department of the Treasury Administrative Rul-ing 88-3 states that banks may not exempt ‘‘cashback’’ transactions (transactions involving thedeposit of checks where a portion of the depositis remitted in cash) from the CTR reportingrequirements. Therefore, cash received by thecustomer on ‘‘cash-back’’ transactions shouldnot be included in the exemption limit review.(Refer toBSA Manual—Administrative Rulings).

Know Your Customer Policy

Advisory #10

While ‘‘Know Your Customer’’ policies andprocedures are not currently required by regula-tion, institutions should strongly be encouragedto develop and maintain such policies and pro-cedures (Refer toBSA Manual—Know YourCustomer Policy Standards).

Y N Comments

43. Does the bank have policies and procedures whichrequire that ‘‘reasonable efforts’’ be made to ascer-tain the true identity of individual customers and/orthe stated business purpose of each commercialenterprise with whom the bank conducts business(Refer to BSA Manual—Know Your CustomerPolicy Standards)?

44. Does the institution’s ‘‘Know Your Customer’’policy include the following, when opening anaccount:

Personal Accounts

a. Procurement of proper identification (e.g., driv-er’s license with photograph, U.S. passport,etc.)?

b. Consideration of customer’s residence or placeof business?

c. Consideration of source of funds/wealth used toopen the account?

d. Check with service bureau, if applicable, forundesirable situations involving customer (kit-ing, NSF, etc.)?

Business Accounts

e. Verification of legal status of business (i.e., soleproprietorship, partnership, etc.)?

f. Verification of name of business, if applicable,with a reporting agency?

g. Verification that business exists and is conduct-ing the stated business?



Y N Comments

h. For foreign business accounts, is there proofthat the business is registered in the country oforigin (e.g. articles of incorporation, etc.)?

i. Procurement of the following information forlarge commercial accounts:• Financial statement?• Description of customer’s principal line of

business?• Description of business operations, i.e., retail

vs. wholesale?

45. Does the bank’s employee education training pro-gram provide detailed instruction in the identifica-tion and reporting of ‘‘suspicious’’ transactions? Ano answer may indicate a training deficiency andshould be so noted in question #16 (Refer toBSAManual—Suspicious Activities).

46. Does the bank have adequate ongoing monitoringsystems in place to identify ‘‘suspicious’’ transactions(structuring, concentration accounts, transactionsinconsistent with the nature of a customer’s statedbusiness purpose, unusual wire transfer activities)?

47. Does the bank have adequate testing of its systemsto identify suspicious transactions?

48. If the institution uses fictitious names for customerson the general ledger or other institution docu-ments, does the institution maintain files containingthe customers’ real names and other identifyinginformation and does the institution have knowl-edge of these customers’ activities (The use offictitious names is customarily found in private orforeign banking)?



Currency Flows and Reporting of Large Cash Transactions

Y N Comments

49. Review the cash totals shipped to and received fromthe Federal Reserve Bank, correspondent banks, orbetween branch offices for a reasonable period oftime (generally no less than three months). Youshould determine, through discussion with manage-ment, the cause of any unusual activity noted (i.e.material variance in totals of currency shipped orreceived or large denomination currency exchanged).You should also determine if the volume of CTRfilings during the period is consistent with anychanges in the patterns of cash activity. (Refer toBSA Manual—Databases).

Advisory #11

The sample size of CTRs you should reviewwill depend upon several factors such as thesize and location of the institution, the detailand accuracy of reports, and your comfort level

with the institution’s internal control proce-dures. If the institution has an automated systemfor identifying large currency transactions,you should proceed to Workprogram pro-cedure 50. If not, proceed to Workprogramprocedure 51.

Y N Comments

50. Ascertain whether the bank has an automated sys-tem in place to capture cash transactions (individualand/or multiple transactions) in excess of $10,000on the same business day by or on behalf of thesame individual, or by account. Determine whetherthe internal audit/independent review has ade-quately tested the accuracy and validity of theautomated large transaction identification systemand that the system is comprehensive with regard toall points of cash entry and exit. Determine whetherthe discount brokerage, private banking, trust, orany other departments within the bank engage incurrency transactions subject to the regulations, andif so, that aggregation systems cover such activities.If the system has not been verified, proceed toADVISORY #13. You should also perform theprocedures contained in Workprogram procedures52 and 53.



Y N Comments

51. If the bank does not make use of an automated largetransaction identification or aggregation system,does the internal audit program or other indepen-dent review include a sample test check of tellers’cash proof sheets or tapes to determine if large cashtransactions are being reported? If not, proceed toADVISORY #13. You should also perform theprocedures contained in Workprogram procedures52 and 53.

52. Review a sample of completed CTRs, whether hardcopy or from computer generated filings, to deter-mine that:

a. CTRs are properly completed in accordancewith Internal Revenue Service instructions.

b. Transaction amounts are consistent with thetype and nature of business or occupation of thecustomer.

c. CTRs are filed for large cash transactions iden-tified by tellers’ proof sheets, automated largecurrency transaction system, or other type ofaggregation system, unless an exemption existsfor the customer. However, CTRs must be filedfor customers who exceed their exemptionlimits.

d. CTRs are filed within 15 calendar days after thedate of the transaction (25 days if magneticallyfiled).

53. Review any correspondence received from theInternal Revenue Service relating to incorrect orincomplete CTRs and determine whether the insti-tution has taken appropriate corrective action.



Advisory #12

If the review of the bank’s handling of currencyflows and large cash transactions is satisfactory,proceed to the funds transfer section of theWorkprogram. If the review was not satisfac-tory, or deficient in any respect, proceed toADVISORY #13.

Advisory #13

If the bank’s internal audit/independent reviewhas not sufficiently tested the validity of theautomated or manual systems to identify largecurrency transactions (i.e. performed a test checkof tellers’ proof sheets for large cash transac-tions), the bank may be in violation of Regula-tion H, Section 208.14. The examiner in chargeshould be notified that the integrity of thereporting system for large currency transactionscannot be verified. Depending upon the circum-stances, the examiner in charge must choose oneof the following options:

• The examiner in charge may instruct thebank to perform a self-assessment of itscompliance with the reporting requirementsof BSA. Specifically, the bank must conducta review of its cash activities since the pre-vious examination ‘‘sufficient in scope’’ tosatisfy the examiner that no other violationsof the BSA have occurred. The scope of sucha review should include a detailed test checkof each teller’s cash proof sheets since theprevious BSA examination. The bank mustprovide a report to the examiner detailing thescope of the review (i.e. number of days ofteller’s work reviewed and the number oftellers reviewed) and the findings that resultfrom the review. (The report from the insti-tution should, at a minimum, include anypreviously unreported large currencytransactions.)

• Where you suspect willful nonreporting ofviolations and an attempt to cover up suchtransactions, then you should perform Work-program procedures 54 through 58.

Y N Comments

54. Review tellers’ cash proof sheets for suspectednonreporting of large currency transactions forperiods of time of suspected violations.

55. If the bank has an automated system in place tocapture individual or multiple cash transactions ofless than $10,000, review an appropriate sample oftransactions to ascertain the following information.

a. Evidence of structured transactions.

b. Evidence of ‘‘concentration accounts’’ (accountswhich have frequent cash deposits aggregatingless than $10,000 on any business day, andrelatively few transfers of large amounts out ofthe accounts, by check or wire).

c. Customers with frequent cash transactions ofless than $10,000 who have not provided taxidentification numbers.

d. Customers with frequent cash transactions thathave provided either a foreign address or postoffice box as an address or have requested thatthe bank hold monthly statements.

e. Other suspicious or unusual activities.



Y N Comments

56. If available, obtain copies of the following inter-nally generated reports for review:

a. Suspected Kiting Reports—These reports iden-tify excessive activity in accounts and should bereviewed for cash activity. (The account profileof an account used for money laundering can besimilar to that of an account used for checkkiting, i.e. high volume of activity, matchingdeposits and withdrawals, low average balancesin relation to activity.)

b. Demand Deposit Activity Reports—Thesereports cover all customer and employeeaccounts. They generally show daily balancesand accumulate deposits and withdrawals over a30-day period. Careful review will show accountsthat have changed, either in average balance orin numbers of transactions.

c. Large Transaction or Cash-In and Cash-OutReports—Most institutions prepare reports ofdeposits and withdrawals, either in cash or bycheck that exceed a certain amount that is lessthan the over $10,000 reporting requirement.Such reports can help identify customers whomay be structuring transactions to avoid CTRreporting or who have unusual or suspiciousactivity in their accounts.

d. Incoming and Outgoing Wire Transfer Logs—These logs can identify transfers of funds out ofthe country or to remote banks, transfers fundedby cashier’s checks and/or money orders inamounts under the CTR filing threshold (over$10,000) and other suspicious patterns for non-customers as well as accountholders. Addition-ally, review incoming and outgoing facsimilelogs for payment instructions related to fundstransfers.

e. Loans Listed by Collateral—Review for ‘‘sig-nificant’’ loans collateralized by cash (certifi-cates of deposit, bank accounts). Review situa-tions in which collateral was received by fundstransfer and the collateral, such as certificates ofdeposits, are from offshore institutions. Inquireas to the purpose and terms of loans securedlargely with cash and whether payments onsuch loans are often received in cash, if at all.Look for loans from which the proceeds areimmediately used to purchase CD’s.



Y N Comments

57. Obtain copies of the bank statement for the institu-tion’s major correspondent bank for a period of atleast two months, together with reconcilement sheetsand general ledger sheets covering the same period.Review large transactions reflected on either theinstitution’s or the correspondent’s records to deter-mine its nature, as indicated by copies of credit ordebit advices, or general ledger tickets. Note thefollowing items and determine the reason(s) forsuch transactions:

a. Advice of credit from a correspondent bank thatcash has been transmitted to the correspondentfor credit to the account of the customer initi-ating the cash shipment on the books of theinstitution under examination.

b. Cashier checks, money orders or similar instru-ments drawn on other institutions in amountsunder $10,000, more than one of which havebeen deposited into the same deposit account,or into accounts controlled by the same person,at the institution under examination, and possi-bly transferred elsewhere in bulk amounts.Traces of such transactions may be found incorrespondent account statements, customeraccount records or in telex records. Note whetherthe instruments under $10,000 are sequentiallynumbered.

58. Review incoming mail of the institution to deter-mine if the institution is receiving currency depositsvia mail, courier services or internal deliveries.Does the institution have procedures to ensure thatCTRs are filed and proper records are maintained?



Funds Transfers (Refer toBSA Manual—Wire Transfer Operations)

Advisory #14

If this Workprogram is being used for institu-tions other than commercial banks, foreignbranches, Edge Act corporations and agreement

corporations, refer to 31 CFR 103.33 (e) and (f)for the applicable requirements. Also, a copy ofthe new wire transfer rules is located in the BSARegulations 31 CFR 103.11 and 103.33.

Y N Comments

59. Is there adequate separation of duties or compen-sating controls to ensure proper authorization forsending and receipt of transfers, correct posting toaccounts and an audit trail of activities?

60. Does the institution accept cash for funds transfersand, if so, does the institution require identification,maintain documentation, and file CTRs, ifapplicable?

61. Does the institution send or receive fund transfersto/from financial institutions in other countries,especially countries with strict privacy and secrecylaws, and, if so, are amounts, frequency, and coun-tries of origin/destination consistent with the natureof the business or occupation of the customer?

62. Does the institution have procedures to monitor foraccounts with frequent cash deposits and subse-quent wire transfers of funds to a larger institutionor out of the country?



Responsibilities for Originating Banks

Y N Comments

63. For funds transfer originations of $3,000 or more,does the institution retain the following records(this information may be with the payment order orin the institution’s files if the originator has anestablished relationship with the institution1) (31CFR 103.33(e)(1)(i))

a. The name and address of the originator;

b. The amount of the funds transfer;

c. The date of the funds transfer;

d. Any payment instructions received from theoriginator with the payment order;

e. The identity of the beneficiary’s bank; and

f. As many of the following items as are receivedwith the payment order:2

(1) The name and address of the beneficiary;

(2) The account number of the beneficiary; and

(3) Any other specific identifier of thebeneficiary.

64. For funds transfers of $3,000 or more for origina-tors that do not have an established relationshipwith the institution,1 in addition to the requirementsin question 63:

a. If the payment order is made in person, does theinstitution verify the required noncustomer iden-tification3 and retain a record of this verifiedinformation? [31 CFR 103.33(e)(2)(i)]

1. A customer has an established relationship with a financial institution if the customer has a loan, deposit,or other asset account, or is a person with respect to which the institution has on file the person’s name andaddress, as well as taxpayer ID number, or, if none, alien identification number or passport number and countryof issuance, and to which the institution provides financial services relying on that information.

2. For funds transfers effected through the Federal Reserve’s Fedwire funds transfer system, only one of theitems is required to be retained, if received with the payment order, until such time as the bank that sends theorder to the Federal Reserve Bank completes its conversion to the expanded Fedwire message format.

3. Information required from noncustomers includes the name and address; the type of identificationreviewed; and the number of the identification document (e.g., driver’s license); as well as a record of theperson’s taxpayer identification number (e.g.,social security or employer identification number) or, if none, alienidentification number or passport number and country of issuance; or a notation in the record of the lack thereof).



Y N Comments

b. If the institution has knowledge that the personplacing the payment order is not the originator,does the institution obtain and retain a record ofthe originator’s taxpayer identification number(e.g., social security or employer identificationnumber) or, if none, alien identification numberor passport number and country of issuance,if known by the person placing the order, ora notation in the record of the lack thereof?(31 CFR 103.33(e)(2)(i)) Does the institutionverify the identity of the person placing theorder on behalf of a third party?

c. If the payment order is not made in person, doesthe institution obtain and retain a record ofname and address of the person placing thepayment order, as well as the person’s taxpayeridentification number (e.g., social security oremployer identification number) or, if none,alien identification number or passport numberand country of issuance, or a notation in therecord of the lack thereof, and a copy or recordof the method of payment (e.g., check or creditcard transaction) for the funds transfer? (31CFR 103.33(e)(2)(ii))

65. Is the information that the institution must retain fororiginators retrievable by reference to the name ofthe originator? If the originator is an establishedcustomer of the institution and has an account usedfor funds transfers, is the information also retriev-able by account number?4 (31 CFR 103.33(e)(4))

66. For transmittals of funds of $3,000 or more, doesthe institution include in the transmittal order5 (31CFR 103.33(g)(1)):

a. The name and, if the payment is orderedfrom an account, the account number of thetransmittor?

b. The address of the transmittor, except for trans-mittal orders through Fedwire until such time asthe bank that sends the order to the FederalReserve Bank completes its conversion to theexpanded Fedwire format;

4. Account number being the actual account used in the funds transfer transaction at the time of the transfer.If the institution has merged with another financial institution, the transfer must be retrievable by the old accountnumber.

5. See 31 CFR Part 103, Section 103.11 for definitions of terms.



Responsibilities for Intermediary Banks

Y N Comments

c. The amount of the transmittal order;

d. The date of the transmittal order;

e. The identity of the recipient’s financial institu-tion;

f. As many of the following items as are receivedwith the transmittal order:2

(1) The name and address of the recipient;

(2) The account number of the recipient; and

(3) Any other specific identifier of the recipi-ent; and either the name and address ornumeric identifier of the transmittor’s finan-cial institution.

67. For funds transfers of $3,000 or more, if theinstitution is acting as an intermediary bank, doesthe institution retain either the original or a micro-film, other copy, or electronic record of the paymentorder? (31 CFR 103.33(e)(1)(ii))

68. For transmittals of funds of $3,000 or more, doesthe institution include in the transmittal order to thenext receiving financial institution the following, ifreceived from the sender4 (31 CFR 103.33(g)(2)):

a. the name and account number of the transmittor;

b. The address of the transmittor, except for trans-mittal orders through Fedwire until such time asthe bank that sends the order to the FederalReserve Bank completes its conversion to theexpanded Fedwire format.

c. The amount of the transmittal order;

d. The date of the transmittal order;

e. The identity of the recipient’s financialinstitution;


4. Account number being the actual account used in the funds transfer transaction at the time of the transfer.If the institution has merged with another financial institution, the transfer must be retrievable by the old accountnumber.



Responsibilities for Beneficiary Banks

Y N Comments

f. As many of the following items as are receivedwith the transmittal order:2

(1) The name and address of the recipient;

(2) The account number of the recipient; and

(3) Any other specific identifier of the recipi-ent; and either the name and address ornumeric identifier of the transmittor’s finan-cial institution.

69. For each payment order of $3,000 or more that aninstitution accepts as a beneficiary’s bank, does theinstitution retain either the original or a microfilm,other copy, or electronic record of the paymentorder? (31 CFR 103.33(e)(1)(iii))

70. In addition to the requirements in question 68, forpayment orders of $3,000 or more received for abeneficiary that does not have an established rela-tionship with the institution:1

a. If the proceeds are delivered in person to thebeneficiary or its representative or agent, doesthe beneficiary’s bank verify the identity of theperson receiving the proceeds and obtain andretain a record of that information?3 (31 CFR103.33(e)(3)(i))

1. A customer has an established relationship with a financial institution if the customer has a loan, deposit,or other asset account, or is a person with respect to which the institution has on file the person’s name andaddress, as well as taxpayer ID number, or, if none, alien identification number or passport number and countryof issuance, and to which the institution provides financial services relying on that information.


3. Information required from noncustomers includes the name and address; the type of identificationreviewed; and the number of the identification document (e.g., driver’s license); as well as a record of theperson’s taxpayer identification number (e.g.,social security or employer identification number) or, if none, alienidentification number or passport number and country of issuance; or a notation in the record of the lack thereof).



Y N Comments

b. If the institution has knowledge that the personreceiving the proceeds is not the beneficiary,does the institution obtain and retain a record ofthe beneficiary’s name and address, as well asthe beneficiary’s taxpayer identification number(e.g., social security or employer identificationnumber) or, if none, alien identification numberor passport number and country of issuance, ifknown by the person receiving the proceeds, ora notation in the record of the lack thereof? (31CFR 103.33(e)(3)(i)) Does the institution verifythe identity of the individual receiving the fundson behalf of a third party?

c. If the proceeds are delivered other than inperson, does the institution retain a copy of thecheck or other instrument used to effect pay-ment, or the information contained thereon, aswell as the name and address of the person towhich it was sent? (31 CFR 103.33(e)(3)(ii))

71. Is the information that the institution must retain forbeneficiaries retrievable by reference to the name ofthe beneficiary? If the beneficiary is an establishedcustomer of the institution and has an account usedfor funds transfers, is the information also retriev-able by account number? (31 CFR 103.33(e)(4))



Purchases/Sales of MonetaryInstruments

Section 103.29 of the BSA requires that finan-cial institutions maintain certain informationregarding sales in currency of bank checks ordrafts, cashier’s checks, money orders or trav-eler’s checks for $3,000 to $10,000, inclusive.(Effective October 17, 1994, financial institu-tions are no longer required to maintain thenecessary information on a ‘‘monetary instru-ment log.’’)

Advisory #15:

If the institution’s stated policy is not to sellmonetary instruments for cash to nondeposit-account-holders in amounts between $3,000 and

$10,000 inclusive, and where the institutionrequires deposit-holders to buy monetary instru-ments only through the use of their depositaccounts (e.g. debit memo, check, etc.), theinstitution is not required to separately maintainthe information pursuant to Section 103.29.However, the institution must have adequatecontrols and proper training in place to ensurethat if a transaction is completed that inadvert-ently does not comply with the stated policy (i.e.teller mistakenly sells $5,000 in traveler’s checksto nondeposit-account-holder for cash), therequired information will be properly recordedon whatever records or systems that the bankchooses (e.g. on the copy of the instrumentpurchased). If the institution’s policies areadequate and therefore the institution does notmaintain a log, you may proceed to ADVI-SORY #18.

Y N Comments

72. Do the financial institution’s records include thefollowing required information for purchasers whohave deposit accounts (as defined in Section 103.11)with the institution:

a. The name of the purchaser.

b. Date of purchase.

c. The type(s) of instrument(s) purchased.

d. The serial number(s) of each of the instru-ment(s) purchased.

e. The dollar amount(s) of each of the instru-ment(s) purchased in currency.

f. Method of verification of identity (either at timeof purchase or when deposit account opened).

73. Do the financial institution’s records include thefollowing required information for purchasers whodo not have deposit accounts with the institution:

a. The name and address of the purchaser.

b. The social security or alien identification num-ber of the purchaser.

c. The date of birth of the purchaser.



Y N Comments

d. The date of purchase.

e. The type(s) of instrument(s) purchased.

f. The serial number(s) of each of the instru-ment(s) purchased.

g. The dollar amount(s) of each of the instru-ment(s) purchased.

h. Method of verifying identity of purchaser andspecific identifying information (e.g. State ofissuance and number of driver’s license).

74. Are the financial institution’s records retrievable,upon request from the Treasury, within a reasonableperiod of time.

75. Does the institution have a system for capturingmultiple sales of monetary instruments in one day,in amounts totalling $3,000 or more?

76. Does the institution use manual or automated sys-tems for identifying cash sales of monetary instru-ments? Note type of system used.



Advisory #16

If the review of the records of the purchases/sales of monetary instruments shows unusual orsuspicious patterns of purchases/sales activity

that might be associated to money laundering,perform Workprogram procedures 77 through79. If not, proceed to Workprogram proce-dure 80.

Y N Comments

77. If the institution uses manual systems, proceed toWorkprogram procedure 79. If the institution usesautomated systems, proceed to Workprogram pro-cedure 78.

78. If the institution relies upon automated systems foridentifying such transactions, does the internalaudit/independent review adequately test the accu-racy and validity of the cash purchases/sales iden-tification system and is the system comprehensivewith regard to all points of purchase/sale? If theinternal audit/independent review has verified theintegrity of the system, then stop. If the integrity ofthe automated system has not been verified, proceedto Workprogram ADVISORY #17.

79. If the institution relies upon manual systems foridentifying such transactions, do the institution’srecords provide an audit trail sufficiently detailed toidentify the method of payment for all purchases/sales of monetary instruments?

a. Does the internal audit/independent reviewinclude a test check of teller’s proof sheets tothe original record of purchases/sales to deter-mine that required information is properly ob-tained and retained?

b. If the integrity of the manual system is verifiedby internal audit/independent review and en-sures that all purchases/sales have been prop-erly documented, then stop. If the integrity ofthe manual system has not been verified, pro-ceed to Workprogram ADVISORY #17.



Advisory #17

If the institution’s internal audit/independentreview has not sufficiently tested the validity ofthe automated or manual systems for identifica-tion of cash sales, the examiner in charge shouldbe notified that internal audit or control may beinadequate and the institution may be in viola-tion of Regulation H, Section 208.14. Depend-ing upon the circumstances, the examiner incharge may request that the institution conduct areview of all sales of monetary instrumentssince the previous examination and indicate in areport to the examiner the source of payment foreach purchase/sale between $3,000 and $10,000.A plan for implementation of adequate internalsafeguards to assure proper record retentionshould also be presented.


Advisory #18

The U.S. Department of Treasury’s Office ofForeign Assets Control (‘‘OFAC’’) administerslaws that impose economic sanctions againstforeign countries to further U.S. foreign policyand national security objectives. OFAC is alsoresponsible for making regulations that restricttransactions by U.S. persons or entities(including banks), located in the U.S. or abroad,with certain foreign countries, their nationals or‘‘specially designated nationals.’’ OFAC regu-larly provides to banks, or banks may subscribeto certain databases or other informational pro-viders (including theFederal Register), currentlistings of foreign countries and designatednationals that are prohibited from conductingbusiness with any U.S. entity or individual (referto Section 1505 of theBSA Manual).

Y N Comments

80. Does the institution have policies and proceduresin place for complying with OFAC laws andregulations?

81. Does the U.S. bank maintain a current listing ofprohibited countries, entities and individuals?

82. Is the OFAC information disseminated to foreigncountry offices?

83. Are new accounts compared to the OFAC listingsprior to opening?

84. Are established accounts regularly compared tocurrent OFAC listings?

Payable Through Accounts

Advisory #19

If the institution being examined engages inpayable through account activities, refer to thesection of theBSA Manualdealing with suchaccounts.



Bank Secrecy ActSection 201.0

TITLE 31—Money and Finance:Treasury

SUBTITLE B—Regulations Relatingto Money and Finance

CHAPTER I—Monetary Offices,Department of the Treasury

PART 103—Financial Recordkeepingand Reporting of Currency andForeign Transactions

SUBPART A—Definitions

31 CFR 103.11

§103.11 Meaning of terms.

[PUBLISHER’S NOTE: Paragraphs (n)(7)(i), (z) and (nn)were revised, and paragraphs (rr), (ss), and (tt) were added at61 FR 7054, 7055, Feb. 23, 1996, effective Aug. 1, 1996.]

When used in this part and in forms prescribedunder this part, where not otherwise distinctlyexpressed or manifestly incompatible with theintent thereof, terms shall have the meaningsascribed in this section.

(a) Accept. A receiving financial institution,other than the recipient’s financial insti-tution, accepts a transmittal order byexecuting the transmittal order. A recipi-ent’s financial institution accepts a trans-mittal order by paying the recipient, bynotifying the recipient of the receipt ofthe order or by otherwise becoming obli-gated to carry out the order.

(b) At one time. For purposes of §103.23 ofthis part, a person who transports, mails,ships or receives; is about to or attemptsto transport, mail or ship; or causes thetransportation, mailing, shipment or receiptof monetary instruments, is deemed to doso ‘‘at one time’’ if:(1) That person either alone, in conjunc-

tion with or on behalf of others;(2) Transports, mails, ships or receives

in any manner; is about to transport,mail or ship in any manner; or causesthe transportation, mailing, shipmentor receipt in any manner of;

(3) Monetary instruments;

(4) Into the United States or out of theUnited States;

(5) Totaling more than $10,000;(6) (i) On one calendar day or (ii) if for

the purpose of evading the report-ing requirements of §103.23, onone or more days.

(c) Bank. Each agent, agency, branch oroffice within the United States of anyperson doing business in one or more ofthe capacities listed below:(1) A commerical bank or trust company

organized under the laws of any Stateor of the United States;

(2) A private bank;(3) A savings and loan association or a

building and loan association orga-nized under the laws of any State orof the United States;

(4) An insured institution as defined insection 401 of the National HousingAct;

(5) A savings bank, industrial bank orother thrift institution;

(6) A credit union organized under thelaw of any State or of the UnitedStates;

(7) Any other organization charteredunder the banking laws of any Stateand subject to the supervision of thebank supervisory authorities of aState;

(8) A bank organized under foreign law;(9) Any national banking association or

corporation acting under the provi-sions of section 25(aa) of the Act ofDec. 23, 1913, as added by the Act ofDec. 24, 1919, ch. 18, 41 Stat. 378, asamended (12 U.S.C. 611–32).

(d) Beneficiary. The person to be paid by thebeneficiary’s bank.

(e) Beneficiary’s bank. The bank or foreignbank identified in a payment order inwhich an account of the beneficiary is tobe credited pursuant to the order or whichotherwise is to make payment to thebeneficiary if the order does not providefor payment to an account.

(f) Broker or dealer in securities. A brokeror dealer in securities, registered orrequired to be registered with the Securi-


ties and Exchange Commission under theSecurities Exchange Act of 1934.

(g) Common carrier. Any person engaged inthe business of transporting individualsor goods for a fee who holds himself outas ready to engage in such transportationfor hire and who undertakes to do soindiscriminately for all persons who areprepared to pay the fee for the particularservice offered.

(h) Currency. The coin and paper money ofthe United States or of any other countrythat is designated as legal tender and thatcirculates and is customarily used andaccepted as a medium of exchange in thecountry of issuance. Currency includesU.S. silver certificates, U.S. notes andFederal Reserve notes. Currency alsoincludes official foreign bank notes thatare customarily used and accepted as amedium of exchange in a foreign country.

(i) Currency dealer or exchanger. A personwho engages as a business in dealing inor exchanging currency, except for bankswhich offer such services as an adjunct totheir regular services.

(j) Deposit account. Deposit accounts includetransaction accounts described in para-graph (q) of this section, savings accounts,and other time deposits.

(k) Domestic. When used herein, refers to thedoing of business within the United States,and limits the applicability of the provi-sion where it appears to the performanceby such institutions or agencies of func-tions within the United States.

(l) Established customer. A person with anaccount with the financial institution,including a loan account or deposit orother asset account, or a person withrespect to which the financial institutionhas obtained and maintains on file theperson’s name and address, as well astaxpayer identification number (e.g., socialsecurity or employer identification num-ber) or, if none, alien identification num-ber or passport number and country ofissuance, and to which the financial insti-tution provides financial services relyingon that information.

(m) Execution date. The day on which thereceiving financial institution may prop-erly issue a transmittal order in executionof the sender’s order. The execution datemay be determined by instruction of the

sender but cannot be earlier than the daythe order is received, and, unless other-wise determined, is the day the order isreceived. If the sender’s instruction statesa payment date, the execution date is thepayment date or an earlier date on whichexecution is reasonably necessary to allowpayment to the recipient on the paymentdate.

(n) Financial institution. Each agent, agency,branch, or office within the United Statesof any person doing business, whether ornot on a regular basis or as an organizedbusiness concern, in one or more of thecapacities listed below:(1) A bank (except bank credit card

systems);(2) A broker or dealer in securities;(3) A currrency dealer or exchanger,

including a person engaged in thebusiness of a check casher;

(4) An issuer, seller, or redeemer of trav-eler’s checks or money orders, exceptas a selling agent exclusively whodoes not sell more than $150,000 ofsuch instruments within any given30-day period;

(5) A licensed transmitter of funds, orother person engaged in the businessof transmitting funds;

(6) A telegraph company;(7) (i) [Effective Aug. 1, 1996.] Casino.

A casino or gambling casino that:Is duly licensed or authorized todo business as such in the UnitedStates, whether under the laws ofa State or of a Territory or Insu-lar Possession of the UnitedStates, or under the Indian Gam-ing Regulatory Act or otherfederal, state, or tribal law orarrangement affecting Indianlands (including, without limi-tation, a casino operating on theassumption or under the viewthat no such authorization isrequired for casino operation onIndian lands); and has grossannual gaming revenue in excessof $1 million. The term includesthe principal headquarters andevery domestic branch or placeof business of the casino.

(ii) For purposes of this paragraph(i)(7), ‘‘gross annual gaming reve-

Bank Secrecy Act 201.0


nue’’ means the gross gamingrevenue received by a casino,during either the previous busi-ness year or the current businessyear of the casino. A casino orgambling casino which is acasino for purposes of this partsolely because its gross annualgaming revenue exceeds$1,000,000 during its currentbusiness year, shall not be con-sidered a casino for purposes ofthis part prior to the time in itscurrent business year that itsgross annual gaming revenueexceeds $1,000,000.

(8) A person subject to supervision byany state or federal bank supervisoryauthority;.

(9) The United States Postal Service withrespect to the sale of money orders.

(o) Foreign bank. A bank organized underforeign law, or an agency, branch oroffice located outside the United States ofa bank. The term does not include anagent, agency, branch or office within theUnited States of a bank organized underforeign law.

(p) Foreign financial agency. A person act-ing outside the United States for a person(except for a country, a monetary orfinancial authority acting as a monetaryor financial authority, or an internationalfinancial institution of which the UnitedStates Government is a member) as afinancial institution, bailee, depositorytrustee, or agent, or acting in a similarway related to money, credit, securities,gold, or a transaction in money, credit,securities, or gold.

(q) Funds transfer. The series of transac-tions, beginning with the originator’s pay-ment order, made for the purpose ofmaking payment to the beneficiary of theorder. The term includes any paymentorder issued by the originator’s bank oran intermediary bank intended to carryout the originator’s payment order. Afunds transfer is completed by acceptanceby the beneficiary’s bank of a paymentorder for the benefit of the beneficiary ofthe originator’s payment order. Fundstransfers governed by the Electronic FundTransfer Act of 1978 (Title XX, Pub. L.95-630, 92 Stat. 3728, 15 U.S.C. 1693, et

seq.), as well as any other funds transfersthat are made through an automated clear-inghouse, an automated teller machine, ora point-of-sale system, are excluded fromthis definition.

(r) Transaction.

(1) Except as provided in paragraph(ii)(2) of this section, transactionmeans a purchase, sale, loan, pledge,gift, transfer, delivery or other dispo-sition, and with respect to a financialinstitution includes a deposit, with-drawal, transfer between accounts,exchange of currency, loan, exten-sion of credit, purchase or sale of anystock, bond, certificate of deposit, orother investment security or mone-tary instrument, or any other pay-ment, transfer, or delivery by, through,or to a financial institution, by what-ever means effected.

(2) For purposes of §103.22, and otherprovisions of this part relating solelyto the report required by that section,the term ‘‘transaction in currency’’shall mean a transaction involvingthe physical transfer of currency fromone person to another. A transactionwhich is a transfer of funds by meansof bank check, bank draft, wire trans-fer, or other written order, and whichdoes not include the physical transferof currency, is not a transaction incurrency for this purpose.

(s) Intermediary financial institution. Areceiving financial institution, other thanthe transmittor’s financial institution orthe recipient’s financial institution. Theterm intermediary financial institutionincludes an intermediary bank.

(t) Investment security. An instrument which:

(1) Is issued in bearer or registered form;

(2) Is of a type commonly dealt in uponsecurities exchanges or markets orcommonly recognized in any area inwhich it is issued or dealt in as amedium for investment;

(3) Is either one of a class or series or byits terms is divisible into a class orseries of instruments; and

(4) Evidences a share, participation orother interest in property or in an

201.0 Bank Secrecy Act


enterprise or evidences an obligationof the issuer.

(u) Monetary instruments.(1) Monetary instruments include:

(i) Currrency;(ii) Traveler’s checks in any form;

(iii) All negotiable instruments(including personal checks, busi-ness checks, official bank checks,cashier’s checks, third-partychecks, promissory notes (as thatterm is defined in the UniformCommercial Code), and moneyorders) that are either in bearerform, endorsed without restric-tion, made out to a fictitiouspayee (for the purposes of§103.23), or otherwise in suchform that title thereto passesupon delivery;

(iv) Incomplete instruments (includ-ing personal checks, businesschecks, official bank checks,cashier’s checks, third-partychecks, promissory notes (as thatterm is defined in the UniformCommercial Code), and moneyorders) signed but with thepayee’s name omitted; and

(v) Securities or stock in bearer formor otherwise in such formthat title thereto passes upondelivery.

(2) Monetary instruments do not includewarehouse receipts or bills of lading.

(v) Originator. The sender of the first pay-ment order in a funds transfer.

(w) Originator’s bank. The receiving bank towhich the payment order of the originatoris issued if the originator is not a bank orforeign bank, or the originator if theoriginator is a bank or foreign bank.

(x) Payment date. The day on which theamount of the transmittal order is payableto the recipient by the recipient’s finan-cial institution. The payment date may bedetermined by instruction of the sender,but cannot be earlier than the day theorder is received by the recipient’s finan-cial institution and, unless otherwise pre-scribed by instruction, is the date theorder is received by the recipient’s finan-cial institution.

(y) Payment order. An instruction of a senderto a receiving bank, transmitted orally,

electronically, or in writing, to pay, or tocause another bank or foreign bank topay, a fixed or determinable amount ofmoney to a beneficiary if:

(z) [Effective Aug. 1, 1996.]Person. Anindividual, a corporation, a partnership, atrust or estate, a joint stock company, anassociation, a syndicate, joint venture, orother unincorporated organization orgroup, an Indian Tribe (as that term isdefined in the Indian Gaming RegulatoryAct), and all entities cognizable as legalpersonalities.

(aa) Receiving bank. The bank or foreignbank to which the sender’s instruction isaddressed.

(bb) Receiving financial institution. The finan-cial institution or foreign financial agencyto which the sender’s instruction isaddressed. The term receiving financialinstitution includes a receiving bank.

(cc) Recipient. The person to be paid by therecipient’s financial institution. The termrecipient includes a beneficiary, exceptwhere the recipient’s financial institutionis a financial institution other than a bank.

(dd) Recipient’s financial institution. The finan-cial institution or foreign financial agencyidentified in a transmittal order in whichan account of the recipient is to becredited pursuant to the transmittal orderor which otherwise is to make paymentto the recipient if the order does notprovide for payment to an account. Theterm recipient’s financial institutionincludes a beneficiary’s bank, exceptwhere the beneficiary is a recipient’sfinancial institution.

(ee) Secretary. The Secretary of the Treasuryor any person duly authorized by theSecretary to perform the functionmentioned.

(ff) Sender. The person giving the instructionto the receiving financial institution.

(gg) Structure (structuring). For purposes ofsection 103.53, a person structures a trans-action if that person, acting alone, or inconjunction with, or on behalf of, otherpersons, conducts or attempts to conductone or more transactions in currency, inany amount, at one or more financialinstitutions, on one or more days, in anymanner, for the purpose of evading thereporting requirements under section103.22 of this Part. ‘In any manner’



includes, but is not limited to, the break-ing down of a single sum of currencyexceeding $10,000 into smaller sums,including sums at or below $10,000, orthe conduct of a transaction, or series ofcurrency transactions, including transac-tions at or below $10,000. The transac-tion or transactions need not exceed the$10,000 reporting threshold at any singlefinancial institution on any single day inorder to constitute structuring within themeaning of this definition.

(hh) Transaction account. Transaction accountsinclude those accounts described in12 U.S.C. 461(b)(1)(C), money marketaccounts and similar accounts that takedeposits and are subject to withdrawal bycheck or other negotiable

(ii) Transaction in currency. A transactioninvolving the physical transfer of cur-rency from one person to another. Atransaction which is a transfer of funds bymeans of bank check, bank draft, wiretransfer, or other written order, and whichdoes not include the physical transfer ofcurrency is not a transaction in currencywithin the meaning of this part.

(jj) Transmittal of funds. A series of transac-tions beginning with the transmittor’stransmittal order, made for the purpose ofmaking payment to the recipient of theorder. The term includes any transmittalorder issued by the transmittor’ s finan-cial institution or an intermediary finan-cial institution intended to carry out thetransmittor’s transmittal order. The termtransmittal of funds includes a fundstransfer. A transmittal of funds is com-pleted by acceptance by the recipient’sfinancial institution of a transmittal orderfor the benefit of the recipient of thetransmittor’s transmittal order. Fundstransfers governed by the Electronic FundTransfer Act of 1978 (Title XX, Pub. L.95-630, 92 Stat. 3728, 15 U.S.C. 1693, etseq.), as well as any other funds transfersthat are made through an automated clear-inghouse, an automated teller machine, ora point-of-sale system, are excluded fromthis definition.

(kk) Transmittal order. The term transmittalorder includes a payment order and is aninstruction of a sender to a receivingfinancial institution, transmitted orally,electronically, or in writing, to pay, or

cause another financial institution or for-eign financial agency to pay, a fixed ordeterminable amount of money to arecipient if:

(ll) Transmittor. The sender of the first trans-mittal order in a transmittal of funds. Theterm transmittor includes an originator,except where the transmittor’s financialinstitution is a financial institution orforeign financial agency other than abank or foreign bank.

(mm) Transmittor’s financial institution. Thereceiving financial institution to whichthe transmittal order of the transmittor isissued if the transmittor is not a financialinstitution or foreign financial agency, orthe transmittor if the transmittor is afinancial institution or foreign financialagency. The term transmittor’s financialinstitution includes an originator’s bank,except where the originator is a transmit-tor’s financial institution other than abank or foreign bank.

(nn) [Effective Aug. 1, 1996.]United States.The States of the United States, the Dis-trict of Columbia, the Indian lands (asthat term is defined in the Indian GamingRegulatory Act), and the Territories andInsular Possessions of the United States.

(oo) Business day. Business day, as used inthis part with respect to banks, means thatday, as normally communicated to itsdepository customers, on which a bankroutinely posts a particular transaction toits customer’s account.

(pp) Postal Service. The United States PostalService

(qq) FinCEN. FinCEN means the FinancialCrimes Enforcement Network, an officewithin the Office of the Under Secretary(Enforcement) of the Department of theTreasury.

(rr) [Effective Aug. 1, 1996.]Indian GamingRegulatory Act. The Indian Gaming Regu-latory Act of 1988, codified at 25 U.S.C.2701–2721 and 18 U.S.C. 1166–68.

(ss) [Effective Aug. 1, 1996.]State. The Statesof the United States and, wherever nec-essary to carry out the provisions of thispart, the District of Columbia.

(tt) [Effective Aug. 1, 1996.]Territories andInsular Possessions. The Commonwealthof Puerto Rico, the United States VirginIslands, Guam, the Commonwealth of theNorthern Mariana Islands, and all other



territories and possessions of the UnitedStates other than the Indian lands and theDistrict of Columbia.

HISTORY:[52 FR 11441, Apr. 8, 1987; 52 FR 12641, Apr. 17, 1987, asamended at 53 FR 777, Jan. 13, 1988; 53 FR 4138, Feb. 12,l988; 54 FR 3027, Jan. 23, 1989; 54 FR 28418, July 6, 1989;55 FR 20143, May 15, 1990; 58 FR 13546, Mar. 12, 1993; 58FR 45263, Aug. 27, 1993; 59 FR 9088, Feb. 25, 1994; 60 FR228, Jan. 3, 1995; 60 FR 44144, Aug. 24, 1995; 61 FR 4326,4331, Feb. 5, 1996, as corrected at 61 FR 14248, 14249,April 1, 1996; 61 FR 7054, 7055, Feb. 23, 1996; 61 FR 7054,7055, Feb. 23, 1996; 61 FR 14383, 14385, Apr. 1, 1996]

AUTHORITY:AUTHORITY NOTE APPLICABLE TO ENTIRE PART:12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.

NOTES:[EFFECTIVE DATE NOTE: 60 FR 228, Jan. 3, 1995, whichamended this section, became effective Jan. 1, 1996; 60 FR44144, Aug. 24, 1995, delayed the effective date of theamendment at 60 FR 228, Jan. 3, 1995, from Jan. 1, 1996 toApr. 1, 1996; 61 FR 14382, April 1, 1996, delayed theeffective date of the amendment at 60 FR 228, Jan. 3, 1995,from April 1, 1996, to May 28, 1996; 61 FR 4326, 4331,Feb. 5, 1996, which revised paragraph (r) and added para-graph (qq), became effective April 1, 1996; 61 FR 7054, 7055,Feb. 23, 1996, which revised paragraphs (n)(7)(i), (z) and(nn), and added paragraphs (rr), (ss) and (tt), is effectiveAug. 1, 1996; 61 FR 14383, 14385, April 1, 1996, whichrevised paragraphs (e), (w), (y), (aa), (bb), (dd), (kk), (ll), and(mm), became effective May 28 1996.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19,Chapter I; Title 26, Chapter I; Title 27, Chapter I; Title 31,Chapters II, IV, V, VI, and VII, and Title 48, Chapter 10.CROSS REFERENCE: General Accounting Office: See 4C.F.R. Chapter I.

NOTES APPLICABLE TO ENTIRE CHAPTER:ABBREVIATION: The following abbreviation is used in thischapter: C.P.D. = Commissioner of the Public Debt.

NOTES APPLICABLE TO ENTIRE PART:EDITORIAL NOTE: Nomenclature changes for part 103appear at 52 FR 11442, Apr. 8, 1987.

SUBPART B—Reports Required tobe Made

31 C.F.R. 103.20

§103.20 Determination by theSecretary.

The Secretary hereby determines that the reportsrequired by this subpart have a high degree ofusefulness in criminal, tax, or regulatory inves-tigations or proceedings.

HISTORY:[37 FR 6912, Apr. 5, 1972, as redesignated at 61 FR 4326,4331, Feb. 5 1996]


NOTES:[EFFECTIVE DATE NOTE: 61 FR 4326, 4331, Feb. 5 1996,which redesignated this section, is effective April 1, 1996.][CROSS REFERENCE: This section was formerly § 103.21.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10.CROSS REFERENCE: General Accounting Office: See 4C.F.R. Chapter I.




31 C.F.R. 103.21

§103.21 Reports by banks ofsuspicious transactions.

(a) General.(1) Every bank shall file with the Treasury

Department, to the extent and in themanner required by this section, a reportof any suspicious transaction relevant toa possible violation of law or regulation.A bank may also file with the TreasuryDepartment by using the SuspiciousActivity Report specified in paragraph(b)(1) of this section or otherwise, areport of any suspicious transaction thatit believes is relevant to the possibleviolation of any law or regulation butwhose reporting is not required by thissection.

(2) A transaction requires reporting underthe terms of this section if it is con-ducted or attempted by, at, or throughthe bank, it involves or aggregates atleast $5,000 in funds or other assets, andthe bank knows, suspects, or has reasonto suspect that:



(i) The transaction involves fundsderived from illegal activities or isintended or conducted in order tohide or disguise funds or assetsderived from illegal activities(including, without limitation, theownership, nature, source, loca-tion, or control of such funds orassets) as part of a plan to violateor evade any federal law or regu-lation or to avoid any transactionreporting requirement under fed-eral law or regulation;

(ii) The transaction is designed to evadeany requirements of this part or ofany other regulations promulgatedunder the Bank Secrecy Act,Pub. L. 91-508, as amended, codi-fied at 12 U.S.C. 1829b, 12 U.S.C.1951–1959, and 31 U.S.C. 5311–5330; or

(iii) The transaction has no business orapparent lawful purpose or is notthe sort in which the particularcustomer would normally beexpected to engage, and the bankknows of no reasonable explana-tion for the transaction after exam-ining the available facts, includingthe background and possible pur-pose of the transaction.

(b) Filing procedures—(1) What to file. A suspicious transaction

shall be reported by completing a Sus-picious Activity Report (‘‘SAR’’), andcollecting and maintaining supportingdocumentation as required by para-graph (d) of this section.

(2) Where to file. The SAR shall be filedwith FinCEN in a central location, to bedetermined by FinCEN, as indicated inthe instructions to the SAR.

(3) When to file. A bank is required to filea SAR no later than 30 calendar daysafter the date of initial detection by thebank of facts that may constitute a basisfor filing a SAR. If no suspect wasidentified on the date of the detection ofthe incident requiring the filing, a bankmay delay filing a SAR for an additional30 calendar days to identify a suspect.In no case shall reporting be delayedmore than 60 calendar days after thedate of initial detection of a reportabletransaction. In situations involving vio-

lations that require immediate attention,such as, for example, ongoing moneylaundering schemes, the bank shallimmediately notify, by telephone, anappropriate law enforcement authorityin addition to filing timely a SAR.

(c) Exceptions. A bank is not required to file aSAR for a robbery or burglary committed orattempted that is reported to appropriate lawenforcement authorities, or for lost, missing,counterfeit, or stolen securities with respectto which the bank files a report pursuantto the reporting requirements of 17 C.F.R.240.17f-1.

(d) Retention of records. A bank shall maintaina copy of any SAR filed and the original orbusiness record equivalent of any support-ing documentation for a period of five yearsfrom the date of filing the SAR. Supportingdocumentation shall be identified, and main-tained by the bank as such, and shall bedeemed to have been filed with the SAR. Abank shall make all supporting documenta-tion available to FinCEN and any appropri-ate law enforcement agencies or bank super-visory agencies upon request.

(e) Confidentiality of reports; limitation of lia-bility. No bank or other financial institution,and no director, officer, employee, or agentof any bank or other financial institution,who reports a suspicious transaction underthis part, may notify any person involved inthe transaction that the transaction has beenreported. Thus, any person subpoenaed orotherwise requested to disclose a SAR orthe information contained in a SAR, exceptwhere such disclosure is requested byFinCEN or an appropriate law enforcementor bank supervisory agency, shall decline toproduce the SAR or to provide any informa-tion that would disclose that a SAR has beenprepared or filed, citing this paragraph (e)and 31 U.S.C. 5318(g)(2), and shall notifyFinCEN of any such request and its responsethereto. A bank, and any director, officer,employee, or agent of such bank, that makesa report pursuant to this section (whethersuch report is required by this section or ismade voluntarily) shall be protected fromliability for any disclosure contained in, orfor failure to disclose the fact of such report,or both, to the full extent provided by31 U.S.C. 5318(g)(3).

(f) Compliance. Compliance with this sectionshall be audited by the Department of the



Treasury, through FinCEN or its delegeesunder the terms of the Bank Secrecy Act.Failure to satisfy the requirements of thissection may be a violation of the reportingrules of the Bank Secrecy Act and of thispart. Such failure may also violate provi-sions of Title 12 of the Code of FederalRegulations.

HISTORY:[61 FR 4326, 4331, Feb. 5, 1996, as corrected at 61 FR 14248,14249, April 1, 1996, and 61 FR 18250, April 25, 1996]


NOTES:[EFFECTIVE DATE NOTE: 61 FR 4326, 4331, Feb. 5, 1996,which added this section, became effective April 1, 1996.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10.CROSS REFERENCE: General Accounting Office: See4 C.F.R. Chapter I.







SUBPART A—Definitions

31 C.F.R. 103.11

§103.22 Reports of currencytransactions.

(a) (1) Each financial institution other than acasino or the Postal Service shall file areport of each deposit, withdrawal,

exchange of currency or other paymentor transfer, by, through, or to suchfinancial institution which involves atransaction in currency of more than$10,000. Transactions in currency byexempt persons with banks occurringafter April 30, 1996, are not subject tothis requirement to the extent providedin paragraph (h) of this section. Mul-tiple currency transactions shall betreated as a single transaction if thefinancial institution has knowledge thatthey are by or on behalf of any personand result in either cash in or cash outtotalling more than $10,000 during anyone business day. Deposits made atnight or over a weekend or holiday shallbe treated as if received on the nextbusiness day following the deposit.

(2) Each casino shall file a report of eachtransaction in currency, involving eithercash in or cash out, of more than$10,000.

(i) Transactions in currency involvingcash in include, but are not limitedto:(A) Purchases of chips, tokens, and

plaques;(B) Front money deposits;(C) Safekeeping deposits;(D) Payments on any form of

credit, including markers andcounter checks;

(E) Bets of currency;(F) Currency received by a casino

for transmittal of funds throughwire transfer for a customer;

(G) Purchases of a casino’s check;and

(H) Exchanges of currency for cur-rency, including foreign cur-rency.

(ii) Transactions in currency involvingcash out include, but are not lim-ited to:(A) Redemptions of chips, tokens,

and plaques;(B) Front money withdrawals;(C) Safekeeping withdrawals;(D) Advances on any form of

credit, including markers andcounter checks;



(E) Payments on bets, includingslot jackpots;

(F) Payments by a casino to acustomer based on receipt offunds through wire transfer forcredit to a customer;

(G) Cashing of checks or othernegotiable instruments;

(H) Exchanges of currency for cur-rency, including foreign cur-rency; and

(I) Reimbursements for custom-ers’ travel and entertainmentexpenses by the casino.

(iii) Multiple currency transactions shallbe treated as a single transaction ifthe casino has knowledge that theyare by or on behalf of any personand result in either cash in or cashout totalling more than $10,000during any gaming day. For pur-poses of this paragraph (a)(2), acasino shall be deemed to have theknowledge described in the preced-ing sentence, if: any sole propri-etor, partner, officer, director, oremployee of the casino, actingwithin the scope of his or heremployment, has knowledge thatsuch multiple currency transac-tions have occurred, includingknowledge from examining thebooks, records, logs, informationretained on magnetic disk, tape orother machine-readable media, orin any manual system, and similardocuments and information, whichthe casino maintains pursuant toany law or regulation or within theordinary course of its business, andwhich contain information that suchmultiple currency transactions haveoccurred.(A) Any sole proprietor, partner,

officer, director, or employeeof the casino, acting withinthe scope of his or her employ-ment has knowledge that suchmultiple currency transactionshave occurred, or

(B) The books, records, logs, infor-mation retained on magneticdisk, tape or other machine-readable media, or in anymanual system, and similar

documents and information,which the casino maintainspursuant to any law or regu-lation or within the normalcourse of its business, containinformation that such multiplecurrency transactions haveoccurred.

(3) The Postal Service shall file a report ofeach cash purchase of postal moneyorders in excess of $10,000. Multiplecash purchases totaling more than$10,000 shall be treated as a singletransaction if the Postal Service hasknowledge that they are by or on behalfof any person during any one day.

(4) A financial institution includes all ofits domestic branch offices for thepurpose of this paragraph’s reportingrequirements.

(b) Except as otherwise directed in writing bythe Assistant Secretary (Enforcement) or theCommissioner of Internal Revenue:(1) This section shall not require reports:

(i) Of transactions with FederalReserve Banks or Federal HomeLoan banks;

(ii) Of transactions between domesticbanks; or

(iii) By nonbank financial institutionsof transactions with commercialbanks (however, commercial banksmust report such transactions withnonbank financial institutions).

(2) A bank may exempt from the reportingrequirement of paragraph (aa) of thissection the following:

(i) Deposits or withdrawals of cur-rency from an existing account byan established depositor who is aUnited States resident and operatesa retail type of business in theUnited States. For the purpose ofthis subsection, a retail type ofbusiness is a business primarilyengaged in providing goods toultimate consumers and for whichthe business is paid in substantialportions by currency, except thatdealerships which buy or sell motorvehicles, vessels, or aircraft are notincluded and their transactions maynot be exempted from the reportingrequirements of this section.



(ii) Deposits or withdrawals of cur-rency from an existing account byan established depositor who is aUnited States resident and operatesa sports arena, race track, amuse-ment park, bar, restaurant, hotel,check cashing service licensed bystate or local governments, vend-ing machine company, theater, reg-ularly scheduled passenger carrieror any public utility.

(iii) Deposits or withdrawals, exchangesof currency or other payments andtransfers by local or state govern-ments, or the United States or anyof its agencies or instrumentalities.

(iv) Withdrawals for payroll purposesfrom an existing account by anestablished depositor who is aUnited States resident and operatesa firm that regularly withdrawsmore than $10,000 in order to payits employees in currency.

(c) In each instance the transactions exemptedunder paragraph (b) of this section must bein amounts which the bank may reasonablyconclude do not exceed amounts commen-surate with the customary conduct of thelawful, domestic business of that customer,or in the case of transactions with a localor state govenment or the United States orany of its agencies or instrumentalities, inamounts which are customary and commen-surate with the authorized activities of theagency or instrumentality. This section doesnot permit a bank to exempt its transactionswith nonbank financial institutions (exceptfor check cashing services licensed by stateor local governments and the United StatesPostal Service) nor will additional exemp-tion authority be granted for such transac-tion (except transactions by other checkcashers).

(d) After October 27, 1986, a bank may notplace any customer on its exempt list with-out first preparing a written statement, signedby the customer, describing the customaryconduct of the lawful domestic business ofthat customer and a detailed statement ofreasons why such person is qualified for anexemption. The statement shall include thename, address, nature of business, taxpayeridentification number, and account numberof the customer being exempted. The signa-ture, including the title and position of the

person signing, will attest to the accuracyof the information concerning the name,address, nature of business, and tax identi-fication number of the customer. Immedi-ately above the signature line, the followingstatement shall appear:

‘‘The information contained above is trueand correct to the best of my knowledgeand belief. I understand that this informa-tion will be read and relied upon by theGovernment.’’

The bank shall indicate in this statementwhether the exemption covers withdrawals,deposits, or both, as well as the dollar limitof the exemption for both deposits andwithdrawals. The bank also shall indicatewhether the exemption is limited to certaintypes of deposits and withdrawals (e.g.,withdrawals for payroll purposes). In eachinstance, the exempted transactions must bein amounts that the bank may reasonablyconclude do not exceed amounts commen-surate with the customary conduct of thelawful domestic business of that customer.The bank is responsible for independentlyverifying the activity of the account anddetermining applicable dollar limits forexempted deposits or withdrawals. The bankmust retain each statement that it preparespursuant to this subparagraph as long as thecustomer is on the exempt list, and for aperiod of five years following removal ofthe customer from the bank’s exempt list.

(e) A bank may apply to the Commissioner ofInternal Revenue for additional authority togrant an exemption to the reporting require-ment, not otherwise permitted under para-graph (b) of this section, if the bank believesthat circumstances warrent such an exemp-tion. Such requests shall be addressed to:Chief, Currency and Banking ReportsBranch, Compliance Review Group, IRSData Center, Post Office Box 32063, Detroit,Michigan 48232, and must be accompaniedby a statement of the circumstances thatwarrant special exemption treatment and acopy of the statement signed by the cus-tomer required by paragraph (d) of thissection.

(f) A record of each exemption granted underthis section and the reason therefor must bekept in a centralized list. The record shallinclude the names and addresses of all banksreferred to in paragraph (b)(1)(ii) of thissection, as well as the name, address, busi-



ness, taxpayer identification number andaccount number of each depositor that hasengaged in currency transactions which havenot been reported because of the exemptionprovided in paragraph (b)(2) of this section.The record concerning the group of deposi-tors exempted under the provisions ofparagraph (b)(2) of this section shall alsoindicate whether the exemption covers with-drawals, deposits, or both, as well as thedollar limit of the exemption.

(g) Upon the request of the Assistant Secretary(Enforcement) or the Commissioner ofInternal Revenue, a bank shall provide areport containing the list of the bank’scustomers whose transactions have beenexempted under this section and such relatedinformation as the Assistant Secretary orCommissioner shall require, including cop-ies of the statements required in paragraph(d) of this section. The report must beprovided within 15 days of the request. Anyexemption may be rescinded at the discre-tion of the requesting official, who mayrequire the bank to file reports required byparagraph (aa) of this section with respect tofuture transactions of any customer whosetransactions previously were exempted.

(h) No filing required by banks for transactionsby exempt persons occurring after April 30,1996.(1) Currency transactions of exempt per-

sons with banks occurring afterApril 30, 1996. Notwithstanding theprovisions of paragraph (a)(1) of thissection, no bank is required to file areport otherwise required by paragraph(a)(1) of this section, with respect toany transaction in currency between anexempt person and a bank that is con-ducted after April 30, 1996.

(2) Exempt person. For purposes of thissection, an exempt person is:

(i) A bank, to the extent of such bank’sdomestic operations;

(ii) A department or agency of theUnited States, of any state, or ofany political subdivision of anystate;

(iii) Any entity established under thelaws of the United States, of anystate, or of any political subdivi-sion of any state, or under aninterstate compact between two ormore states, that exercises govern-

mental authority on behalf of theUnited States or any such state orpolitical subdivision;

(iv) Any corporation whose commonstock is listed on the New YorkStock Exchange or the AmericanStock Exchange (except stock listedon the Emerging Company Mar-ketplace of the American StockExchange) or whose common stockhas been designated as a NasdaqNational Market Security listed onthe Nasdaq Stock Market (exceptstock listed under the separate‘‘Nasdaq Small-Cap Issues’’ head-ing); and

(v) Any subsidiary of any corporationdescribed in paragraph (h)(2)(iv) ofthis section whose federal incometax return is filed as part of aconsolidated federal income taxreturn with such corporation, pur-suant to section 1501 of the Inter-nal Revenue Code and the regula-tions promulgated thereunder, forthe calendar year 1995 or for itslast fiscal year ending beforeApril 15, 1996.

(3) Designation of exempt persons.(i) A bank must designate each exempt

person with whom it engagesin transactions in currency, on orbefore the later of August 15,1996,1 and the date 30 days follow-ing the first transaction in currencybetween such bank and such exemptperson that occurs after April 30,1996.

(ii) Designation of an exempt personshall be made by a single filing ofInternal Revenue Service Form4789, in which line 36 is marked‘‘Designation of Exempt Person’’and items 2–14 (Part I, Section A)and items 37–49 (Part III) are com-pleted. The designation must bemade separately by each bank thattreats the person in question as anexempt person. (For availability,see 26 C.F.R. 601.602.)

(iii) This designation requirementapplies whether or not the particu-

1. Rescinded.



lar exempt person to be designatedhas previously been treated asexempt from the reporting require-ments of paragraph (a) of this sec-tion under the rules contained inparagraph (b) or (e) of this section.

(4) Operating rules for designating exemptpersons.

(i) Subject to the specific rules of thisparagraph (h), a bank must takesuch steps to assure itself that aperson is an exempt person (withinthe meaning of applicable provi-sions of paragraph (h)(2) of thissection) that a reasonable and pru-dent bank would take to protectitself from loan or other fraud orloss based on misidentification of aperson’s status.

(ii) A bank may treat a person as agovernmental department, agency,or entity if the name of such personreasonably indicates that it isdescribed in paragraph (h)(2)(ii) or(h)(2)(iii) of this section, or if suchperson is known generally in thecommunity to be a State, the Dis-trict of Columbia, a tribal govern-ment, a Territory or Insular Posses-sion of the United States, or apolitical subdivision or a wholly-owned agency or instrumentalityof any of the foregoing. An entitygenerally exercises governmentalauthority on behalf of the UnitedStates, a State, or a political subdi-vision, for purposes of paragraph(h)(2)(iii) of this section, only ifits authorities include one or moreof the powers to tax, to exercisethe authority of eminent domain,or to exercise police powers withrespect to matters within itsjurisdiction.

(iii) In determining whether a person isdescribed in paragraph (h)(2)(iv)of this section, a bank may rely onany New York Stock Exchange,American Stock Exchange, orNasdaq Stock Market listing pub-lished in a newspaper of generalcirculation and on any commonlyaccepted or published stock sym-bol guide.

(iv) In determining whether a person isdescribed in paragraph (h)(2)(v) ofthis section, a bank may rely uponany reasonably authenticated cor-porate officer’s certificate or anyreasonably authenticated photo-copy of Internal Revenue ServiceForm 851 (Affiliation Schedule) orthe equivalent thereof for theappropriate tax year.

(5) Limitation on exemption. A transactioncarried out by an exempt person as anagent for another person who is thebeneficial owner of the funds that arethe subject of a transaction in currencyis not subject to the exemption fromreporting contained in paragraph (h)(1)of this section.

(6) Effect of exemption; limitation onliability.

(i) FinCEN may in the future deter-mine by amendment to this partthat the exemption contained inthis paragraph (h) shall be the onlybasis for exempting personsdescribed in paragraph (h)(2) ofthis section from the reporting re-quirements of paragraph (a) of thissection.

(ii) No bank shall be subject to penaltyunder this part for failure to file areport required by paragraph (a) ofthis section with respect to a cur-rency transaction by an exemptperson with respect to which therequirements of this paragraph (h)have been satisfied, unless the bank:

(iii) (A) Knowingly files false orincomplete information withrespect to the transaction orthe customer engaging in thetransaction; or

(B) Has reason to believe at thetime the exemption is grantedthat the customer does notmeet the criteria establishedby this paragraph (h) for treat-ment of the transactor as anexempt person or that thetransaction is not a transactionof the exempt person.

(iv) A bank that files a report withrespect to a currency transaction byan exempt person rather than treat-ing such person as exempt shall



remain subject with respect to eachsuch report to the rules for filingreports, and the penalties for filingfalse or incomplete reports, that areapplicable to reporting of transac-tions in currency by persons otherthan exempt persons. A bank thatcontinues for the period permittedby paragraph (h)(6)(i) of this sec-tion to treat a person described inparagraph (h)(2) of this section asexempt from the reporting require-ments of paragraph (aa) of thissection on a basis other than asprovided in this paragraph (h) shallremain subject in full to the rulesgoverning an exemption on suchother basis and to the penalties forfailing to comply with the rulesgoverning such other exemption.

(7) Obligation to file suspicious activityreports, etc. Nothing in this paragraph(h) relieves a bank of the obligation, oralters in any way such bank’s obliga-tion, to file a report required by §103.21with respect to any transaction, includ-ing, without limitation, any transactionin currency, or relieves a bank of anyother reporting or recordkeeping obliga-tion imposed by this part (except theobligation to report transactions in cur-rency pursuant to paragraph (a) of thissection to the extent provided in thisparagraph (h)).

(8) Revocation. The status of any person asan exempt person under this paragraph(h) may be revoked by FinCEN bywritten notice, which may be providedby publication in the Federal Register inappropriate situations, on such terms asare specified in such notice. In addition,and without any action on the part of theTreasury Department:(i) The status of a corporation as an

exempt person pursuant to para-graph (h)(2)(iv) of this sectionceases once such corporation ceasesto be listed on the applicable stockexchange; and

(ii) The status of a subsidiary as anexempt person under paragraph(h)(2)(v) of this section ceases oncesuch subsidiary ceases to be includedin a consolidated federal income tax

return of a person described in para-graph (h)(2)(iv) of this section.

(Approved by the Office of Management and Budget undercontrol number 1505-0063)

HISTORY:[52 FR 11442, Apr. 8, 1987, as amended at 53 FR 777, Jan.13, 1988; 53 FR 4138, Feb. 12, 1988; 58 FR 13547, Mar. 12,1993; 58 FR 45263, Aug. 27, 1993; 59 FR 9088, Feb. 25,1994; 59 FR 61662, Dec. 1, 1994; 61 FR 18204, 18209,April 24, 1996]


NOTES:[EFFECTIVE DATE NOTE: 61 FR 18204, 18209, April 24,1996, which added a new sentence immediately following thefirst sentence in paragraph (aa)(1), and added a new paragraph(h), became effective May 1, 1996.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.




31 C.F.R. 103.23

§103.23 Reports of transportation ofcurrency or monetary instruments.

(a) Each person who physically transports,mails, or ships, or causes to be physicallytransported, mailed, or shipped, or attemptsto physically transport, mail or ship, orattempts to cause to be physically trans-ported, mailed or shipped, currency or othermonetary instruments in an aggregate amountexceeding $10,000 at one time from theUnited States to any place outside the UnitedStates, or into the United States from anyplace outside the United States, shall make areport thereof. A person is deemed to havecaused such transportation, mailing or ship-ping when he aids, abets, counsels, com-



mands, procures, or requests it to be done bya financial institution or any other person.

(b) Each person who receives in the U.S. cur-rency or other monetary instruments in anaggregate amount exceeding $10,000 atone time which have been transported,mailed, or shipped to such person from anyplace outside the United States with respectto which a report has not been filed underparagraph (a) of this section, whether ornot required to be filed thereunder, shallmake a report thereof, stating the amount,the date of receipt, the form of monetaryinstruments, and the person from whomreceived.

(c) This section shall not require reports by:(1) A Federal Reserve;(2) A bank, a foreign bank, or a broker or

dealer in securities, in respect to cur-rency or other monetary instrumentsmailed or shipped through the postalservice or by common carrier;

(3) A commercial bank or trust companyorganized under the laws of any State orof the United States with respect tooverland shipments of currency or mone-tary instruments shipped to or receivedfrom an established customer maintain-ing a deposit relationship with the bank,in amounts which the bank may reason-ably conclude do not exceed amountscommensurate with the customary con-duct of the business, industry or profes-sion of the customer concerned;

(4) A person who is not a citizen or resi-dent of the United States in respectto currency or other monetary instru-ments mailed or shipped from abroad toa bank or broker or dealer in securitiesthrough the postal service or by com-mon carrier;

(5) A common carrier of passengers inrespect to currency or other monetaryinstruments in the possession of itspassengers;

(6) A common carrier of goods in respectto shipments of currency or monetaryinstruments not declared to be such bythe shipper;

(7) A travelers’ check issuer or its agent inrespect to the transportation of travel-ers’ checks prior to their delivery toselling agents for eventual sale to thepublic;

(8) By a person with respect to a restric-tively endorsed traveler’s check that isin the collection and reconciliation pro-cess after the traveler’s check has beennegotiated,

(9) Nor by a person engaged as a businessin the transportation of currency, mone-tary instruments and other commercialpapers with respect to the transportationof currency or other monetary instru-ments overland between establishedoffices of banks or brokers or dealers insecurities and foreign persons.

(d) A transfer of funds through normal bankingprocedures which does not involve the physi-cal transportation of currency or monetaryinstruments is not required to be reported bythis section. This section does not requirethat more than one report be filed coveringa particular transportation, mailing or ship-ping of currency or other monetary instru-ments with respect to which a complete andtruthful report has been filed by a person.However, no person required by paragraph(a) or (b) of this section to file a report shallbe excused from liability for failure to do soif, in fact, a complete and truthful report hasnot been filed.


HISTORY:[37 FR 26517, Dec. 13, 1972, as amended at 50 FR 18479,May 1, 1985; 50 FR 42693, Oct. 22, 1985; 53 FR 4138,Feb. 12, 1988; 54 FR 28418, July 6, 1989]

AUTHORITY:AUTHORITY NOTE APPLICABLE TO ENTIRE PART:12 U.S.C. 1829b and 1951–1959; 31 U.S.C. 5311–5330.

NOTES:NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.









SUBPART B—Reports Requiredto be Made

31 C.F.R. 103.24

§103.24 Reports of foreign financialaccounts.

(a) Each person subject to the jurisdiction of theUnited States (except a foreign subsidiary ofa U.S. person) having a financial interest in,or signature or other authority over, a bank,securities or other financial account in aforeign country shall report such relation-ship to the Commissioner of the InternalRevenue for each year in which such rela-tionship exists, and shall provide such infor-mation as shall be specified in a reportingform prescribed by the Secretary to be filedby such persons. Persons having a financialinterest in 25 or more foreign financialaccounts need only note that fact on theform. Such persons will be required toprovide detailed information concerning eachaccount when so requested by the Secretaryor his delegate.

HISTORY:[42 FR 63774, Dec. 20, 1977, as amended at 52 FR 11443,Apr. 8, 1987; 52 FR 12641, Apr. 17, 1987]






31 C.F.R. 103.25

§103.25 Reports of transactions withforeign financial agencies.

(a) Promulgation of reporting requirements.TheSecretary, when he deems appropriate, maypromulgate regulations requiring specifiedfinancial institutions to file reports of certaintransactions with designated foreign finan-cial agencies. If any such regulation isissued as a final rule without notice andopportunity for public comment, then afinding of good cause for dispensing withnotice and comment in accordance with5 U.S.C. 553(b) will be included in theregulation. If any such regulation is notpublished in the Federal Register, then anyfinancial institution subject to the regulationwill be named and personally served orotherwise given actual notice in accordancewith 5 U.S.C. 553(b). If a financial institu-tion is given notice of a reporting require-ment under this section by means other thanpublication in the FEDERAL REGISTER,the Secretary may prohibit disclosure of theexistence or provisions of that reportingrequirement to the designated foreign finan-cial agency or agencies and to any otherparty.

(b) Information subject to reporting require-ments.A regulation promulgated pursuantto paragraph (a) of this section shall desig-nate one or more of the following categoriesof information to be reported:(1) Checks or drafts, including traveler’s

checks, received by respondent finan-cial institution for collection or creditto the account of a foreign financialagency, sent by respondent financialinstitution to a foreign country for col-lection or payment, drawn by respon-dent financial institution on a foreignfinancial agency, drawn by a foreignfinancial agency on respondent financialinstitution—including the followinginformation.



(i) Name of maker or drawer;(ii) Name of drawee or drawee finan-

cial institution;(iii) Name of payee;(iv) Date and amount of instrument;(iv) Names of all endorsers.

(2) Transmittal orders received by a respon-dent financial institution from a foreignfinancial agency or sent by respondentfinancial institution to a foreign finan-cial agency, including all informationmaintained by that institution pursuantto §103.33.

(3) Loans made by respondent financialinstitution to or through a foreign finan-cial agency—including the followinginformation:

(i) Name of borrower;(ii) Name of person acting for bor-

rower;(iii) Date and amount of loan;(iv) Terms of repayment;(v) Name of guarantor;

(vi) Rate of interest;(vii) Method of disbursing proceeds;

(viii) Collateral for loan.(4) Commercial paper received or shipped

by the respondent financial institution—including the following information:

(i) Name of maker;(ii) Date and amount of paper;

(iii) Due date;(iv) Certificate number;(v) Amount of transaction.

(5) Stocks received or shipped by respon-dent financial institution—including thefollowing information:

(i) Name of corporation;(ii) Type of stock;(iii) Certificate number;(iv) Number of shares;(v) Date of certificate;

(vi) Name of registered holder;(vii) Amount of transaction.

(6) Bonds received or shipped by respon-dent financial institution—including thefollowing information:

(i) Name of issuer;(ii) Bond number;

(iii) Type of bond series;(iv) Date issued;(v) Due date;

(vi) Rate of interest;

(vii) Amount of transaction;(viii) Name of registered holder.

(7) Certificates of deposit received or shippedby respondent financial institution—including the following information:

(i) Name and address of issuer;(ii) Date issued;

(iii) Dollar amount;(iv) Name of registered holder;(v) Due date;

(vi) Rate of interest;(vii) Certificate number;

(viii) Name and address of issuingagent.

(c) Scope of reports.In issuing regulations asprovided in paragraph (a) of this section, theSecretary will prescribe:(1) A reasonable classification of financial

institutions subject to or exempt from areporting requirement;

(2) A foreign country to which a reportingrequirement applies if the Secretarydecides that applying the requirement toall foreign countries is unnecessary orundesirable;

(3) The magnitude of transactions subjectto a reporting requirement; and

(4) The kind of transaction subject to orexempt from a reporting requirement.

(d) Form of reports.Regulations issued pursu-ant to paragraph (a) of this section mayprescribe the manner in which the informa-tion is to be reported. However, the Secre-tary may authorize a designated financialinstitution to report in a different manner ifthe institution demonstrates to the Secretarythat the form of the required report isunnecessarily burdensome on the institutionas prescribed; that a report in a differentform will provide all the information theSecretary deems necessary; and that submis-sion of the information in a different mannerwill not unduly hinder the effective admin-istration of this part.

(e) Limitations.(1) In issuing regulations under paragraph

(a) of this section, the Secretary shallconsider the need to avoid impeding orcontrolling the export or import of mone-tary instruments and the need to avoidburdening unreasonably a person mak-ing a transaction with a foreign financialagency.



(2) The Secretary shall not issue a regula-tion under paragraph (a) of this sectionfor the purpose of obtaining individu-ally identifiable account informationconcerning a customer, as defined bythe Right to Financial Privacy Act (12U.S.C. 3401 et seq.), where that cus-tomer is already the subject of an ongo-ing investigation for possible violationof the Currency and Foreign Transac-tions Reporting Act, or is known by theSecretary to be the subject of an inves-tigation for possible violation of anyother Federal law.

(3) The Secretary may issue a regulationpursuant to paragraph (a) of this sectionrequiring a financial institution to reporttransactions completed prior to thedate it received notice of the reportingrequirement. However, with respect tocompleted transactions, a financial insti-tution may be required to provide infor-mation only from records required to bemaintained pursuant to Subpart C of thispart, or any other provision of state orFederal law, or otherwise maintained inthe regular course of business.


HISTORY:[50 FR 27824, July 8, 1985, as amended at 53 FR 10073,March 29, 1988; 60 FR 229, Jan. 3, 1995; 60 FR 44144,Aug. 24, 1995; 61 FR 14382, April 1, 1996]






31 C.F.R. 103.26

§103.26 Reports of certain domesticcoin and currency transactions.

(a) If the Secretary of the Treasury finds, uponthe Secretary’s own initiative or at therequest of an appropriate Federal or Statelaw enforcement official, that reasonablegrounds exist for concluding that additionalrecordkeeping and/or reporting require-ments are necessary to carry out the pur-poses of this part and to prevent personsfrom evading the reporting/recordkeepingrequirements of this part, the Secretary mayissue an order requiring any domestic finan-cial institution or group of domestic finan-cial institutions in a geographic area and anyother person participating in the type oftransaction to file a report in the manner andto the extent specified in such order. Theorder shall contain such information as theSecretary may describe concerning anytransaction in which such financial institu-tion is involved for the payment, receipt, ortransfer of United States coins or currency(or such other monetary instruments as theSecretary may describe in such order) thetotal amounts or denominations of which areequal to or greater than an amount which theSecretary may prescribe.

(b) An order issued under paragraph (a) of thissection shall be directed to the Chief Execu-tive Officer of the financial institution andshall designate one or more of the followingcategories of information to be reported:Each deposit, withdrawal, exchange ofcurrency or other payment or transfer, by,through or to such financial institution speci-fied in the order, which involves all or anyclass of transactions in currency and/ormonetary instruments equal to or exceedingan amount to be specified in the order.

(c) In issuing an order under paragraph (a) ofthis section, the Secretary will prescribe:

(1) The dollar amount of transactions sub-ject to the reporting requirement in theorder;

(2) The type of transaction or transactionssubject to or exempt from a reportingrequirement in the order;



(3) The appropriate form for reporting thetransactions required in the order;

(4) The address to which reports required inthe order are to be sent or from whichthey will be picked up;

(5) The starting and ending dates by whichsuch transactions specified in the orderare to be reported;

(6) The name of a Treasury official to becontacted for any additional informationor questions;

(7) The amount of time the reports andrecords of reports generated in responseto the order will have to be retained bythe financial institution; and

(8) Any other information deemed neces-sary to carry out the purposes of theorder.

(d) (1) No order issued pursuant to paragraph(a) of this section shall prescribe areporting period of more than 60 daysunless renewed pursuant to the require-ments of paragraph (a).

(2) Any revisions to an order issued underthis section will not be effective untilmade in writing by the Secretary.

(3) Unless otherwise specified in the order,a bank receiving an order under thissection may continue to use the exemp-tions granted under §103.22 of this partprior to the receipt of the order, but maynot grant additional exemptions.

(4) For purposes of this section, the term‘‘geographic area’’ means any area inone or more States of the United States,the District of Columbia, the Common-wealth of Puerto Rico, the United StatesVirgin Islands, Guam, the Common-wealth of the Northern Mariana Islands,American Samoa, the Trust Territory ofthe Pacific Islands, the territories andpossessions of the United States, and/orpolitical subdivision or subdivisionsthereof, as specified in an order issuedpursuant to paragraph (a) of this section.


HISTORY:[54 FR 33679, Aug. 16, 1989]









SUBPART B—Reports to be Made

31 C.F.R. 103.27

§103.27 Filing of reports.

(a) (1) A report required by §103.22(a) shall befiled by the financial institution within15 days following the day on which thereportable transaction occurred.

(2) A report required by §103.22(g) shallbe filed by the bank within 15 days afterreceiving a request for the report.

(3) A copy of each report filed pursuant to§103.22 shall be retained by the finan-cial institution for a period of five yearsfrom the date of the report.

(4) All reports required to be filed by§103.22 shall be filed with the Com-missioner of Internal Revenue, unlessotherwise specified.

(b) (1) A report required by §103.23(a) shall befiled at the time of entry into the UnitedStates or at the time of departure, mail-ing or shipping from the United States,unless otherwise specified by the Com-missioner of Customs.



(2) A report required by §103.23(b) shallbe filed within 15 days after receiptof the currency or other monetaryinstruments.

(3) All reports required by §103.23 shall befiled with the Customs officer in chargeat any port of entry or departure, or asotherwise specified by the Commis-sioner of Customs. Reports required by§103.23(a) for currency or other mone-tary instruments not physically accom-panying a person entering or departingfrom the United States, may be filedby mail on or before the date of entry,departure, mailing or shipping. Allreports required by §103.23(b) may alsobe filed by mail. Reports filed by mailshall be addressed to the Commissionerof Customs, Attention: Currency Trans-portation Reports, Washington, DC20229.

(c) Reports required to be filed by §103.24shall be filed with the Commissioner ofInternal Revenue on or before June 30 ofeach calendar year with respect to foreignfinancial acccounts exceeding $10,000maintained during the previous calendaryear.

(d) Reports required by §103.22, §103.23 or§103.24 shall be filed on forms prescribedby the Secretary. All information called forin such forms shall be furnished.

(e) Forms to be used in making the reportsrequired by §§103.22 and 103.24 may beobtained from the Internal Revenue Service.Forms to be used in making the reportsrequired by §103.23 may be obtained fromthe U.S. Customs Service.


HISTORY:[52 FR 11443, Apr. 8, 1987; 52 FR 12641, Apr. 17, 1987, asamended at 53 FR 4138, Feb. 12, 1988. Redesignated at 54 FR33678, Aug. 16, 1989]






31 C.F.R. 103.28

§103.28 Identification required.

Before concluding any transaction with respectto which a report is required under §103.22, afinancial institution shall verify and record thename and address of the individual presentinga transaction, as well as record the identity,account number, and the social security ortaxpayer identification number, if any, of anyperson or entity on whose behalf such trans-action is to be effected. Verification of theidentity of an individual who indicates that heor she is an alien or is not a resident of theUnited States must be made by passport, alienidentification card, or other official documentevidencing nationality or residence (e.g., a Pro-vincial driver’s license with indication ofhome address). Verification of identity in anyother case shall be made by examination ofa document, other than a bank signature card,that is normally acceptable within the bankingcommunity as a means of identification whencashing checks for nondepositors (e.g., a driverslicense or credit card). Where a person is anonresident alien, the casino shall also recordthe person’s passport number or a descriptionof some other government document usedto verify his identity. A bank signature cardmay be relied upon only if it was issued afterdocuments establishing the identity of theindividual were examined and notation of thespecific information was made on the signa-ture card. In each instance, the specific identi-fying information (i.e., the account number ofthe credit card, the driver’s license number,etc.) used in verifying the identity of the cus-tomer shall be recorded on the report, andthe mere notation of ‘‘known customer’’ or‘‘bank signature card on file’’ on the report isprohibited.




HISTORY:[52 FR 11443, Apr. 8, 1987; 52 FR 12641, Apr. 17, 1987, asamended at 54 FR 3027, Jan. 23, 1989. Redesignated at 54 FR33678, Aug. 16, 1989]





SUBPART B—Reports to be Made

31 C.F.R. 103.29

§103.29 Purchases of bank checksand drafts, cashier’s checks, moneyorders and traveler’s checks.

(a) No financial institution may issue or sell abank check or draft, cashier’s check, moneyorder or traveler’s check for $3,000 or morein currency unless it maintains records ofthe following information, which must beobtained for each issuance or sale of one ormore of these instruments to any individualpurchaser which involves currency inamounts of $3,000–$10,000 inclusive:(1) If the purchaser has a deposit account

with the financial institution:(i) (A) The name of the purchaser;

(B) The date of purchase;(C) The type(s) of instrument(s)

purchased;(D) The serial number(s) of each of

the instrument(s) purchased;and

(E) The amount in dollars of eachof the instrument(s) purchased.

(ii) In addition, the financial institutionmust verify that the individual is adeposit accountholder or must verifythe individual’s identity. Verifica-tion may be either through a signa-

ture card or other file or record atthe financial institution provided thedeposit accountholder’s name andaddress were verified previously andthat information was recorded onthe signature card or other file orrecord; or by examination of a docu-ment which is normally acceptablewithin the banking community as ameans of identification when cash-ing checks for nondepositors andwhich contains the name andaddress of the purchaser. If thedeposit accountholder’s identity hasnot been verified previously, thefinancial institution shall verify thedeposit accountholder’s identity byexamination of a document whichis normally acceptable within thebanking community as a means ofidentification when cashing checksfor nondepositors and which con-tains the name and address of thepurchaser, and shall record the spe-cific identifying information (e.g.,State of issuance and number ofdriver’s license).

(2) If the purchaser does not have a depositaccount with the financial institution:(i) (A) The name and address of the

purchaser;(B) The social security number of

the purchaser, or if the pur-chaser is an alien and does nothave a social security number,the alien identification number;

(C) The date of birth of the pur-chaser;

(D) The date of purchase;(E) The type(s) of instrument(s)

purchased;(F) The serial number(s) of the

instrument(s) purchased; and(G) The amount in dollars of each

of the instrument(s) purchased.(ii) In addition, the financial institution

shall verify the purchaser’s nameand address by examination of adocument which is normally accept-able within the banking communityas a means of identification whencashing checks for nondepositorsand which contains the name andaddress of the purchaser, and shallrecord the specific identifying infor-



mation (e.g., State of issuance andnumber of driver’s license).

(b) Contemporaneous purchases of the same ordifferent types of instruments totaling $3,000or more shall be treated as one purchase.Multiple purchases during one business daytotaling $3,000 or more shall be treated asone purchase if an individual employee,director, officer, or partner of the financialinstitution has knowledge that these pur-chases have occurred.

(c) Records required to be kept shall be retainedby the financial institution for a period offive years and shall be made available to theSecretary upon request at any time.

HISTORY:[55 FR 20143, May 15, 1990; 59 FR 52252, Oct. 17, 1994]


NOTES:[EFFECTIVE DATE NOTE: 59 FR 52252, Oct. 17, 1994,which revised this section, became effective Oct. 17, 1994.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.



SUBPART C—Records Requiredto be Maintained

31 C.F.R. 103.31

§103.31 Determination by theSecretary.

The Secretary hereby determines that the recordsrequired to be kept by this subpart have a highdegree of usefulness in criminal, tax, or regula-tory investigations or proceedings.

HISTORY:37 FR 6912, Apr. 5, 1972.






31 C.F.R. 103.32

§103.32 Records to be made andretained by persons having financialinterests in foreign financial accounts.

Records of accounts required by §103.24 tobe reported to the Commissioner of InternalRevenue shall be retained by each person hav-ing a financial interest in or signature or otherauthority over any such account. Such recordsshall contain the name in which each suchaccount is maintained, the number or otherdesignation of such account, the name andaddress of the foreign bank or other personwith whom such account is maintained, thetype of such account, and the maximum valueof each such account during the reportingperiod. Such records shall be retained for aperiod of 5 years and shall be kept at alltimes available for inspection as authorizedby law. In the computation of the period of5 years, there shall be disregarded anyperiod beginning with a date on which thetaxpayer is indicted or information instituted onaccount of the filing of a false or fraudulentFederal income tax return or failing to file aFederal income tax return, and ending with thedate on which final disposition is made of thecriminal proceeding.

HISTORY:[37 FR 6912, Apr. 5, 1972, as amended at 52 FR 11444,Apr. 8, 1987]




NOTES:NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.

Chapter I.NOTES APPLICABLE TO ENTIRE CHAPTER:ABBREVIATION: The following abbreviation is used in thischapter: C.P.D. = Commissioner of the Public Debt.



31 C.F.R. 103.33

§103.33 Records to be made andretained by financial institutions.

Each financial institution shall retain either theoriginal or a microfilm or other copy or repro-duction of each of the following:(a) A record of each extension of credit in an

amount in excess of $10,000, except anextension of credit secured by an interest inreal property, which record shall contain thename and address of the person to whom theextension of credit is made, the amountthereof, the nature or purpose thereof, andthe date thereof;

(b) A record of each advice, request, or instruc-tion received or given regarding any trans-action resulting (or intended to result andlater cancelled if such a record is normallymade) in the transfer of currency or othermonetary instruments, funds, checks, invest-ment securities, or credit, of more than$10,000 to or from any person, account, orplace outside the United States.

(c) A record of each advice, request, or instruc-tion given to another financial institutionor other person located within or withoutthe United States, regarding a transactionintended to result in the transfer of funds, orof currency, other monetary instruments,checks, investment securities, or credit, ofmore than $10,000 to a person, account orplace outside the United States.

(d) A record of such information for such periodof time as the Secretary may require in anorder issued under §103.26(a), not to exceedfive years.


(e) Banks.Each agent, agency, branch, or officelocated within the United States of a bankis subject to the requirements of this para-graph (e) with respect to a funds transfer inthe amount of $3,000 or more:(1) Recordkeeping requirements.

(i) For each payment order that itaccepts as an originator’s bank, abank shall obtain and retain eitherthe original or a microfilm, othercopy, or electronic record of thefollowing information relating tothe payment order:(A) The name and address of the

originator;(B) The amount of the payment

order;(C) The execution date of the pay-

ment order;(D) Any payment instructions

received from the originatorwith the payment order;

(E) The identity of the beneficia-ry’s bank; and

(F) As many of the followingitems as are received with thepayment order:2

(1) The name and address ofthe beneficiary;

(2) The account number ofthe beneficiary; and

(3) Any other specific identi-fier of the beneficiary.

(ii) For each payment order that itaccepts as an intermediary bank, abank shall retain either the originalor a microfilm, other copy, or elec-tronic record of the payment order.

(iii) For each payment order that itaccepts as a beneficiary’s bank, abank shall retain either the originalor a microfilm, other copy, or elec-tronic record of the payment order.

(2) Originators other than established cus-tomers.In the case of a payment orderfrom an originator that is not an estab-

2. For funds transfers effected through the Federal Reserve’sFedwire funds transfer system, only one of the items isrequired to be retained, if received with the payment order,until such time as the bank that sends the order to the FederalReserve Bank completes its conversion to the expandedFedwire message format.



lished customer, in addition to obtainingand retaining the information requiredin paragraph (e)(1)(i) of this section:

(i) If the payment order is made inperson, prior to acceptance theoriginator’s bank shall verify theidentity of the person placing thepayment order. If it accepts thepayment order, the originator’sbank shall obtain and retain arecord of the name and address, thetype of identification reviewed, thenumber of the identification docu-ment (e.g., driver’s license), as wellas a record of the person’s taxpayeridentification number (e.g., socialsecurity or employer identificationnumber) or, if none, alien identifi-cation number or passport numberand country of issuance, or a nota-tion in the record of the lackthereof. If the originator’s bank hasknowledge that the person placingthe payment order is not the origi-nator, the originator’s bank shallobtain and retain a record of theoriginator’s taxpayer identificationnumber (e.g., social security oremployer identification number) or,if none, alien identification numberor passport number and country ofissuance, if known by the personplacing the order, or a notation inthe record of the lack thereof.

(ii) If the payment order accepted bythe originator’s bank is not made inperson, the originator’s bank shallobtain and retain a record of nameand address of the person placingthe payment order, as well as theperson’s taxpayer identificationnumber (e.g., social security oremployer identification number) or,if none, alien identification numberor passport number and country ofissuance, or a notation in the recordof the lack thereof, and a copy orrecord of the method of payment(e.g., check or credit card transac-tion) for the funds transfer. If theoriginator’s bank has knowledgethat the person placing the pay-ment order is not the originator, theoriginator’s bank shall obtain andretain a record of the originator’s

taxpayer identification number (e.g.,social security or employer identi-fication number) or, if none, alienidentification number or passportnumber and country of issuance, ifknown by the person placing theorder, or a notation in the record ofthe lack thereof.

(3) Beneficiaries other than established cus-tomers.For each payment order that itaccepts as a beneficiary’s bank for abeneficiary that is not an establishedcustomer, in addition to obtaining andretaining the information required inparagraph (e)(1)(iii) of this section:(i) if the proceeds are delivered in

person to the beneficiary or itsrepresentative or agent, the ben-eficiary’s bank shall verify the iden-tity of the person receiving the pro-ceeds and shall obtain and retain arecord of the name and address, thetype of identification reviewed, andthe number of the identificationdocument (e.g., driver’s license), aswell as a record of the person’staxpayer identification number (e.g.,social security or employer identi-ficati on number) or, if none, alienidentification number or passportnumber and country of issuance, ora notation in the record of the lackthereof. If the beneficiary’s bankhas knowledge that the person re-ceiving the proceeds is not the bene-ficiary, the beneficiary’s bank shallobtain and retain a record of thebeneficiary’s name and address, aswell as the beneficiary’s taxpayeridentification number (e.g., socialsecurity or employer identificationnumber) or, if none, alien identifi-cation number or passport numberand country of issuance, if knownby the person receiving the pro-ceeds, or a notation in the record ofthe lack thereof.

(ii) if the proceeds are delivered otherthan in person, the beneficiary’sbank shall retain a copy of thecheck or other instrument used toeffect payment, or the informationcontained thereon, as well as thename and address of the person towhich it was sent.



(4) Retrievability.The information that anoriginator’s bank must retain under para-graphs (e)(1)(i) and (e)(2) of this sectionshall be retrievable by the originator’sbank by reference to the name of theoriginator. If the originator is an estab-lished customer of the originator’s bankand has an account used for funds trans-fers, then the information also shall beretrievable by account number. Theinformation that a beneficiary’s bankmust retain under paragraphs (e)(1)(iii)and (e)(3) of this section shall be retriev-able by the beneficiary’s bank by refer-ence to the name of the beneficiary. Ifthe beneficiary is an established cus-tomer of the beneficiary’s bank and hasan account used for funds transfers, thenthe information also shall be retrievableby account number. This informationneed not be retained in any particularmanner, so long as the bank is able toretrieve the information required by thisparagraph, either by accessing fundstransfer records directly or through ref-erence to some other record maintainedby the bank.

(5) Verification. Where verification isrequired under paragraphs (e)(2) and(e)(3) of this section, a bank shall verifya person’s identity by examination ofa document (other than a bank signa-ture card), preferably one that containsthe person’s name, address, and photo-graph, that is normally acceptable byfinancial institutions as a means ofidentification when cashing checksfor persons other than establishedcustomers. Verification of the identityof an individual who indicates that heor she is an alien or is not a residentof the United States may be madeby passport, alien identification card,or other official document evidencingnationality or residence (e.g., a foreigndriver’s license with indication of homeaddress).

(6) Exceptions.The following funds trans-fers are not subject to the requirementsof this section:(i) Funds transfers where the origina-

tor and beneficiary are any of thefollowing:

(A) A bank;

(B) A wholly-owned domestic sub-sidiary of a bank chartered inthe United States;

(C) A broker or dealer in securi-ties;

(D) A wholly-owned domestic sub-sidiary of a broker or dealer insecurities;

(E) The United States;(F) A state or local government; or(G) A federal, state or local gov-

ernment agency or instrumen-tality; and

(ii) Funds transfers where both the origi-nator and the beneficiary are thesame person and the originator’sbank and the beneficiary’s bank arethe same bank.

(f) Nonbank financial institutions.Each agent,agency, branch, or office located within theUnited States of a financial institution otherthan a bank is subject to the requirements ofthis paragraph (f) with respect to a transmit-tal of funds in the amount of $3,000 ormore:(1) Recordkeeping requirements.

(i) For each transmittal order that itaccepts as a transmittor’s financialinstitution, a financial institutionshall obtain and retain either theoriginal or a microfilm, other copy,or electronic record of the follow-ing information relating to thetransmittal order:

(A) The name and address of thetransmittor;

(B) The amount of the transmittalorder;

(C) The execution date of the trans-mittal order;

(D) Any payment instructionsreceived from the transmittorwith the transmittal order;

(E) The identity of the recipient’sfinancial institution;

(F) As many of the following itemsas are received with the trans-mittal order:3

3. For transmittals of funds effected through the FederalReserve’s Fedwire funds transfer system by a domestic brokeror dealers in securities, only one of the items is required to beretained, if received with the transmittal order, until such timeas the bank that sends the order to the Federal Reserve Bankcompletes its conversion to the expanded Fedwire messageformat.



(1) The name and address ofthe recipient;

(2) The account number of therecipient; and

(3) Any other specific identi-fier of the recipient; and

(G) Any form relating to the trans-mittal of funds that is com-pleted or signed by the personplacing the transmittal order.

(ii) For each transmittal order that itaccepts as an intermediary finan-cial institution, a financial institu-tion shall retain either the originalor a microfilm, other copy, or elec-tronic record of the transmittalorder.

(iii) for each transmittal order that itaccepts as a recipient’s financialinstitution, a financial institutionshall retain either the original or amicrofilm, other copy, or electronicrecord of the transmittal order.

(2) Transmittors other than established cus-tomers.In the case of a transmittal orderfrom a transmittor that is not an estab-lished customer, in addition to obtainingand retaining the information requiredin paragraph (f)(1)(i) of this section:(i) If the transmittal order is made in

person, prior to acceptance the trans-mittor’s financial institution shallverify the identity of the personplacing the transmittal order. If itaccepts the transmittal order, thetransmittor’s financial institutionshall obtain and retain a record ofthe name and address, the type ofidentification reviewed, and thenumber of the identification docu-ment (e.g., driver’s license), as wellas a record of the person’s taxpayeridentification number (e.g., socialsecurity or employer identificationnumber) or, if none, alien identifi-cation number or passport numberand country of issuance, or a nota-tion in the record the lack thereof. Ifthe transmittor’s financial institu-tion has knowledge that the personplacing the transmittal order is notthe transmittor, the transmittor’sfinancial institution shall obtain andretain a record of the transmittor’staxpayer identification number (e.g.,

social security or employer identi-fication number) or, if none, alienidentification number or passportnumber and country of issuance, ifknown by the person placing theorder, or a notation in the record thelack thereof.

(ii) If the transmittal order accepted bythe transmittor’s financial institu-tion is not made in person, thetransmittor’s financial institutionshall obtain and retain a record ofthe name and address of the personplacing the transmittal order, as wellas the person’s taxpayer identifica-tion number (e.g., social security oremployer identification number) or,if none, alien identification numberor passport number and country ofissuance, or a notation in the recordof the lack thereof, and a copy orrecord of the method of payment(e.g., check or credit card transac-tion) for the transmittal of funds. Ifthe transmittor’s financial institu-tion has knowledge that the personplacing the transmittal order is notthe transmittor, the transmittor’sfinancial institution shall obtain andretain a record of the transmittor’staxpayer identification number (e.g.,social security or employer identi-fication number) or, if none, alienidentification number or passportnumber and country of issuance, ifknown by the person placing theorder, or a notation in the record thelack thereof.

(3) Recipients other than established cus-tomers.For each transmittal order that itaccepts as a recipient’s financial institu-tion for a recipient that is not an estab-lished customer, in addition to obtainingand retaining the information requiredin paragraph (f)(1)(iii) of this section:(i) If the proceeds are delivered in

person to the recipient or its repre-sentative or agent, the recipient’sfinancial institution shall verify theidentity of the person receiving theproceeds and shall obtain and retaina record of the name and address,the type of identification reviewed,and the number of the identificationdocument (e.g., driver’s license), as



well as a record of the person’staxpayer identification number (e.g.,social security or employer identi-fication number) or, if none, alienidentification number or passportnumber and country of issuance, ora notation in the record of the lackthereof. If the recipient’s financialinstitution has knowledge that theperson receiving the proceeds is notthe recipient, the recipient’s finan-cial institution shall obtain andretain a record of the recipient’sname and address, as well as therecipient’s taxpayer identificationnumber (e.g., social security oremployer identification number) or,if none, alien identification numberor passport number and country ofissuance, if known by the personreceiving the proceeds, or a nota-tion in the record of the lack thereof.

(ii) If the proceeds are delivered otherthan in person, the recipient’s finan-cial institution shall retain a copy ofthe check or other instrument usedto effect payment, or the informa-tion contained thereon, as well asthe name and address of the personto which it was sent.

(4) Retrievability. The information that atransmittor’s financial institution mustretain under paragraphs (f)(1)(i) and(f)(2) of this section shall be retrievableby the transmittor’s financial institutionby reference to the name of the trans-mittor. If the transmittor is an estab-lished customer of the transmittor’sfinancial institution and has an accountused for transmittals of funds, then theinformation also shall be retrievable byaccount number. The information that arecipient’s financial institution mustretain under paragraphs (f)(1)(iii) and(f)(3) of this section shall be retrievableby the recipient’s financial institution byreference to the name of the recipient. Ifthe recipient is an established customerof the recipient’s financial institutionand has an account used for transmittalsof funds, then the information also shallbe retrievable by account number. Thisinformation need not be retained in anyparticular manner, so long as the finan-cial institution is able to retrieve the

information required by this paragraph,either by accessing transmittal of fundsrecords directly or through reference tosome other record maintained by thefinancial institution.

(5) Verification. Where verification isrequired under paragraphs (f)(2) and(f)(3) of this section, a financial institu-tion shall verify a person’s identity byexamination of a document (other thana customer signature card), preferablyone that contains the person’s name,address, and photograph, that is nor-mally acceptable by financial institu-tions as a means of identification whencashing checks for persons other thanestablished customers. Verification ofthe identity of an individual who indi-cates that he or she is an alien or is nota resident of the United States may bemade by passport, alien identificationcard, or other official document evidenc-ing nationality or residence (e.g., a for-eign driver’s license with indication ofhome address).

(6) Exceptions.The following transmittalsof funds are not subject to the require-ments of this section:(i) Transmittals of funds where the

transmittor and the recipient are anyof the following:(A) A bank;(B) A wholly-owned domestic sub-

sidiary of a bank chartered inthe United States;

(C) A broker or dealer in securi-ties;

(D) A wholly-owned domestic sub-sidiary of a broker or dealer insecurities;

(E) The United States;(F) A state or local government; or(G) A federal, state or local gov-

ernment agency or instrumen-tality; and

(ii) Transmittals of funds where boththe transmittor and the recipientare the same person and the trans-mittor’s financial institution andthe recipient’s financial institutionare the same broker or dealer insecurities.

(g) Any transmittor’s financial institution orintermediary financial institution locatedwithin the United States shall include in any



transmittal order for a transmittal of funds inthe amount of $3,000 or more, informationas required in this paragraph (g):(1) A transmittor’s financial institution shall

include in a transmittal order, at the timeit is sent to a receiving financial institu-tion, the following information:

(i) The name and, if the paymentis ordered from an account,the account number of thetransmittor;

(ii) The address of the transmittor,except for a transmittal orderthrough Fedwire until such timeas the bank that sends the orderto the Federal Reserve Bankcompletes its conversion to theexpanded Fedwire format;

(iii) The amount of the transmittalorder;

(iv) The execution date of the transmit-tal order;

(v) The identity of the recipient’sfinancial institution;

(vi) As many of the following items asare received with the transmittalorder:4(A) The name and address of the

recipient;(B) The account number of the

recipient;(C) Any other specific identifier

of the recipient; and(vii) Either the name and address or

numerical identifier of the trans-mittor’s financial institution.

(2) A receiving financial institution thatacts as an intermediary financial institu-tion, if it accepts a transmittal order,shall include in a corresponding trans-mittal order at the time it is sent to thenext receiving financial institution, thefollowing information, if received fromthe sender:

(i) The name and the account num-ber of the transmittor;

(ii) The address of the transmittor,except for a transmittal order

through Fedwire until such timeas the bank that sends the orderto the Federal Reserve Bankcompletes its conversion to theexpanded Fedwire format;

(iii) The amount of the transmittalorder;

(iv) The execution date of the transmit-tal order;

(v) The identity of the recipient’sfinancial institution;

(vi) As many of the following items asare received with the transmittalorder:5(A) The name and address of the

recipient;(B) The account number of the

recipient;(C) Any other specific identifier

of the recipient; and(vii) Either the name and address or

numerical identifier of the trans-mittor’s financial institution.

(3) Safe harbor for transmittals of fundsprior to conversion to the expandedFedwire message format. The followingprovisions apply to transmittals of fundseffected through the Federal Reserve’sFedwire funds transfer system or other-wise by a financial institution before thebank that sends the order to the FederalReserve Bank or otherwise, completesits conversion to the expanded Fedwiremessage format.

(i) Transmittor’s financial institution.A transmittor’s financial institutionwill be deemed to be in compliancewith the provisions of paragraph(g)(1) of this section if it:(A) Includes in the transmittal

order, at the time it is sent tothe receiving financial insti-tution, the information speci-fied in paragraphs (g)(1)(iii)through (v), and the informa-tion specified in paragraph(g)(1)(vi) of this section to theextent that such information

4. For transmittals of funds effected through the FederalReserve’s Fedwire funds transfer system by a financial insti-tution, only one of the items is required to be included in thetransmittal order, if received with the sender’s transmittalorder, until such time as the bank that sends the order to theFederal Reserve Bank completes its conversion to the expandedFedwire message format.

5. For transmittals of funds effected through the FederalReserve’s Fedwire funds transfer system by a financial insti-tution, only one of the items is required to be included in thetransmittal order, if received with the sender’s transmittalorder, until such time as the bank that sends the order to theFederal Reserve Bank completes its conversion to the expandedFedwire message format.



has been received by the finan-cial institution, and

(B) Provides the information speci-fied in paragraphs (g)(1)(i),(ii) and (vii) of this section toa financial institution that actedas an intermediary financialinstitution or recipient’s finan-cial institution in connectionwith the transmittal order,within a reasonable time afterany such financial institutionmakes a request therefor inconnection with the request-ing financial institution’sreceipt of a lawful request forsuch information from afederal, state, or local lawenforcement or financial reg-ulatory agency, or in con-nection with the requestingfinancial institution’s ownBank Secrecy Act complianceprogram.

(ii) Intermediary financial institution.An intermediary financial institu-tion will be deemed to be in com-pliance with the provisions of para-graph (g)(2) of this section if it:(A) Includes in the transmittal

order, at the time it is sent tothe receiving financial insti-tution, the information speci-fied in paragraphs (g)(2)(iii)through (g)(2)(vi) of this sec-tion, to the extent that suchinformation has been receivedby the intermediary financialinstitution; and

(B) Provides the information speci-fied in paragraphs (g)(2)(i),(ii) and (vii) of this section, tothe extent that such informa-tion has been received by theintermediary financial institu-tion, to a financial institutionthat acted as an intermediaryfinancial institution or recipi-ent’s financial institution inconnection with the transmit-tal order, within a reasonabletime after any such financialinstitution makes a requesttherefor in connection withthe requesting financial insti-

tution’s receipt of a lawfulrequest for such informationfrom a federal, state, or locallaw enforcement or regulatoryagency, or in connection withthe requesting financial insti-tution’s own Bank Secrecy Actcompliance program.

(iii) Obligation of requesting finan-cial institution. Any informa-tion requested under paragraph(g)(3)(i)(B) or (g)(3)(ii)(B) ofthis section shall be treated bythe requesting institution, oncereceived, as if it had been includedin the transmittal order to whichsuch information relates.

(4) Exceptions.The requirements of thisparagraph (g) shall not apply to trans-mittals of funds that are listed in para-graph (e)(6) or (f)(6) of this section.

HISTORY:[37 FR 6912, Apr. 5, 1972, as amended at 52 FR 11444,Apr. 8, 1987; 54 FR 33679, Aug. 16, 1989; 60 FR 229, 237,Jan. 3, 1995; 60 FR 44144, Aug. 24, 1995; 61 FR 14382,14383, 14385, 14386, 14388, April 1, 1996, as corrected at61 FR 18250, April 25, 1996]


NOTES:[EFFECTIVE DATE NOTE: 60 FR 229, Jan. 3, 1995, whichadded paragraphs (e) and (f), became effective Jan. 1, 1996;60 FR 237, Jan. 3, 1995, which added paragraph (g), becameeffective Jan. 1, 1996; 60 FR 44144, Aug. 24, 1995, delayedthe effective date of the amendment at 60 FR 229, Jan. 3,1995, from Jan. 1, 1996 to April 1, 1996; 61 FR 14382,April 1, 1996, further delayed the effective date of theamendments at 60 FR 229 and 237, Jan. 3, 1995, from April 1,1996 to May 28, 1996; 61 FR 14383, 14385, April 1, 1996,which amended paragraphs (e) and (f), became effective May28, 1996; 61 FR 14386, 14388, April 1, 1996, which revisedthe introductory text of paragraphs (g) and (g)(1), and addedparagraphs (g)(3) and (g)(4), became effective May 28, 1996.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.






31 C.F.R. 103.34

§103.34 Additional records to bemade and retained by banks.

(a) (1) With respect to each certificate of depositsold or redeemed after May 31, 1978, oreach deposit or share account openedwith a bank after June 30, 1972, a bankshall, within 30 days from the date sucha transaction occurs or an account isopened, secure and maintain a record ofthe taxpayer identification number ofthe customer involved; or where theaccount or certificate is in the names oftwo or more persons, the bank shallsecure the taxpayer identification num-ber of a person having a financial inter-est in the certificate or account. In theevent that a bank has been unable tosecure, within the 30-day period speci-fied, the required identification, it shallnevertheless not be deemed to be inviolation of this section if (i) it has madea reasonable effort to secure such iden-tification, and (ii) it maintains a listcontaining the names, addresses, andaccount numbers of those persons fromwhom it has been unable to secure suchidentification, and makes the names,addresses, and account numbers of thosepersons available to the Secretary asdirected by him. A bank acting as anagent for another person in the purchaseor redemption of a certificate of depositissued by another bank is responsiblefor obtaining and recording the requiredtaxpayer identification, as well as formaintaining the records referred to inparagraphs (b)(11) and (12) of this sec-tion. The issuing bank can satisfy therecordkeeping requirement by recordingthe name and address of the agenttogether with a description of the instru-ment and the date of the transaction.Where a person is a non-resident alien,the bank shall also record the person’spassport number or a description ofsome other government document usedto verify his identity.

(2) The 30-day period provided for in para-graph (a)(1) of this section shall be

extended where the person opening theaccount has applied for a taxpayer iden-tification or social security number onForm SS-4 or SS-5, until such time asthe person maintaining the account hashad a reasonable opportunity to securesuch number and furnish it to the bank.

(3) A taxpayer identification numberrequired under paragraph (a)(1) of thissection need not be secured for accountsor transactions with the following:(i) agencies and instrumentalities of Fed-eral, state, local or foreign governments;(ii) judges, public officials, or clerksof courts of record as custodians offunds in controversy or under the con-trol of the court; (iii) aliens who are(A) ambassadors, ministers, careerdiplomatic or consular officers, or(B) naval, military or other attaches offoreign embassies and legations, and forthe members of their immediate fami-lies; (iv) aliens who are accreditedrepresentatives of international organi-zations which are entitled to enjoy privi-leges, exemptions and immunities as aninternational organization under theInternational Organization ImmunitiesAct of December 29, 1945 (22 U.S.C.288), and the members of their imme-diate families; (v) aliens temporarilyresiding in the United States for a periodnot to exceed 180 days; (vi) aliens notengaged in a trade or business in theUnited States who are attending a rec-ognized college or university or anytraining program, supervised or con-ducted by any agency of the FederalGovernment; (vii) unincorporated sub-ordinate units of a tax exempt centralorganization which are covered by agroup exemption letter, (viii) a personunder 18 years of age with respect to anaccount opened as a part of a schoolthrift savings program, provided theannual interest is less than $10; (ix) aperson opening a Christmas club, vaca-tion club and similar installment savingsprograms provided the annual interest isless than $10; and non-resident alienswho are not engaged in a trade orbusiness in the United States. In instancesdescribed in paragraphs (a)(3), (viii)and (ix) of this section, the bank shall,within 15 days following the end of any



calendar year in which the interestaccrued in that year is $10 or more useits best effort to secure and maintain theappropriate taxpayer identification num-ber or application form therefor.

(4) The rules and regulations issued by theInternal Revenue Service under section6109 of the Internal Revenue Code of1954 shall determine what constitutes ataxpayer identification number andwhose number shall be obtained in thecase of an account maintained by one ormore persons.

(b) Each bank shall, in addition, retain either theoriginal or a microfilm or other copy orreproduction of each of the following:(1) Each document granting signature

authority over each deposit or shareaccount, including any notations, ifsuch are normally made, of specificidentifying information verifying theidentity of the signer (such as adriver’s license number or credit cardnumber);

(2) Each statement, ledger card or otherrecord on each deposit or share account,showing each transaction in, or withrespect to, that account;

(3) Each check, clean draft, or moneyorder drawn on the bank or issued andpayable by it, except those drawn for$100 or less or those drawn on accountswhich can be expected to have drawnon them an average of at least 100checks per month over the calendaryear or on each occasion on whichsuch checks are issued, and whichare (i) dividend checks, (ii) payrollchecks, (iii) employee benefit checks,(iv) insurance claim checks, (v) medi-cal benefit checks, (vi) checks drawnon government agency accounts,(vii) checks drawn by brokers or deal-ers in securities, (viii) checks drawn onfiduciary accounts, (ix) checks drawnon other financial institutions, or pen-sion or annuity checks;

(4) Each item in excess of $100 (otherthan bank charges or periodic chargesmade pursuant to agreement with thecustomer), comprising a debit to acustomer’s deposit or share account,not required to be kept, and notspecifically exempted, under para-graph (b)(3) of this section;

(5) Each item, including checks, drafts,or transfers of credit, of more than$10,000 remitted or transferred to aperson, account or place outside theUnited States;

(6) A record of each remittance or transferof funds, or of currency, other mone-tary instruments, checks, investmentsecurities, or credit, of more than$10,000 to a person, account or placeoutside the United States;

(7) Each check or draft in an amount inexcess of $10,000 drawn on or issuedby a foreign bank which the domesticbank has paid or presented to a non-bank drawee for payment;

(8) Each item, including checks, draftsor transfers of credit, of more than$10,000 received directly and notthrough a domestic financial institu-tion, by letter, cable or any other means,from a bank, broker or dealer in for-eign exchange outside the UnitedStates;

(9) A record of each receipt of currency,other monetary instruments, invest-ment securities or checks, and of eachtransfer of funds or credit, of morethan $10,000 received on any oneoccasion directly and not through adomestic financial institution, from abank, broker or dealer in foreignexchange outside the United States;and

(10) Records prepared or received by abank in the ordinary course of busi-ness, which would be needed to recon-struct a transaction account and totrace a check in excess of $100 depos-ited in such account through its domes-tic processing system or to supply adescription of a deposited check inexcess of $100. This subparagraph shallbe applicable only with respect todemand deposits.

(11) A record containing the name, address,and taxpayer identification number, ifavailable, of the purchaser of eachcertificate of deposit, as well as adescription of the instrument, a nota-tion of the method of payment, and thedate of the transaction.

(12) A record containing the name, addressand taxpayer identification number, ifavailable, of any person presenting a



certificate of deposit for payment, aswell as a description of the instrumentand the date of the transaction.

(13) Each deposit slip or credit ticketreflecting a transaction in excess of$100 or the equivalent record for directdeposit or other wire transfer deposittransactions. The slip or ticket shallrecord the amount of any currencyinvolved.


HISTORY:[38 FR 2175, Jan. 22, 1973, as amended at 38 FR 3509,Feb. 7, 1973; 43 FR 21672, May 19, 1978; 52 FR 11444,Apr. 8, 1987]


NOTES: NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.




31 C.F.R. 103.35

§103.35 Additional records to bemade and retained by brokers ordealers in securities.

(a) (1) With respect to each brokerage accountopened with a broker or dealer in secu-rities after June 30, 1972, by a personresiding or doing business in the UnitedStates or a citizen of the United States,such broker or dealer shall within30 days from the date such account isopened, secure and maintain a record ofthe taxpayer identification number ofthe person maintaining the account; orin the case of an account of one or more

individuals, such broker or dealer shallsecure and maintain a record of thesocial security number of an individualhaving a financial interest in that account.In the event that a broker or dealer hasbeen unable to secure the identificationrequired within the 30-day period speci-fied, it shall nevertheless not be deemedto be in violation of this section if: (i) Ithas made a reasonable effort to securesuch identification, and (ii) it maintainsa list containing the names, addresses,and account numbers of those personsfrom whom it has been unable to securesuch identification, and makes the names,addresses, and account numbers of thosepersons available to the Secretary asdirected by him. Where a person is anon-resident alien, the broker or dealerin securities shall also record the per-son’s passport number or a descriptionof some other government documentused to verify his identity.

(2) The 30-day period provided for in para-graph (a)(1) of this section shall beextended where the person opening theaccount has applied for a taxpayer iden-tification or social security number onForm SS-4 or SS-5, until such time asthe person maintaining the account hashad a reasonable opportunity to securesuch number and furnish it to the brokeror dealer.

(3) A taxpayer identification number for adeposit or share account required underparagraph (a)(1) of this section need notbe secured in the following instances:(i) Accounts for public funds openedby agencies and instrumentalities ofFederal, state, local, or foreign govern-ments, (ii) accounts for aliens who are(a) ambassadors, ministers, careerdiplomatic or consular officers, or(b) naval, military or other attaches offoreign embassies, and legations, andfor the members of their immediatefamilies, (iii) accounts for aliens whoare accredited representatives to inter-national organizations which areentitled to enjoy privileges, exemptions,and immunities as an internationalorganization under the InternationalOrganizations Immunities Act of Decem-ber 29, 1945 (22 U.S.C. 288), and forthe members of their immediate fami-



lies, (iv) aliens temporarily residing inthe United States for a period not toexceed 180 days, (v) aliens not engagedin a trade or business in the UnitedStates who are attending a recognizedcollege or university or any trainingprogram, supervised or conducted byany agency of the Federal Government,and (vi) unincorporated subordinateunits of a tax exempt central organiza-tion which are covered by a groupexemption letter.

(b) Every broker or dealer in securities shall, inaddition, retain either the original or amicrofilm or other copy or reproduction ofeach of the following:

(1) Each document granting signature ortrading authority over each customer’saccount;

(2) Each record described in §240.17a-3(a)(1), (2), (3), (5), (6), (7), (8), and (9) ofTitle 17, Code of Federal Regulations;

(3) A record of each remittance or transferof funds, or of currency, checks, othermonetary instruments, investment secu-rities, or credit, of more than $10,000 toa person, account, or place, outside theUnited States;

(4) A record of each receipt of currency,other monetary instruments, checks, orinvestment securities and of each trans-fer of funds or credit, of more than$10,000 received on any one occasiondirectly and not through a domesticfinancial institution, from any person,account or place outside the UnitedStates.


HISTORY:[37 FR 26518, Dec. 13, 1972, as amended at 38 FR 2176,Jan. 22, 1973; 52 FR 11444, Apr. 8, 1987]






31 C.F.R. 103.36

§103.36 Additional records to bemade and retained by casinos.

[PUBLISHER’S NOTE: Paragraph (b)(7) was amended at61 FR 7054, 7056, Feb. 23, 1996, effective Aug. 1, 1996. Forthe convenience of the user, paragraph (b)(7) has been set outtwice below. The first version is effective until Aug. 1, 1996.The second version is effective Aug. 1, 1996.]

(a) With respect to each deposit of funds,account opened or line of credit extendedafter the effective date of these regulations,a casino shall, at the time the funds aredeposited, the account is opened or credit isextended, secure and maintain a record ofthe name, permanent address, and socialsecurity number of the person involved.Where the deposit, account or credit is in thenames of two or more persons, the casinoshall secure the name, permanent address,and social security number of each personhaving a financial interest in the deposit,account or line of credit. The name andaddress of such person shall be verified bythe casino at the time the deposit is made,account opened, or credit extended. Theverification shall be made by examination ofa document of the type described in §103.28,and the specific identifying information shallbe recorded in the manner described in§103.28. In the event that a casino has beenunable to secure the required social securitynumber, it shall not be deemed to be inviolation of this section if (1) it has made areasonable effort to secure such number and(2) it maintains a list containing the namesand permanent addresses of those personsfrom who it has been unable to obtain socialsecurity numbers and makes the names andaddresses of those persons available to theSecretary upon request. Where a person is anonresident alien, the casino shall also recordthe person’s passport number or a descrip-



tion of some other government documentused to verify his identity.

(b) In addition, each casino shall retain eitherthe original or a microfilm or other copy orreproduction of each of the following:(1) A record of each receipt (including but

not limited to funds for safekeeping orfront money) of funds by the casino forthe account (credit or deposit) of anyperson. The record shall include thename, permanent address and socialsecurity number of the person fromwhom the funds were received, as wellas the date and amount of the fundsreceived. If the person from whom thefunds were received is a nonresidentalien, the person’s passport number ora description of some other govern-ment document used to verify the per-son’s identity shall be obtained andrecorded;

(2) A record of each bookkeeping entrycomprising a debit or credit to a cus-tomer’s deposit account or creditaccount with the casino;

(3) Each statement, ledger card or otherrecord of each deposit account or creditaccount with the casino, showingeach transaction (including deposits,receipts, withdrawals, disbursementsor transfers) in or with respect to, acustomer’s deposit account or creditaccount with the casino;

(4) A record of each extension of credit inexcess of $2500, the terms and condi-tions of such extension of credit, andrepayments. The record shall includethe customer’s name, permanentaddress, social security number, andthe date and amount of the transaction(including repayments). If the cus-tomer or person for whom the creditextended is a non-resident alien, hispassport number or description of someother government document used toverify his identity shall be obtainedand recorded;

(5) A record of each advice, request orinstruction received or given by thecasino for itself or another person withrespect to a transaction involving aperson, account or place outside theUnited States (including but not lim-ited to communications by wire, letter,or telephone). If the transfer outside

the United States is on behalf of a thirdparty, the record shall include thethird party’s name, permanent address,social security number, signature, andthe date and amount of the transaction.If the transfer is received from outsidethe United States on behalf of a thirdparty, the record shall include the thirdparty’s name, permanent address, socialsecurity number, signature, and thedate and amount of the transaction. Ifthe person for whom the transaction isbeing made is a non-resident alien therecord shall also include the person’sname, his passport number or a descrip-tion of some other government docu-ment used to verify his identity;

(6) Records prepared or received by thecasino in the ordinary course of busi-ness which would be needed to recon-struct a person’s deposit account orcredit account with the casino or totrace a check deposited with the casinothrough the casino’s records to thebank of deposit;

(7) [Effective until Aug. 1, 1996.] Allrecords, documents or manualsrequired to be maintained by acasino under state and local laws orregulations.

(7) [Effective Aug. 1, 1996.] All records,documents or manuals required to bemaintained by a casino under state andlocal laws or regulations, regulationsof any governing Indian tribe or tribalgovernment, or terms of (or any regu-lations issued under) any Tribal-Statecompacts entered into pursuant to theIndian Gaming Regulatory Act, withrespect to the casino in question.

(8) All records which are prepared or usedby a casino to monitor a customer’sgaming activity.

(9) (i) A separate record containing a listof each transaction between thecasino and its customers involvingthe following types of instrumentshaving a face value of $ 3,000 ormore:(A) Personal checks (excluding

instruments which evidencecredit granted by a casinostrictly for gaming, such asmarkers);



(B) Business checks (includingcasino checks);

(C) Official bank checks;

(D) Cashier’s checks;

(E) Third-party checks;

(F) Traveler’s checks; and

(G) Money orders.

(ii) The list will contain the time, date,and amount of the transaction; thename and permanent address ofthe customer; the type of instru-ment; the name of the drawee orissuer of the instrument; all refer-ence numbers (e.g., casino accountnumber, personal check number,etc.); and the name or casinolicense number of the casinoemployee who conducted the trans-action. Applicable transactionswill be placed on the list in thechronological order in which theyoccur.

(12) A copy of the compliance programdescribed in §103.54(a).

HISTORY:[50 FR 5068, Feb. 6, 1985, as amended at 52 FR 11444,Apr. 8, 1987; 54 FR 1167, Jan. 12, 1989; 58 FR 13547,Mar. 12, 1994; 59 FR 61662, Dec. 1, 1994; 61 FR 7054, 7056,Feb. 23, 1996]


NOTES:[EFFECTIVE DATE NOTE: 61 FR 7054, 7056, Feb. 23,1996, which added ’, regulations of any governing Indian tribeor tribal government, or terms of (or any regulations issuedunder) any Tribal-State compacts entered into pursuant to theIndian Gaming Regulatory Act, with respect to the casino inquestion.’’ after ‘‘state and local laws or regulations,’’ iseffective Aug. 1, 1996.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.




31 C.F.R. 103.37

§103.37 Additional records to bemade and retained by currencydealers or exchangers.

(a) (1) After July 7, 1987, each currency dealeror exchanger shall secure and maintaina record of the taxpayer identificationnumber of each person for whom atransaction account is opened or a lineof credit is extended within 30 daysafter such account is opened or creditline extended. Where a person is anon-resident alien, the currency dealeror exchanger shall also record the per-son’s passport number or a descriptionof some other government documentused to verify his identity. Where theaccount or credit line is in the names oftwo or more persons, the currency dealeror exchanger shall secure the taxpayeridentification number of a person hav-ing a financial interest in the account orcredit line. In the event that a currencydealer or exchanger has been unable tosecure the identification required withinthe 30-day period specified, it shallnevertheless not be deemed to be inviolation of this section if:(i) It has made a reasonable effort to

secure such identification, and(ii) It maintains a list containing the

names, addresses, and account orcredit line numbers of those personsfrom whom it has been unable tosecure such identification, and makesthe names, addresses, and accountor credit line numbers of those per-sons available to the Secretary asdirected by him.

(2) The 30-day period provided for in para-graph (a)(1) of this section shall beextended where the person opening theaccount or credit line has applied for ataxpayer identification or social securitynumber on Form SS-4 or SS-5, untilsuch time as the person maintaining theaccount or credit line has had a reason-able opportunity to secure such numberand furnish it to the currency dealer orexchanger.



(3) A taxpayer identification number for anaccount or credit line required underparagraph (a)(1) of this section need notbe secured in the following instances:

(i) Accounts for public funds openedby agencies and instrumentalitiesof Federal, state, local or foreigngovernments,

(ii) Accounts for aliens who are—(A) Ambassadors, ministers, career

diplomatic or consular offi-cers, or

(B) Naval, military or otherattaches of foreign embassies,and legations, and formembers of their immediatefamilies,

(iii) Accounts for aliens who are accred-ited representatives to internationalorganizations which are entitled toenjoy privileges, exemptions, andimmunities as an internationalorganization under the Interna-tional Organizations ImmunitiesAct of December 29, 1945 (22U.S.C. 288), and for the membersof their immediate families,

(iv) Aliens temporarily residing in theUnited States for a period not toexceed 180 days,

(v) Aliens not engaged in a trade orbusiness in the United States whoare attending a recognized collegeor any training program, super-vised or conducted by any agencyof the Federal Government, and

(vi) Unincorporated subordinate unitsof a tax exempt central organiza-tion which are covered by a groupexemption letter.

(b) Each currency dealer or exchanger shallretain either the original or a microfilm orother copy or reproduction of each of thefollowing:(1) Statements of accounts from banks,

including paid checks, charges or otherdebit entry memoranda, deposit slipsand other credit memoranda repre-senting the entries reflected on suchstatements;

(2) Daily work records, including purchaseand sales slips or other memorandaneeded to identify and reconstruct cur-rency transactions with customers andforeign banks;

(3) A record of each exchange of currencyinvolving transactions in excess of$1000, including the name and addressof the customer (and passport number ortaxpayer identification number unlessreceived by mail or common carrier)date and amount of the transaction andcurrency name, country, and total amountof each foreign currency;

(4) Signature cards or other documentsevidencing signature authority overeach deposit or security account, con-taining the name of the depositor, streetaddress, taxpayer identification number(TIN) or employer identification num-ber (EIN) and the signature of thedepositor or of a person authorized tosign on the account (if customer accountsare maintained in a code name, a recordof the actual owner of the account);

(5) Each item, including checks, drafts, ortransfers of credit, of more than $10,000remitted or transferred to a person,account or place outside the UnitedStates;

(6) A record of each receipt of currency,other monetary instruments, investmentsecurities and checks, and of each trans-fer of funds or credit, or more than$10,000 received on any one occasiondirectly and not through a domesticfinancial institution, from any person,account or place outside the UnitedStates;

(7) Records prepared or received by a dealerin the ordinary course of business, thatwould be needed to reconstruct anaccount and trace a check in excess of$100 deposited in such account throughits internal recordkeeping system toits depositary institution, or to supply adescription of a deposited check inexcess of $100;

(8) A record maintaining the name, addressand taxpayer identification number, ifavailable, of any person presenting acertificate of deposit for payment, aswell as a description of the instrumentand date of transaction;

(9) A system of books and records that willenable the currency dealer or exchangerto prepare an accurate balance sheet andincome statement.




HISTORY:[52 FR 11444, Apr. 8, 1987]






31 C.F.R. 103.38

§103.38 Nature of records andretention period.

(a) Wherever it is required that there be retainedeither the original or a microfilm or othercopy or reproduction of a check, draft,monetary instrument, investment security,or other similar instrument, there shall beretained a copy of both front and back ofeach such instrument or document, exceptthat no copy need be retained of the back ofany instrument or document which isentirely blank or which contains only stan-dardized printed information, a copy ofwhich is on file.

(b) Records required by this subpart to beretained by financial institutions may bethose made in the ordinary course of busi-ness by a financial institution. If no record ismade in the ordinary course of business ofany transaction with respect to which recordsare required to be retained by this subpart,then such a record shall be prepared inwriting by the financial institution.

(c) The rules and regulations issued by theInternal Revenue Service under 26 U.S.C.6109 determine what constitutes a taxpayer

identification number and whose numbershall be obtained in the case of an accountmaintained by one or more persons.

(d) All records that are required to be retainedby this part shall be retained for a period offive years. Records or reports required to bekept pursuant to an order issued under§103.26 of this part shall be retained for theperiod of time specified in such order, not toexceed five years. All such records shallbe filed or stored in such a way as to beaccessible within a reasonable period oftime, taking into consideration the nature ofthe record, and the amount of time expiredsince the record was made.


HISTORY:[37 FR 6912, Apr. 5, 1972. Redesignated at 50 FR 5068,Feb. 6, 1985, and further redesignated and amended at 52 FR11444, 11445, Apr. 8, 1987; 54 FR 33679, Aug. 16, 1989]






31 C.F.R. 103.39

§103.39 Person outside theUnited States.

For the purposes of this subpart, a remittance ortransfer of funds, or of currency, other monetaryinstruments, checks, investment securities, orcredit to the domestic account of a person whoseaddress is known by the person making theremittance or transfer, to be outside the United



States, shall be deemed to be a remittance ortransfer to a person outside the United States,except that, unless otherwise directed by theSecretary, this section shall not apply to atransaction on the books of a domestic financialinstitution involving the account of a customerof such institution whose address is withinapproximately 50 miles of the location of theinstitution, or who is known to be temporarilyoutside the United States.

HISTORY:[37 FR 6912, Apr. 5, 1972. Redesignated at 50 FR 5068,Feb. 6, 1985 and 52 FR 11444, Apr. 8, 1987]





SUBPART D—General Provisions

31 C.F.R. 103.41

§103.41 Dollars as including foreigncurrency.

Wherever in this part an amount is stated indollars, it shall be deemed to mean also theequivalent amount in any foreign currency.

HISTORY:37 FR 6912, Apr. 5, 1972.






31 C.F.R. 103.42

§103.42 Photographic or otherreproductions of Governmentobligations.

Nothing herein contained shall require or autho-rize the microfilming or other reproduction of(a) Currency or other obligation or security of

the United States as defined in 18 U.S.C. 8,or

(b) Any obligation or other security of anyforeign government, the reproduction ofwhich is prohibited by law.

HISTORY:37 FR 6912, Apr. 5, 1972.






31 C.F.R. 103.43

§103.43 Availability of information.

(a) The Secretary may within his discretiondisclose information reported under this partfor any reason consistent with the purposesof the Bank Secrecy Act, including those set



forth in paragraphs (b) through (d) of thissection.

(b) The Secretary may make any informa-tion set forth in any report received pur-suant to this part available to anotheragency of the United States, to an agencyof a state or local government or to anagency of a foreign government, upon therequest of the head of such department oragency made in writing and stating theparticular information desired, the criminal,tax or regulatory purpose for which theinformation is sought, and the official needfor the information.

(c) The Secretary may make any informationset forth in any report received pursuant tothis part available to the Congress, or anycommittee or subcommittee thereof, upon awritten request stating the particular infor-mation desired, the criminal, tax or regu-latory purpose for which the informationis sought, and the official need for theinformation.

(d) The Secretary may make any informationset forth in any report received pursuantto this part available to any other depart-ment or agency of the United States thatis a member of the Intelligence Community,as defined by Executive Order 12333 orany succeeding executive order, upon therequest of the head of such departmentor agency made in writing and statingthe particular information desired, thenational security matter with which theinformation is sought and the official needtherefor.

(e) Any information made available under thissection to other department or agencies ofthe United States, any state or local govern-ment, or any foreign government shall bereceived by them in confidence, and shallnot be disclosed to any person except forofficial purposes relating to the investiga-tion, proceeding or matter in connectionwith which the information is sought.

(f) The Secretary may require that a state orlocal government department or agencyrequesting information under paragraph (b)of this section pay fees to reimburse theDepartment of the Treasury for costs inci-dental to such disclosure. The amount ofsuch fees will be set in accordance with thestatute on fees for government services,31 U.S.C. 9701.


HISTORY:[50 FR 42693, Oct. 22, 1985, as amended at 50 FR 46283,Nov. 7, 1985; 52 FR 35545, Sept. 22, 1987]






31 C.F.R. 103.44

§103.44 Disclosure.

All reports required under this part and allrecords of such reports are specifically exemptedfrom disclosure under section 552 of Title 5,United States Code.

HISTORY:37 FR 6912, Apr. 5, 1972.








31 C.F.R. 103.45

§103.45 Exceptions, exemptions, andreports.

(a) The Secretary, in his sole discretion, may bywritten order or authorization make excep-tions to or grant exemptions from therequirements of this part. Such exceptionsor exemptions may be conditional or uncon-ditional, may apply to particular persons orto classes of persons, and may apply toparticular transactions or classes of trans-actions. They shall, however, be applicableonly as expressly stated in the order ofauthorization, and they shall be revocable inthe sole discretion of the Secretary.

(b) The Secretary shall have authority to furtherdefine all terms used herein.

(c) (1) The Secretary may, as an alternative tothe reporting and recordkeeping require-ments for casinos in §§103.22(a)(2) and103.25(a)(2), and 103.36, grant exemp-tions to the casinos in any state whoseregulatory system substantially meetsthe reporting and recordkeeping require-ments of this part.

(2) In order for a state regulatory system toqualify for an exemption on behalf of itscasinos, the state must provide:

(i) That the Treasury Department beallowed to evaluate the effective-ness of the state’s regulatory sys-tem by periodic oversight reviewof that system;

(ii) That the reports required under thestate’s regulatory system be sub-mitted to the Treasury Departmentwithin 15 days of receipt by thestate;

(iii) That any records required to bemaintained by the casinos relevantto any matter under this part and towhich the state has access or main-tains under its regulatory systembe made available to the TreasuryDepartment within 30 days ofrequest;

(iv) That the Treasury Department beprovided with periodic statusreports on the state’s complianceefforts and findings;

(v) That all but minor violations of thestate requirements be reported toTreasury within 15 days of discov-ery; and

(vi) That the state will initiate compli-ance examinations of specific insti-tutions at the request of Treasurywithin a reasonable time, not toexceed 90 days where appropriate,and will provide reports of theseexaminations to Treasury within15 days of completion or periodi-cally during the course of theexamination upon the request ofthe Secretary. If for any reason thestate were not able to conduct aninvestigation within a reasonabletime, the state will permit Treasuryto conduct the investigation.

(3) Revocation of any exemption under thissubsection shall be in the sole discretionof the Secretary.

HISTORY:[38 FR 2176, Jan. 22, 1973, as amended at 50 FR 5069,Feb. 6, 1985; 50 FR 36875, Sept. 10, 1985]






31 C.F.R. 103.46

§103.46 Enforcement.

(a) Overall authority for enforcement and com-pliance, including coordination and direc-tion of procedures and activities of allother agencies exercising delegated author-



ity under this part, is delegated to theAssistant Secretary (Enforcement).

(b) Authority to examine institutions to deter-mine compliance with the requirements ofthis part is delegated as follows:(1) To the Comptroller of the Currency with

respect to those financial institutionsregularly examined for safety and sound-ness by national bank examiners;

(2) To the Board of Governors of the Fed-eral Reserve System with respect tothose financial institutions regularlyexamined for safety and soundness byFederal Reserve bank examiners;

(3) To the Federal Deposit Insurance Cor-poration with respect to those finan-cial institutions regularly examined forsafety and soundness by FDIC bankexaminers;

(4) To the Federal Home Loan Bank Boardwith respect to those financial institu-tions regularly examined for safety andsoundness by FHLBB bank examiners;

(5) To the Chairman of the Board of theNational Credit Union Administrationwith respect to those financial institu-tions regularly examined for safety andsoundness by NCUA examiners.

(6) To the Securities and Exchange Com-mission with respect to brokers or deal-ers in securities;

(7) To the Commissioner of Customs withrespect to §§103.23 and 103.48;

(8) To the Commissioner of Internal Reve-nue with respect to all financial institu-tions, except brokers or dealers in secu-rities, not currently examined by Federalbank supervisory agencies for sound-ness and safety.

(c) Authority for investigating criminal viola-tions of this part is delegated as follows:(1) To the Commissioner of Customs with

respect to §103.23;(2) To the Commissioner of Internal Reve-

nue except with respect to §103.23.(d) Authority for the imposition of civil penal-

ties for violations of this part lies with theAssistant Secretary, and in the AssistantSecretary’s absence, the Deputy AssistantSecretary (Law Enforcement).

(e) Periodic reports shall be made to the Assis-tant Secretary by each agency to whichcompliance authority has been delegatedunder paragraph (b) of this section. Thesereports shall be in such a form and submit-

ted at such intervals as the Assistant Secre-tary may direct. Evidence of specific viola-tions of any of the requirements of this partmay be submitted to the Assistant Secretaryat any time.

(f) The Assistant Secretary or his delegate, andany agency to which compliance has beendelegated under paragraph (b) of this sec-tion, may examine any books, papers,records, or other data of domestic financialinstitutions relevant to the recordkeeping orreporting requirements of this part.

HISTORY:[37 FR 6912, Apr. 5, 1972, as amended at 50 FR 42693,Oct. 22, 1985; 52 FR 11445, Apr. 8, 1987]






31 C.F.R. 103.47

§103.47 Civil penalty.

(a) For any willful violation, committed on orbefore October 12, 1984, of any reportingrequirement for financial institutions underthis part or of any recordkeeping require-ments of §103.22, the Secretary may assessupon any domestic financial institution, andupon any partner, director, officer, oremployee thereof who willfully participatesin the violation, a civil penalty not to exceed$1,000.

(b) For any willful violation committed afterOctober 12, 1984 and before October 28,1986, of any reporting requirement for finan-cial institutions under this part or of therecordkeeping requirements of §103.32, the



Secretary may assess upon any domesticfinancial institution, and upon any partner,director, officer, or employee thereof whowillfully participates in the violation, a civilpenalty not to exceed $10,000.

(c) For any willful violation of any recordkeep-ing requirement for financial institutions,except violations of §103.32, under thispart, the Secretary may assess upon anydomestic financial institution, and upon anypartner, director, officer, or employee thereofwho willfully participates in the violation, acivil penalty not to exceed $1,000.

(d) For any failure to file a report required under§103.23 or for filing such a report contain-ing any material omission or misstatement,the Secretary may assess a civil penalty upto the amount of the currency or monetaryinstruments transported, mailed or shipped,less any amount forfeited under §103.48.

(e) For any willful violation of §103.53 com-mitted after January 26, 1987, the Secretarymay assess upon any person a civil penaltynot to exceed the amount of coins andcurrency involved in the transaction withrespect to which such penalty is imposed.The amount of any civil penalty assessedunder this paragraph shall be reduced by theamount of any forfeiture to the United Statesin connection with the transaction for whichthe penalty was imposed.

(f) For any willful violation committed afterOctober 27, 1986, of any reporting require-ment for financial institutions under this part(except §103.24, §103.25 or §103.32), theSecretary may assess upon any domesticfinancial institution, and upon any partner,director, officer, or employee thereof whowillfully participates in the violation, a civilpenalty not to exceed the greater of theamount (not to exceed $100,000) involvedin the transaction or $25,000.

(g) For any willful violation committed afterOctober 27, 1986, of any requirement of§103.24, §103.25, or §103.32, the Secre-tary may assess upon any person, a civilpenalty:(1) In the case of a violation of §103.25

involving a transaction, a civil penaltynot to exceed the greater of the amount(not to exceed $100,000) of the transac-tion, or $25,000; and

(2) In the case of a violation of §103.24 or§103.32 involving a failure to report theexistence of an account or any identify-

ing information required to be providedwith respect to such account, a civilpenalty not to exceed the greater of theamount (not to exceed $100,000) equalto the balance in the account at the timeof the violation, or $25,000.

(h) For each negligent violation of any require-ment of this part, committed after Octo-ber 27, 1986, the Secretary may assess uponany financial institution a civil penalty not toexceed $500.

HISTORY:[37 FR 6912, Apr. 5, 1972, as amended at 52 FR 11445,Apr. 8, 1987; 52 FR 12641, Apr. 17, 1987]






31 C.F.R. 103.48

§103.48 Forfeiture of currency ormonetary instruments.

Any currency or other monetary instrumentswhich are in the process of any transportationwith respect to which a report is required under§103.23 are subject to seizure and forfeiture tothe United States if such report has not beenfiled as required in §103.25, or contains materialomissions or misstatements. The Secretary may,in his sole discretion, remit or mitigate any suchforfeiture in whole or in part upon such termsand conditions as he deems reasonable.

HISTORY:37 FR 6912, Apr. 5, 1972.








31 C.F.R. 103.49

§103.49 Criminal penalty.

(a) Any person who willfully violates any pro-vision of Title I of Pub. L. 91-508, or of thispart authorized thereby may, upon convic-tion thereof, be fined not more than $1,000or be imprisoned not more than 1 year, orboth. Such person may in addition, if theviolation is of any provision authorized byTitle I of Pub. L. 91-508 and if the violationis committed in furtherance of the commis-sion of any violation of Federal law punish-able by imprisonment for more than 1 year,be fined not more than $10,000 or beimprisoned not more than 5 years, or both.

(b) Any person who willfully violates any pro-vision of Title II of Pub. L. 91-508, or of thispart authorized thereby, may, upon convic-tion thereof, be fined not more than $250,000or be imprisoned not more than 5 years, orboth.

(c) Any person who willfully violates any pro-vision of Title II of Pub. L. 91-508, or of thispart authorized thereby, where the violationis either(1) Committed while violating another law

of the United States, or(2) Committed as part of a pattern of any

illegal activity involving more than$100,000 in any 12-month period, may,upon conviction thereof, be fined notmore than $500,000 or be imprisonednot more than 10 years, or both.

(d) Any person who knowingly makes any false,fictitious or fraudulent statement or repre-sentation in any report required by this part

may, upon conviction thereof, be fined notmore than $10,000 or be imprisoned notmore than 5 years, or both.

HISTORY:[37 FR 6912, Apr. 5, 1972, as amended at 50 FR 18479,May 1, 1985; 53 FR 4138, Feb. 12, 1988]






31 C.F.R. 103.50

§103.50 Enforcement authority withrespect to transportation of currencyor monetary instruments.

(a) If a customs officer has reasonable cause tobelieve that there is a monetary instrumentbeing transported without the filing of thereport required by §§103.23 and 103.25 ofthis chapter, he may stop and search, with-out a search warrant, a vehicle, vessel,aircraft, or other conveyance, envelope orother container, or person entering or depart-ing from the United States with respect towhich or whom the officer reasonablybelieves is transporting such instrument.

(b) If the Secretary has reason to believe thatcurrency or monetary instruments are in theprocess of transportation and with respect towhich a report required under §103.23 hasnot been filed or contains material omissionsor misstatements, he may apply to any courtof competent jurisdiction for a search war-rant. Upon a showing of probable cause, thecourt may issue a warrant authorizing thesearch of any or all of the following:(1) One or more designated persons.



(2) One or more designated or describedplaces or premises.

(3) One or more designated or describedletters, parcels, packages, or other physi-cal objects.

(4) One or more designated or describedvehicles. Any application for a searchwarrant pursuant to this section shall beaccompanied by allegations of fact sup-porting the application.

(c) This section is not in derogation of theauthority of the Secretary under any otherlaw or regulation.

HISTORY:[37 FR 6912, Apr. 5, 1972, as amended at 50 FR 18479,May 1, 1985]






31 C.F.R. 103.51

§103.51 Access to records.

Except as provided in §§103.34(a)(1),103.35(a)(1), and 103.36(a) and except for thepurpose of assuring compliance with the record-keeping and reporting requirements of this part,this part does not authorize the Secretary or anyother person to inspect or review the recordsrequired to be maintained by subpart C of thispart. Other inspection, review or access to suchrecords is governed by other applicable law.

HISTORY:[50 FR 5069, Feb. 6, 1985]






31 C.F.R. 103.52

§103.52 Rewards for informants.

(a) If an individual provides original informa-tion which leads to a recovery of a criminalfine, civil penalty, or forfeiture, whichexceeds $50,000, for a violation of theprovisions of the Act or of this part,the Secretary may pay a reward to thatindividual.

(b) The Secretary shall determine the amount ofthe reward to be paid under this section;however, any reward paid may not be morethan 25 percent of the net amount of the fine,penalty or forfeiture collected, or $150,000,whichever is less.

(c) An officer or employee of the United States,a State, or a local government who providesoriginal information described in paragraph(a) in the performance of official duties isnot eligible for a reward under this section.

HISTORY:[50 FR 18479, May 1, 1985]


NOTES:NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, ChapterI; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.






31 C.F.R. 103.53

§103.53 Structured transactions.

No person shall for the purpose of evading thereporting requirements of §103.22 with respectto such transaction:(a) Cause or attempt to cause a domestic finan-

cial institution to fail to file a report requiredunder §103.22;

(b) Cause or attempt to cause a domestic finan-cial institution to file a report required under§103.22 that contains a material omission ormisstatement of fact; or

(c) Structure (as that term is defined in§103.11(gg) of this part) or assist in struc-turing, or attempt to structure or assist instructuring, any transaction with one ormore domestic financial institutions.

HISTORY:[52 FR 11446, Apr. 8, 1987, as amended at 54 FR 3027,Jan. 23, 1989]






31 C.F.R. 103.54

§103.54 Special rules for casinos.

(a) Compliance programs.

(1) Each casino shall develop and imple-ment a written program reasonablydesigned to assure and monitor compli-ance with the requirements set forth in31 U.S.C. chapter 53, subchapter II andthe regulations contained in this part.

(2) At a minimum, each compliance pro-gram shall provide for:

(i) A system of internal controls toassure ongoing compliance;

(ii) Internal and/or external indepen-dent testing for compliance;

(iii) Training of casino personnel,including training in the identifi-cation of unusual or suspicioustransactions, to the extent that thereporting of such transactions ishereafter required by this part, byother applicable law or regulation,or by the casino’s own administra-tive and compliance policies;

(iv) An individual or individuals toassure day-to-day compliance;

(v) Procedures for using all availableinformation to determine:(A) When required by this part,

the name, address, socialsecurity number, and otherinformation, and verificationof the same, of a person;

(B) When required by this part,the occurrence of unusual orsuspicious transactions; and

(C) Whether any record asdescribed in subpart C of thispart must be made and retained;and

(vi) For casinos that have automateddata processing systems, the use ofautomated programs to aid inassuring compliance.

(b) Special terms.As used in this part, asapplied to casinos:(1) Business year means the annual account-

ing period, such as a calendar or fiscalyear, by which a casino maintains itsbooks and records for purposes of sub-title A of title 26 of the United StatesCode.

(2) Casino account number means any andall numbers by which a casino identifiesa customer.

(3) Customer includes every person whichis involved in a transaction to which thispart applies with a casino, whether or



not that person participates, or intendsto participate, in the gaming activitiesoffered by that casino.

(4) Gaming day means the normal businessday of a casino. For a casino that offers24 hour gaming, the term means that24 hour period by which the casinokeeps its books and records for busi-ness, accounting, and tax purposes. Forpurposes of the regulations contained inthis part, each casino may have only onegaming day, common to all of itsdivisions.

(5) Machine-readable means capable ofbeing read by an automated data pro-cessing system.

(c) [Removed. See 59 FR 61662, Dec. 1, 1994]

HISTORY:[58 FR 13549, Mar. 12, 1993; 58 FR 45263, Aug. 27, 1993;59 FR 9088, Feb. 25, 1994; 59 FR 61662, Dec. 1, 1994;60 FR 33725, June 29, 1995]


NOTES:[EFFECTIVE DATE NOTE: 60 FR 33725, June 29, 1995,which revised paragraph (a)(1) and substituted ‘‘unusual’’ for‘‘usual’’ in paragraph (a)(2)(v)(B), became effective June 29,1995.]NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.



SUBPART E—Summons

31 C.F.R. 103.61

§103.61 General.

For any investigation for the purpose of civilenforcement of violations of the Currency andForeign Transactions Reporting Act, as amended(31 U.S.C. 5311 through 5324), section 21 of theFederal Deposit Insurance Act (12 U.S.C.1829b), section 411 of the National Housing Act

(12 U.S.C. 1730d), or Chapter 2 of Pub. L.91-508 (12 U.S.C. 1951 et seq.), or any regula-tion under any such provision, the Secretary ordelegate of the Secretary may summon a finan-cial institution or an officer or employee of afinancial institution (including a former officeror employee), or any person having possession,custody, or care of any of the records and reportsrequired under the Currency and Foreign Trans-actions Reporting Act or this part to appearbefore the Secretary or his delegate, at a timeand place named in the summons, and to givetestimony, under oath, and be examined, and toproduce such books, papers, records, or otherdata as may be relevant or material to suchinvestigation.

HISTORY:52 FR 23979, June 26, 1987.





SUBPART E—Summons

31 C.F.R. 103.62

§103.62 Persons who may issuesummons.

For purposes of this part, the following officialsare hereby designated as delegates of the Secre-tary who are authorized to issue a summonsunder §103.61, solely for the purposes of civilenforcement of this part:(a) Office of the Secretary. The Assistant Sec-

retary (Enforcement), the Deputy AssistantSecretary (Law Enforcement), and theDirector, Office of Financial Enforcement.

(b) Internal Revenue Service.Except withrespect to §103.23 of this part, the Commis-



sioner, the Deputy Commissioner, the Asso-ciate Commissioner (Operations), the Assis-tant Commissioner (Examination), RegionalCommissioners, Assistant Regional Com-missioners (Examination), District Direc-tors, District Examination Division Chiefs,and, for the purposes of perfecting seizuresand forfeitures related to civil enforcementof this part, the Assistant Commissioner(Criminal Investigation), Assistant RegionalCommissioners (Criminal Investigation), andDistrict Criminal Investigation DivisionChiefs.

(c) Customs Service.With respect to §103.23of this part, the Commissioner, the DeputyCommissioner, the Assistant Commissioner(Enforcement), Regional Commissioners,Assistant Regional Commissioners (Enforce-ment), and Special Agents in Charge.

HISTORY:52 FR 23979, June 26, 1987.



NOTES APPLICABLE TO ENTIRE CHAPTER:ABBREVIATION: The following abbreviation is used in this

chapter: C.P.D. = Commissioner of the Public Debt.NOTESAPPLICABLE TO ENTIRE PART:EDITORIAL NOTE: Nomenclature changes for part 103appear at 52 FR 11442, Apr. 8, 1987.

SUBPART E—Summons

31 C.F.R. 103.63

§103.63 Contents of summons.

(a) Summons for testimony. Any summonsissued under §103.61 of this part to compelthe appearance and testimony of a personshall state:(1) The name, title, address, and telephone

number of the person before whom theappearance shall take place (who maybe a person other than the persons who

are authorized to issue such a summonsunder §103.62 of this part);

(2) The address to which the person sum-moned shall report for the appearance;

(3) The date and time of the appearance;and

(4) The name, title, address, and telephonenumber of the person who has issuedthe summons.

(b) Summons of books, papers, records, or data.Any summons issued under §103.61 of thispart to require the production of books,papers, records, or other data shall describethe materials to be produced with reasonablespecificity, and shall state:(1) The name, title, address, and telephone

number of the person to whom thematerials shall be produced (who maybe a person other than the persons whoare authorized to issue such a summonsunder §103.62 of this part);

(2) The address at which the person sum-moned shall produce the materials, notto exceed 500 miles from any placewhere the financial institution operatesor conducts business in the UnitedStates;

(3) The specific manner of production,whether by personal delivery, by mail,or by messenger service;

(4) The date and time for production; and(5) The name, title, address, and telephone

number of the person who has issuedthe summons.

HISTORY:52 FR 23979, June 26, 1987.







SUBPART E—Summons

31 C.F.R. 103.64

§103.64 Service of summons.

(a) Who may serve.Any delegate of the Secre-tary authorized under §103.62 of this part toissue a summons, or any other person autho-rized by law to serve summonses or otherprocess, is hereby authorized to serve asummons issued under this part.

(b) Manner of service.Service of a summonsmay be made—

(1) Upon any person, by registered mail,return receipt requested, directed to theperson summoned;

(2) Upon a natural person by personaldelivery; or

(3) Upon any other person by delivery to anofficer, managing or general agent, orany other agent authorized to receiveservice of process.

(c) Certificate of service.The summons shallcontain a certificate of service to be signedby the server of the summons. On thehearing of an application for enforcement ofthe summons, the certificate of service signedby the person serving the summons shall beevidence of the facts it states.

HISTORY:52 FR 23979, June 26, 1987.





SUBPART E—Summons

31 C.F.R. 103.65

§103.65 Examination of witnessesand records.

(a) General. Any delegate of the Secretaryauthorized under §103.62 of this part toissue a summons, or any officer or employeeof the Treasury Department or any com-ponent thereof who is designated by thatperson (whether in the summons orotherwise), is hereby authorized to receiveevidence and to examine witnesses pursuantto the summons. Any person authorizedby law may administer any oaths and affir-mations that may be required under thissubpart.

(b) Testimony taken under oath.Testimony ofany person under this part may be takenunder oath, and shall be taken down inwriting by the person examining the personsummoned or shall be otherwise tran-scribed. After the testimony of a witness hasbeen transcribed, a copy of that transcriptshall be made available to the witness uponrequest, unless for good cause the personissuing the summons determines, under5 U.S.C. 555, that a copy should not beprovided. If such a determination has beenmade, the witness shall be limited toinspection of the official transcript of thetestimony.

(c) Disclosure of summons, testimony, or records.Unless the Secretary or a delegate of theSecretary listed under §103.62(a) of thispart so authorizes in writing, or it is other-wise required by law, no delegate of theSecretary listed under §103.62 (b) or (c)of this part or other officer or employee ofthe Treasury Department or any componentthereof shall—(1) Make public the name of any person

to whom a summons has been issuedunder this part, or release any informa-tion to the public concerning that personor the issuance of a summons to thatperson prior to the time and date set forthat person’s appearance or productionof records; or

(2) Disclose any testimony taken (includingthe name of the witness) or materialpresented pursuant to the summons, toany person other than an officer or



employee of the Treasury Departmentor of any component thereof.

Nothing in the preceding sentenceshall preclude a delegate of the Secre-tary, or other officer or employee ofthe Treasury Department or any com-ponent thereof, from disclosing testi-mony taken, or material presented pur-suant to a summons issued under thispart, to any person in order to obtainnecessary information for investigativepurposes relating to the performance ofofficial duties, or to any officer oremployee of the Department of Justicein connection with a possible violationof Federal law.

HISTORY:52 FR 23979, June 26, 1987.





SUBPART E—Summons

31 C.F.R. 103.66

§103.66 Enforcement of summons.

In the case of contumacy by, or refusal to obeya summons issued to, any person under this part,the Secretary or any delegate of the Secretarylisted under §103.62 of this part shall refer thematter to the Attorney General or delegate of theAttorney General (including any United StatesAttorney or Assistant United States Attorney, asappropriate), who may bring an action to compelcompliance with the summons in any court ofthe United States within the jurisdiction ofwhich the investigation which gave rise to the

summons being or has been carried on, thejurisdiction in which the person summoned isa resident, or the jurisdiction in which the per-son summoned carries on business or maybe found. When a referral is made by a dele-gate of the Secretary other than a delegatenamed in §103.62(a) of this part, promptnotification of the referral must be made tothe Director, Office of Financial Enforce-ment, Office of the Assistant Secretary (Enforce-ment). The court may issue an order requiringthe person summoned to appear before theSecretary or delegate of the Secretary toproduce books, papers, records, or other data,to give testimony as may be necessary inorder to explain how such material was com-piled and maintained, and to pay the costs ofthe proceeding. Any failure to obey the orderof the court may be punished by the courtas a contempt thereof. All process in anycase under this section may be served in anyjudicial district in which such person may befound.

HISTORY:52 FR 23979, June 26, 1987.





SUBPART E—Summons

31 C.F.R. 103.67

§103.67 Payment of expenses.

Persons summoned under this part shall bepaid the same fees and mileage for travel inthe United States that are paid witnesses inthe courts of the United States. The United



States shall not be liable for any other expenseincurred in connection with the production ofbooks, papers, records, or other data under thispart.

HISTORY:52 FR 23979, June 26, 1987.





SUBPART F—Administrative Rulings

31 C.F.R. 103.70

§103.70 Scope.

This subpart provides that the Assistant Secre-tary (Enforcement), or his designee, either uni-laterally or upon request, may issue administra-tive rulings interpreting the application ofpart 103.

HISTORY:52 FR 35546, Sept. 22, 1987.






31 C.F.R. 103.71

§103.71 Submitting requests.

(a) Each request for an administrative rulingmust be in writing and contain the followinginformation:(1) A complete description of the situation

for which the ruling is requested,(2) A complete statement of all material

facts related to the subject transaction,(3) A concise and unambiguous question to

be answered,(4) A statement certifying, to the best of the

requestor’s knowledge and belief, thatthe question to be answered is not appli-cable to any ongoing state or federalinvestigation, litigation, grand jury pro-ceeding, or proceeding before any othergovernmental body involving either therequestor, any other party to the subjecttransaction, or any other party withwhom the requestor has an agencyrelationship,

(5) A statement identifying any informationin the request that the requestor con-siders to be exempt from disclosureunder the Freedom of Information Act,5 U.S.C. 552, and the reason therefor,

(6) If the subject situation is hypothetical, astatement justifying why the particularsituation described warrants the issu-ance of a ruling,

(7) The signature of the person making therequest, or

(8) If an agent makes the request, the sig-nature of the agent and a statementcertifying the authority under which therequest is made.

(b) A request filed by a corporation shall besigned by a corporate officer and a requestfiled by a partnership shall be signed by apartner.

(c) A request may advocate a particular pro-posed interpretation and may set forth thelegal and factual basis for that interpretation.

(d) Requests shall be addressed to: Director,FinCEN, Office of the Assistant Secretary(Enforcement), U.S. Department of the Trea-sury, 1500 Pennsylvania Avenue NW.,Room 4320, Washington, DC 20220.

(e) The requester shall advise the Director,FinCEN, immediately in writing of any



subsequent change in any material fact orstatement submitted with a ruling request inconformity with paragraph (a) of this section.


HISTORY:52 FR 35546, Sept. 22, 1987.






31 C.F.R. 103.72

§103.72 Nonconforming requests.

The Director, Office of Financial Enforcement,shall notify the requester if the ruling requestdoes not conform with the requirements of§103.71. The notice shall be in writing and shalldescribe the requirements that have not beenmet. A request that is not brought into confor-mity with such requirements within 30 daysfrom the date of such notice, unless extendedfor good cause by the Office of FinancialEnforcement, shall be treated as though it werewithdrawn.


HISTORY:52 FR 35546, Sept. 22, 1987.


NOTES:NOTES APPLICABLE TO ENTIRE TITLE:EDITORIAL NOTE: Other regulations issued by Departmentof the Treasury appear in Title 12, Chapter I; Title 19, Chap-ter I; Title 26, Chapter I; Title 27, Chapter I; Title 31, Chap-

ters II, IV, V, VI, and VII, and Title 48, Chapter 10. CROSSREFERENCE: General Accounting Office: See 4 C.F.R.Chapter I.




31 C.F.R. 103.73

§103.73 Oral communications.

(a) The Office of the Assistant Secretary(Enforcement) will not issue administrativerulings in response to oral requests. Oralopinions or advice by Treasury, the CustomsService, the Internal Revenue Service, theOffice of the Comptroller of the Currency,or any other bank supervisory agency per-sonnel, regarding the interpretation andapplication of this part, do not bind theTreasury Department and carry no preceden-tial value.

(b) A person who has made a ruling request inconformity with §103.71 may request anopportunity for oral discussion of the issuespresented in the request. The request shouldbe made to the Director, Office of FinancialEnforcement, and any decision to grant sucha conference is wholly within the discretionof the Director. Personal conferences ortelephone conferences may be scheduledonly for the purpose of affording therequester an opportunity to discuss freelyand openly the matters set forth in theadministrative ruling request. Accordingly,the conferees will not be bound by anyargument or position advocated or agreedto, expressly or impliedly, during the con-ference. Any new arguments or facts putforth by the requester at the meeting must bereduced to writing by the requester andsubmitted in conformity with §103.71 beforethey may be considered in connection withthe request.


HISTORY:52 FR 35546, Sept. 22, 1987.








31 C.F.R. 103.74

§103.74 Withdrawing requests.

A person may withdraw a request for an admin-istrative ruling at any time before the ruling hasbeen issued.

HISTORY:52 FR 35546, Sept. 22, 1987.






31 C.F.R. 103.75

§103.75 Issuing rulings.

The Assistant Secretary (Enforcement), or hisdesignee may issue a written ruling interpreting

the relationship between part 103 and eachsituation for which such a ruling has beenrequested in conformity with §103.71. A rulingissued under this section shall bind the TreasuryDepartment only in the event that the requestdescribes a specifically identified actual situa-tion. A ruling issued under this section shallhave precedential value, and hence may berelied upon by others similarly situated, only ifit is published or will be published by the Officeof Financial Enforcement in the FEDERALREGISTER. Rulings with precedential valuewill be published periodically in the FederalRegister and yearly in the Appendix to this part.All rulings with precedential value will beavailable by mail to any person upon writtenrequest specifically identifying the ruling sought.Treasury will make every effort to respond toeach requestor within 90 days of receiving arequest.


HISTORY:52 FR 35546, Sept. 22, 1987.






31 C.F.R. 103.76

§103.76 Modifying or rescindingrulings.

(a) The Assistant Secretary (Enforcement), orhis designee may modify or rescind anyruling made pursuant to §103.75:(1) When, in light of changes in the statute

or regulations, the ruling no longer sets



forth the interpretation of the AssistantSecretary (Enforcement) with respect tothe described situation,

(2) When any fact or statement submitted inthe original ruling request is found to bematerially inaccurate or incomplete, or

(3) For other good cause.(b) Any person may submit to the Assistant

Secretary (Enforcement) a written requestthat an administrative ruling be modified orrescinded. The request should conform tothe requirements of §103.71, explain whyrescission or modification is warranted, andrefer to any reasons in paragraph (a) of thissection that are relevant. The request mayadvocate an alternative interpretation andmay set forth the legal and factual basis forthat interpretation.

(c) Treasury shall modify an existing adminis-trative ruling by issuing a new ruling thatrescinds the relevant prior ruling. Oncerescinded, an administrative ruling shall nolonger have any precedential value.

(d) An administrative ruling may be modified orrescinded retroactively with respect to oneor more parties to the original ruling requestif the Assistant Secretary determines that:(1) A fact or statement in the original ruling

request was materially inaccurate orincomplete,

(2) The requestor failed to notify in writingthe Office of Enforcement of a materialchange to any fact or statement in theoriginal request, or

(3) A party to the original request acted inbad faith when relying upon the ruling.


HISTORY:52 FR 35546, Sept. 22, 1987.






31 C.F.R. 103.77

§103.77 Disclosing information.

(a) Any part of any administrative ruling, includ-ing names, addresses, or information relatedto the business transactions of private par-ties, may be disclosed pursuant to a requestunder the Freedom of Information Act,5 U.S.C. 552. If the request for an adminis-trative ruling contains information whichthe requestor wishes to be considered forexemption from disclosure under the Free-dom of Information Act, the requestor shouldclearly identify such portions of the requestand the reasons why such information shouldbe exempt from disclosure.

(b) A requestor claiming an exemption fromdisclosure will be notified, at least 10 daysbefore the administrative ruling is issued,of a decision not to exempt any of suchinformation from disclosure so that theunderlying request for an administrative rul-ing can be withdrawn if the requestor sochooses.


HISTORY:52 FR 35546, Sept. 22, 1987.







Administrative Ruling 88–1(June 22, 1988) Section 301.0

31 U.S.C. 5313—REPORTS ONDOMESTIC COINS ANDCURRENCY TRANSACTIONS

31 C.F.R. 103.22—REPORTS OFCURRENCY TRANSACTIONS(ALSO SECTION 103.53)

Suspicious transactions; how to notify properlaw enforcement authorities and what informa-tion should be reported.Treasury encourages allfinancial institutions to be aware of the possibil-ity that their institutions may be misused bythose who intentionally structure transactions toevade the reporting requirement or engage intransactions that may involve illegal activity.Information which may be relevant to a possibleviolation of the Bank Secrecy Act or its regula-tions or indicative of money laundering or taxevasion should be reported to the local InternalRevenue Service, Criminal Investigation Divi-sion office or 1-800-BSA-CTRS. All disclosuresshould be made in accordance with the Right toFinancial Privacy Act.

BSA RULING 88–1

Issue

What action should a financial institution takewhen it believes that it is being misused bypersons who are intentionally structuring trans-actions to evade the reporting requirement orengaging in transactions that may involve illegalactivity such as drug trafficking, tax evasion ormoney laundering?

Facts

A teller at X State Bank notices that the sameperson comes into the bank each day and pur-chases, with cash, between $9,000 and $9,900 incashier’s checks. Even when aggregated, thesepurchases never exceed $10,000 during any onebusiness day. The teller also notices that thisperson tries to go to different tellers for eachtransaction and is very reluctant to provideinformation about his frequent transactions orother information such as name, address, etc.

Likewise, the payees on these cashier’s checksall have common names such as ‘‘John Smith’’or ‘‘Mary Jones.’’ The teller informs the bank’scompliance officer that she believes that thisperson is structuring his transactions in order toevade the reporting requirements under the BankSecrecy Act. X State Bank wants to know whatactions it should take in this situation or in anyother situation where a transaction or a personconducting a transaction appears suspicious.

Law and Analysis

As it appears that the person may be intention-ally structuring the transactions to evade theBank Secrecy Act reporting requirements, XState Bank should immediately telephone thelocal office of the Internal Revenue Service(‘‘IRS’’) and speak to a Special Agent in the IRSCriminal Investigation Division, or should call1-800-BSA-CTRS, where his call will be referredto a Special Agent.

Any information provided to the IRS shouldbe given within the confines of §1103(c) of theRight to Financial Privacy Act, 12 U.S.C. §3401–3422, Section 1103(c) of that Act permits afinancial institution to notify a governmentauthority of information relevant to a possibleviolation of any statute or regulation. Suchinformation may consist of the names of anyindividuals or corporate entities involved in thesuspicious transactions; account numbers; homeand business addresses; social security numbers;type of account; interest paid on account; loca-tion of the branch or office where the suspicioustransaction occurred; a specification of theoffense that the financial institution believes hasbeen committed; and a description of the activi-ties giving rise to the bank’s suspicion. S. Rep.99–433, 99th Cong., 2d Sess., pp. 15–16.

Additionally, the bank may be required, bythe Federal regulatory agency which supervisesit, to submit a criminal referral form.1 Thus, thebank should check with its regulatory agency todetermine whether a referral form should besubmitted.

Lastly, under the facts as described above, XState Bank is not required to file a Currency

1. Effective 4-1-96, new form termedSuspicious ActivityReport.


Transaction Report (‘‘CTR’’) because the cur-rency transaction (i.e. purchase of cashier’schecks) did not exceed $10,000 during onebusiness day. If the bank had found that on aparticular day the person had in fact used a totalof more than $10,000 in currency to purchasecashier’s checks, but had each individual cash-ier’s checks made out in amounts of less than$10,000, the bank is obligated to file a CTR, andshould follow the other steps described above.

Holding

If X State Bank notices that a person may bemisusing it by intentionally structuring trans-actions to evade the BSA reporting requirementsor engaging in transactions that may involve

other illegal activity, the bank should telephonethe local office of the Internal Revenue Service,Criminal Investigation Division, and report thatinformation to a Special Agent, or should call1-800-BSA-CTRS. In addition, the Federal regu-latory agency which supervises X State Bankmay require the bank to submit a criminalreferral form.2 All disclosures to the Govern-ment should be made in accordance with theprovisions of the Right to Financial Privacy Act.

Gerald L. HilsherDeputy Assistant Secretary(Law Enforcement)

2. Effective 4-1-96, replaced withSuspicious ActivityReport.

301.0 Administrative Ruling 88–1



31 U.S.C. 5316—REPORTS ONEXPORTING AND IMPORTINGMONETARY INSTRUMENTS

31 C.F.R. 103.23—REPORTS OFTRANSPORTATION OFCURRENCY OR MONETARYINSTRUMENTS(ALSO SECTION 103.22)

Filing of CMIRS; bank’s duty to file on behalf oftheir customers international transportation ofmonetary instruments.A bank has no duty to filea Report of the International Transportation ofCurrency or Monetary Instrument (‘‘CMIR’’,Customs Form 4790), on behalf of its customerswhen the customer is importing or exportingcurrency or monetary instruments in excess of$10,000.

BSA RULING 88–2

Issue

When, if ever, should a bank file a CMIR onbehalf of its customer, when the customer isimporting or exporting more than $10,000 incurrency or monetary instruments?

Facts

A customer walks into B National Bank (‘‘B’’)with $15,000 in cash for deposit into her account.As is required, the bank teller begins to fill outa Currency Transaction Report (‘‘CTR’’, IRSForm 4789) in order to report a transaction incurrency of more than $10,000. While the telleris filling out the CTR, the customer mentions tothe teller that she has just received the money ina letter from a relative in France. Should theteller also file a CMIR, either on the customer’sbehalf or on the bank’s behalf?

Law and Analysis

B National Bank should not file a CMIR when acustomer deposits currency in excess of $10,000into her account, even if the bank has knowledgethat the customer received the currency from a

place outside the United States. 31 CFR 103.23requires that a CMIR be filed by anyone whotransports, mails, ships or receives, or attempts,causes or attempts to cause the transportation,mailing, shipping or receiving of currency ormonetary instruments in excess of $10,000,from or to a place outside the United States. Theterm ‘‘monetary instruments’’ includes currencyand instruments such as negotiable instrumentsendorsed without restriction.See 31 CFR103.11(k).

The obligation to file the CMIR is solely onthe person who transports, mails, ships, orreceives, or causes or attempts to transport, mail,ship, or receive. No other person is under anyobligation to file a CMIR. Thus, if a customerwalks into the bank and declares that he or shehas received or transported currency in an aggre-gate amount exceeding $10,000 from a placeoutside the United States and wishes to depositthe currency into his or her account, the bank isunder no obligation to file a CMIR on thecustomer’s behalf. Likewise, because the bankitself did not receive the money from a customeroutside the United States, it has no obligation tofile a CMIR on its own behalf. The same holdstrue if a customer declares his intent to transportcurrency or monetary instruments in excess of$10,000 to a place outside the United States.

However, the bank is strongly encouraged toinform the customer of the CMIR reportingrequirement. If the bank has knowledge that thecustomer is aware of the CMIR reportingrequirement, but is nevertheless disregarding therequirement or if information about the trans-action is otherwise suspicious, the bank shouldcontact the local office of the U.S. CustomsService or 1-800-BE-ALERT. The United StatesCustoms Service has been delegated authorityby the Assistant Secretary (Enforcement) toinvestigate criminal violations of 31 CFR 103.23.

Any information provided to Customs shouldbe given within the confines of section 1103(c)of the Right to Financial Privacy Act, 12 U.S.C.3401–3422. Section 1103(c) permits a financialinstitution to notify a Government authority ofinformation relevant to a possible violation ofany statute or regulation. Such information mayconsist of the name (including those of corpo-rate entities) of any individual involved in thesuspicious transaction; account numbers; homeand business addresses; social security numbers;


type of account; interest paid on account; loca-tion of branch where the suspicious transactionoccurred; a specification of the offense that thefinancial institution believes has been commit-ted; and a description of the activities giving riseto the bank’s suspicions. See S. Rep. 99–433,99th Cong., 2nd Sess., pp. 15–16.

Therefore, under the facts above, the tellerneed only file a CTR for the deposit of thecustomer’s $15,000 in currency.

A previous interpretation of section 103.23(b)by Treasury held that if a bank received cur-rency or monetary instruments over the counterfrom a person who may have transported theminto the United States, and knows that suchitems have been transported into the country, itmust file a report on Form 4790 if a completeand truthful report has not been filed by thecustomer. See 31 CFR Part 103 Appendix,Section 103.23 Interpretation 2, at 364 (1987).This ruling hereby supersedes that interpretation.

Holding

A bank should not file a CMIR when a customerdeposits currency or monetary instruments in

excess of $10,000 into her account even if thebank has knowledge that the currency or mone-tary instruments were received or transportedfrom a place outside the United States. 31 CFR103.23. The same is true if the bank has knowl-edge that the customer intends to transport thecurrency or monetary instruments to a placeoutside the United States.

However, the bank is required to file a CTR ifit receives in excess of $10,000 in cash from itscustomer, and is strongly encouraged to informthe customer of the CMIR requirements. Inaddition, if the bank has knowledge that thecustomer is aware of the CMIR reportingrequirement and is nevertheless planning todisregard it or if the transaction is otherwisesuspicious, the bank should notify the localoffice of the United States Customs Service (or1-800-BE-ALERT) of the suspicious trans-action. Such notice should be made within theconfines of the Right to Financial Privacy Act,12 U.S.C. 3403(c).

Gerald H. HilsherDeputy Assistant Secretary(Law Enforcement)




31 U.S.C. 5313—REPORTS OFDOMESTIC COINS ANDCURRENCY TRANSACTIONS

31 C.F.R. 103.22—REPORTS OFCURRENCY TRANSACTIONS

Exemptions; reporting of ‘‘cash-back’’ transac-tions. Under sections 103.22(b)(2)(i) and103.22(b)(2)(ii), a bank may only exemptdepos-its or withdrawalsof currency from the report-ing requirements of section 103.22(a)(1)(emphasis added). A bank may not grant aunilateral exemption, or obtain additional author-ity to grant a special exemption to ‘‘cash-back’’transactions because these transactions are nei-ther deposits nor withdrawals. A ‘‘cash back’’transaction is one where one or more checks orother monetary instruments are presented inexchange for cash or a portion of the checks ormonetary instruments are deposited while theremainder is exchanged for cash. If, during asingle banking day, a bank handles a ‘‘cash-back’’ transaction that results in the transfer ofmore than $10,000 in currency to a customerwho operates an otherwise exemptible business,the bank must file a CTR identifying the trans-action as a ‘‘check cashed’’ transaction, regard-less of whether the customer has been properlygranted an exemption for daily deposits orwithdrawals.

BSA RULING 88–3

Issue

Whether a bank may exempt ‘‘cash-back’’ trans-actions of a customer whose primary business isof a type that may be exempted either unilater-ally by the bank or pursuant to additionalauthority granted by the IRS.

Facts

The ABC Grocery (‘‘ABC’’), a retail grocerystore, has an account at the X State Bank for itsdaily deposits of currency. Because ABC regu-larly and frequently deposits amounts rangingfrom $20,000 to $30,000, the bank has properly

granted ABC an exemption for daily deposits upto a limit of $30,000.

Recently, ABC began providing its customerswith a check-cashing service as an adjunct to itsprimary business of selling groceries. ABC’sprimary business still consists of the sale ofgroceries. However, the unexpectedly heavydemand for ABC’s check-cashing service hasrequired ABC to maintain a substantially greaterquantity of cash in the store than was necessaryfor the grocery business in the past. To facilitatethe operations of its check- cashing service,ABC is presenting the bank with large numbersof checks in ‘‘cash-back’’ transactions, ratherthan depositing the checks into its account andwithdrawing cash from that account. X StateBank has just been presented with a ‘‘cash-back’’ transaction wherein an employee of ABCis exchanging $15,000 worth of checks for cash.How should the bank treat this transaction?

Law and Analysis

A ‘‘cash back’’ transaction is one where one ormore checks or other monetary instruments arepresented in exchange for cash or a portion ofthe checks or monetary instruments are depos-ited while the remainder is exchanged for cash.‘‘Cash back’’ transactions can never be exemptedfrom the Bank Secrecy Act reporting require-ments. Thus, the bank must file a CurrencyTransaction Report on IRS Form 4789 reportingthis $15,000 ‘‘cash back’’ transaction, eventhough the customer’s account has been grantedan exemption for daily deposits of up to $30,000.This is because section 103.22(b)(2)(i) permits abank to exempt only ‘‘(d)eposits or withdrawalsof currency from an existing account by anestablished depositor who is a United Statesresident and operates a retail type of business inthe United States’’ (emphasis added). As ‘‘cash-back’’ transactions do not constitute either a‘‘deposit or withdrawal of currency’’ within themeaning of the regulations, the bank must reporton a CTR any ‘‘cash-back’’ transaction thatresults in the transfer of more than $10,000 incurrency to a customer during a single bankingday, regardless of whether the customer hasproperly been granted an exemption for itsdeposits or withdrawals.


Moreover, because ‘‘cash back’’ transactionsare never exemptible, the bank may not unilat-erally exempt ‘‘cash-back’’ transactions by ABC,or seek additional authority from the IRS togrant a special exemption for ABC’s ‘‘cash-back’’ transactions. Instead, the bank must reportABC’s ‘‘cash back’’ transaction on a CTR,listing it as a $15,000 ‘‘check cashed’’ transaction.

Holding

A bank may never grant a unilateral exemption,or obtain additional authority from the IRS togrant a special exemption to the ‘‘cash-back’’transactions of a customer. A ‘‘cash back’’

transaction is one where one or more checks orother monetary instruments are presented inexchange for cash or a portion of the checks ormonetary instruments are deposited while theremainder is exchanged for cash. If a bankhandles a ‘‘cash-back’’ transaction that results inthe transfer of more than $10,000 to a customerduring a single banking day, it must report thattransaction on IRS Form 4789, the CurrencyTransaction Report, as a ‘‘check cashed’’ trans-action, regardless of whether the customer hasbeen properly granted an exemption for dailydeposits or withdrawals.




Administrative Ruling 88–4(August 8, 1988) Section 304.0



Exemption lists; listing of multiple establish-ments using exempted account.When a bank hasexempted a single deposit account of a customerinto which more than one of the customer’sestablishments makes deposits, the bank maylist the name, address, business, types of trans-actions exempted (i.e., withdrawals, deposits orboth), the dollar limit of the exemption, taxpayeridentification number and account number (‘‘Sec-tion 103.22(f) information’’) of the customer’sheadquarters or its principal business establish-ment, or it may separately list the same infor-mation for each establishment using that account.If the bank chooses to list only the informationfor the customer’s headquarters, the bank shouldbriefly note on the exemption list that theaccount is used by multiple establishments andshould ensure that the individual addresses ofthose establishments are readily available uponrequest. If a bank has granted separate exemp-tions to several accounts, each of which is usedby a single establishment of the customer, thebank must separately list the Section 103.22(f)information for each of those establishments.

BSA RULING 88–4

Issue

If a bank has exempted a single account of acustomer into which multiple establishments ofthat customer make deposits, must the bank listall of the establishments on its exemption list ormay the bank list only the section 103.22(f)information of the customer’s headquarters orits principal business establishment on itsexemption list?

Facts

A fast food company operates a chain of fast-food restaurants in several states. In New York,

the company has established a single depositaccount at Bank A, into which all of the com-pany’s establishments in that area make depos-its. In Connecticut, the company has establishedten bank accounts at Bank B; each of thecompany’s ten establishments in Connecticuthave been assigned a separate account intowhich it makes deposits. Banks A and B haveproperly exempted the company’s accounts, butnow seek guidance on the manner in which theyshould add these accounts to their exemptionlists. All of the company’s establishments usethe same taxpayer identification number (‘‘TIN’’).

Law and Analysis

Under the regulations, the bank must keep ‘‘in acentralized list,’’ section 103.22(f) informationfor ‘‘each depositor that has engaged in currencytransactions which have not been reportedbecause of (an) exemption . . .’’ However, whereall of the company’s establishments deposit intoone exempt account as at Bank A, above, thebank need only maintain section 103.22(f)information on its list for the customer’s corpo-rate headquarters or the principal establishmentthat obtained the exemption. The bank may, butis not required to, list identifying informationfor all of the customers’ establishments depos-iting into the one account. If the bank chooses tolist only the information for the customer’sheadquarters or principal establishment, it shouldbriefly note that on the exemption list andshould ensure that the individual addresses foreach establishment are readily available uponrequest. Where each of the company’s establish-ments deposit into separate exempt accounts asat Bank B, the bank must maintain separatesection 103.22(f) information on the exemptionlist for each establishment.

Under section 103.22(b)(2)(i), (ii), and (iv)and 103.22(e) of the regulation, a bank can onlygrant an exemption for ‘‘an existing account (of)an established depositor who is a United Statesresident.’’ Under these provisions, therefore, thebank can only grant an exemption for an exist-ing individual account, not for an individualcustomer or group of accounts. Thus, if acustomer has a separate account for each of itsbusiness establishments, the bank must considereach account for a separate exemption. If the


bank grants exemptions for more than oneaccount, it should prepare a separate exemptionstatement and establish a separate dollar limitfor each account.

Once an exemption has been granted for anaccount, section 103.22(f) requires the bankto maintain a centralized exemption list thatincludes the name, address, business, types oftransactions exempted, the dollar limit of theexemption, taxpayer identification number, andaccount number of the customers whose accountshave been exempted.

Holding

Under 31 CFR 103.22, when a bank hasexempted a single account of a customer intowhich more than one of the customer’s estab-lishments make deposits, the bank may includethe name, address, business, type of transactionsexempted, the dollar limit of the exemption,taxpayer identification number, and account num-

ber (‘‘section 103.22(f) information’’) of eitherthe customer’s headquarters or the principalbusiness establishment, or it may separately listsection 103.22(f) information for each of theestablishments using that account. If the bankchooses to list only the information for thecustomer’s headquarters or principal establish-ment, it should briefly note that fact on theexemption list, and it should ensure thatthe individual addresses of those establishmentsnot on the list are readily available upon request.If a bank has granted separate exemptions toseveral accounts, each of which is used by asingle establishment of the same customer, thebank must include on its exemption list section103.22(f) information for each of those estab-lishments. Previous Treasury correspondence orinterpretations contrary to this policy are herebyrescinded.




Administrative Ruling 88–5(September 2, 1988) Section 305.0


31 C.F.R. 103.11—MEANING OFTERMS—BANK AND FINANCIALINSTITUTION


Filing of CTRs: The use of armored caroperations—a bank’s duty to file a CTR whencurrency is never physically received or inpossession of the bank.

It is the duty of a financial institution to file aForm 4789, Currency Transaction Report(‘‘CTR’’), on currency transactions in excess of$10,000 when such transactions are effected byan armored car company acting on behalf of thefinancial institution, even if the currency neverphysically enters the financial institution.

BSA RULING 88–5

Issue

Does a financial institution have a duty to file aCTR on currency transactions where the finan-cial institution never physically receives thecash because it uses an armored car service tocollect, transport and process its customer’scash receipts?

Facts

X State Bank (the ‘‘Bank’’) and Acme ArmoredCar Service (‘‘Acme’’) have entered into acontract which provides for Acme to collect,transport and process revenues received fromBank customers.

Each day, Acme picks up cash, checks anddeposit tickets from Little Z, a non-exemptcustomer of the Bank. Recently, receipts of cashfrom Little Z have exceeded $10,000. Acmedelivers the checks and deposit tickets to theBank where they are processed and Little Z’saccount is credited. All cash collected, however,is taken by Acme to its central office where it iscounted and processed. The cash is then deliv-

ered by Acme to the Federal Reserve Bank fordeposit into the Bank’s account. Must the Bankfile a CTR to report a receipt of cash in excess of$10,000 by Acme from Little Z?

Law and Analysis

Yes. Since Acme is receiving cash in excess of$10,000 on behalf of the Bank, the Bank mustfile a CTR in order to report these transactions.

Section 103.22(a)(1) requires ‘‘(e)ach finan-cial institution . . . [to] file a report of eachdeposit, withdrawal, exchange of currency orother payment or transfer, by, through or to suchfinancial institution which involves a transactionin currency of more than $10,000.’’ Section103.11(c) and (n) defines ‘‘Bank’’ and ‘‘Finan-cial Institution’’ to include agents of those banksand financial institutions.

Under the facts presented, Acme is acting asan agent of the Bank. This is because Acme andthe Bank have a contractual relationship wherebythe Bank has authorized Acme to pick up,transport and process Little Z’s receipts onbehalf of the Bank. The Federal Reserve Bank’sacceptance of deposits from Acme into theBank’s account at the Fed, is additional evi-dence of the agency relationship between theBank and Acme.

Therefore, when Acme receives currencyin excess of $10,000 from Little Z, the Bankmust report that transaction on Form 4789.Likewise, if Acme receives currency from LittleZ in multiple transactions, section 103.22(a)(1)requires the Bank to aggregate these transac-tions and file a single CTR for the total amountof currency received by Acme, if the Bank hasknowledge of these multiple transactions. Knowl-edge by the Bank’s agent, i.e., Acme, that thecurrency was received in multiple transactions,is attributable to the Bank. The Bank mustassure that Acme, as its agent, obtains all theinformation and identification necessary to com-plete the CTR.

Holding

Financial institutions must file a CTR for thecurrency received by an armored car service


from the financial institution’s customer whenthe armored car service physically receives thecash from the customer, transports it and pro-cesses the receipts, even though the currencymay never physically be received by the finan-cial institution. This is because the armored car

service is acting as an agent of the financialinstitution.




Administrative Ruling 89–1(January 12, 1989) Section 306.0



Exemptions: special exemption for a group ofaccountsbelongingto thesame customer. Undersections 103.22(b) (2)(i) and 103.22(b)(2)(ii) ofthe Bank Secrecy Act (‘‘BSA’’) regulations, abank may exempt onlydepositsor withdrawalsof currency from anexisting account by anestablished depositor who is a United Statesresident and operates a retail type of business inthe United States or one of the businessesspecified in Section 103.22(b)(2)(ii). 31 C.F.R.Part 103. A bank may notunilaterally grant oneexemption or establish a single dollar exemptionlimit for a group of existing accounts of thesame customer. Under section 103-22(e), how-ever, a bank may apply to the Internal RevenueService (‘‘IRS’’) for additional authority to grantexemptions to the reporting requirements nototherwise permitted under section 103.22(b).Under this authority and at the request of a bank,the IRS may, in its discretion, provide the bankwith authority to grant one exemption and oneexemption limit applicable to a group of exempt-ible accounts that belong to the same customerand have the same Taxpayer Identification Num-ber (‘‘TIN’’). Only accounts with transactions ofless than $10,000 in currency may be includedin the group exemption, and the aggregatedtransactions of the various accounts included inthe group must regularly and frequently exceed$10,000 in currency.

BSA RULING 89–1

Issue

Under Section 103.22 of the BSA regulations,may a bank unilaterally grant one exemption orestablish a single dollar exemption limit for agroup of existing accounts of the same cus-tomer? If not, may a bank obtain additionalauthority from the IRS to grant a single exemp-tion for a group of exemptible accounts belong-ing to the same customer?

Facts

ABC Inc. (‘‘ABC’’), with TIN 12-3456789,owns five fast food restaurants. Each restauranthas its own account at the X State Bank andeach restaurant routinely deposits less than$10,000 into its individual account. However,when the deposits into these five accounts areaggregated they regularly and frequently exceed$10,000. Accordingly, the bank prepares andfiles one CTR for ABC Inc., on each businessday that ABC’s aggregated currency transac-tions exceed $10,000. X State Bank wants toknow whether it can unilaterally exempt thesefive accounts having the same TIN, and, if not,whether it can obtain additional authority fromthe IRS to grant a single exemption to the groupof five accounts belonging to ABC.

Law and Analysis

Under section 103.22(b)(2)(i) and (ii) of theBank Secrecy Act (‘‘BSA’’) regulations, 31C.F.R. Part 103, only an individual account of acustomer may be unilaterally exempted from thecurrency transaction reporting provisions. Thebank may not unilaterally grant one exemptionor establish a single dollar exemption limitfor multiple accounts of the same customer.This is because sections 103.22(b)(2)(i) and103.22(b)(2)(ii) of the BSA regulations onlypermit a bank to unilaterally exempt ‘‘[d]epositsor withdrawals of currency from anexistingaccountby an established depositorwho is aUnited States resident and operates a retail typeof business in the United States.’’ 31 C.F.R.103.22(b) (2)(i) and (ii).

Section 103.22(e) of the BSA regulationsprovides, however, that ‘‘[a]bank may apply tothe . . . [IRS] for additional authority to grantexemptions to the reporting requirements nototherwise permitted under paragraph (b) of thissection 31 C.F.R. 103.22(e). Therefore, underthis authority, and at the request of a bank, theIRS may, in its discretion, grant the requestingbank additional authority to exempt a group ofaccounts when the following conditions are met:

• Each of the accounts in the group is owned bythe same person and has the same taxpayeridentification number.


• The deposits or withdrawals into each accountare made by a customer that operates a busi-ness that may be either unilaterally or spe-cially exemptible and each account meets theother exemption criteria (except for the dollaramount).

• Currency transactions for each account indi-vidually do not exceed $10,000 on a regularand frequent basis.

• Aggregated currency transactions for allaccounts included in the group regularly andfrequently exceed $10,000.

If a bank determines that an exemption wouldbe appropriate in a situation involving a groupof accounts belonging to a single customer, itmust apply to the IRS for authority to grant onespecial exemption covering the accounts in ques-tion. As with all requests for special exemptions,any request for additional authority to grant aspecial exemption must be made in writing andaccompanied by a statement of the circum-stances that warrant special exemption treatmentand a copy of the statement signed by thecustomer as required by section 103.22(d). 31C.F.R. 103.22(d).

Additional authority to grant a special exemp-tion for a group of accounts must be obtainedfrom the IRS regardless of whether the busi-nesses may be unilaterally exempted under103.22(b)(2), because the exemption, if granted,would apply to a group of existing accountsas opposed to anindividual existingaccount.31 C.F.R. §103.22(b)(2).

Also, if any one of a given customer’saccounts has regular and frequent currency trans-actions which exceed $10,000, that accountmaynot be included in the group exemption. This isbecause the bank may, as provided by section103.22(b)(2), either unilaterally exempt thataccount or obtain authority from the IRS togrant a special exemption for that account if itmeets the other criteria for exemption. Thus,only accounts of exemptible businesses whichdo not have regular and frequent (e.g., daily,

weekly or twice a month) currency transactionsin excess of $10,000 may be eligible for a groupexemption.

The intention of this special exemption is topermit banks to exempt the accounts of estab-lished customers, such as the ABC Inc. restau-rants described above, which are owned by thesame person and have the same TIN but whichindividually do not have sufficient currencydeposit or withdrawal activity that regularly andfrequently exceed $10,000.

Holding

If X State Bank determines that an exemptionwould be appropriate for ABC Inc., it mustapply to the IRS for authority to grant onespecial exemption covering ABC’s five separateaccounts. As with all requests for special exemp-tions, ABC’s request for additional authority togrant a special exemption must be made inwriting and accompanied by a statement of thecircumstances that warrant special exemptiontreatment and a copy of the statement signed bythe customer as required by section 103.22(d).31 C.F.R. 103.22(d). The IRS may, in its discre-tion, grant additional authority to exempt theABC accounts if: (1) they have the same tax-payer identification number; (2) they each arefor customers that operate a business that maybe either unilaterally or specially exemptibleand each account meets the other exemptioncriteria (except for dollar amount); (3) the cur-rency transactions for each account individuallydo not exceed $10,000 on a regular and frequentbasis; but (4) when aggregated the currencytransactions for all the accounts regularly andfrequently do exceed $10,000.







Exemptions; aggregation and reporting of mul-tiple transactions involving exempted accounts.When a customer has more than one accountand a bank has knowledge that multiple cur-rency transactions have been conducted in theseaccounts on the same business day, the bankmust aggregate the transactions in those accounts.Where one or more of the customers’ accountshas been exempted, the bank must total thecurrency transactions within each account todetermine whether the exemption limit has beenexceeded. If the exemption limit has not beenexceeded, the bank does not have to aggregatethe transactions for the exempted account withany other of the customer’s currency transac-tions. If the total of the transactions involvingthe exempt account exceeds the exemption limit,the bank must aggregate those transactions withthe transactions from any other exemptedaccounts where the exemption limit has beenexceeded, with the transactions from any non-exempt accounts, and with any reportable trans-actions conducted by or on behalf of the cus-tomer that do not involve accounts (e.g.,purchases of bank checks or ‘‘cash back’’ trans-actions) of which the bank has knowledge.

BSA RULING 89–2

Issue

When a customer has established bank accountsfor each of several establishments that it owns,and the bank has exempted one or more of thoseaccounts, how does the bank aggregate thecustomer’s currency transactions?

Facts

X Company (‘‘X’’) operates two fast-food res-taurants and a wholesale food business. X hasopened separate bank accounts at the A National

Bank (the ‘‘bank’’) for each of its two restau-rants, account numbers 1 and 2 respectively.Each of these two accounts has been properlyexempted by the bank. Account number 1 has anexemption limit of $25,000 for deposits, andaccount number 2 has an exemption limit of$40,000 for deposits. X also has a third account,account number 3, at the bank for use in theoperation of its wholesale food business. onoccasion, cash deposits of more than $10,000are made into this third account. Because thesecash deposits are infrequent, the bank cannotobtain additional authority to grant this accounta special exemption.

During the same business day, two $15,000cash deposits totalling $30,000 are made intoaccount number 1, a separate cash deposit of$35,000 is made into account number 2 and adeposit of $9,000 in currency is made intoaccount number 3 (X’s account for its wholesalefood business).

The bank must now determine how to aggre-gate and report all of these transactions on aForm 4789, Currency Transaction Report,(‘‘CTR’’). Must they aggregate all of the depos-its made into account numbers 1, 2 and 3 andreport them on a single CTR?

Law and Analysis

Section 103.22 of the Bank Secrecy Act(‘‘BSA’’), 31 CFR Part 103, requires a financialinstitution to treat multiple currency transactions‘‘as a single transaction if the financial institu-tion has knowledge that they are by or on behalfof any person and result in either cash-in orcash-out totalling more than $10,000 during anyone business day.’’ This means that a financialinstitution must file a CTR if it knows thatmultiple currency transactions involving two ormore accounts have been conducted by or onbehalf of the same person and, those transac-tions, when aggregated, exceed $10,000. Knowl-edge, in this context, means knowledge on thepart of a partner, director, officer or employee ofthe institution or on the part of any existingcomputer or manual system at the institutionthat permits it to aggregate transactions.

Thus, if the bank has knowledge of multipletransactions, the bank should aggregate the trans-actions in the following manner.


First, the bank should separately review andtotal all cash-in and cash-out transactions withineach account. Cash-in transactions should beaggregated with other cash-in transactions andcash-out transactions should be aggregated withcash-out transactions. Cash-in and cash-out trans-actions should not be aggregated together oroffset against each other.

Second, the bank should determine whetherthe account has an exemption limit. If theaccount has an exemption limit, the bank shoulddetermine whether it has been exceeded. If theexemption limit has not been exceeded, thetransactions for the exempted account shouldnot be aggregated with other transactions.

If the total transactions during the same busi-ness day for a particular account exceed theexemption limit, the total of all of the transac-tions for that account should be aggregated withthe total amount of the transactions for otheraccounts that exceed their respective exemptionlimits, with any accounts without exemptionlimits, and with transactions conducted by or onbehalf of the same person that do not involveaccounts (e.g., purchases of bank checks withcash) of which the bank has knowledge.

In the example discussed above, all of thetransactions have been conducted ‘‘on behalfof’’ X, as X owns the restaurants and thewholesale food business. The total $30,000deposit for account 1 exceeds the $25,000exemption limit for that account. The $35,000deposit into account number 2 is less than the$40,000 exemption limit for that account. Finally,the $9,000 deposit into account number 3, doesnot by itself constitute a reportable transaction.

Therefore, under the facts above, the bankshould aggregate the entire $30,000 deposit intoaccount number 1 (not just the amount thatexceeds the exemption limit), with the $9,000deposit into account number 3, for a total of$39,000. The bank should not include the$35,000 deposit into account number 2,, as thatdeposit does not exceed the exemption limit forthat account. Accordingly, the bank should com-plete and file a single CTR for $39,000.

If the bank does not have knowledge that

multiple currency transactions have been con-ducted in these accounts on the same businessday (e.g., because it does not have a system thataggregates among accounts and the depositswere made by three different individuals atdifferent times) the bank should file one CTR for$30,000 for account number 1, as the activityinto that account exceeds its exemption limit.

Holding

When a customer has more than one accountand a bank employee has knowledge that mul-tiple currency transaction have been conductedin the accounts or the bank has an existingcomputer or manual system that permits it toaggregate transactions for multiple accounts, thebank should aggregate the transactions in thefollowing manner.

First, the bank should aggregate for eachaccount all cash-in or cash-out transactions con-ducted during one business day. If the accounthas an exemption limit, the bank should deter-mine whether the exemption limit of that accounthas been exceeded. If the exemption limit hasnot been exceeded, the total of the transactionsfor that particular account does not have to beaggregated with other transactions. If the totaltransactions during the same business day for aparticular account exceed the exemption limit,however, the total of all of the transactions forthat account should be aggregated with any totalfrom other accounts that exceed their respectiveexemption limits, with any accounts withoutexemption limits, and with any reportable trans-actions conducted by or on behalf of the cus-tomer not involving accounts (e.g., purchases ofbank checks or ‘‘cash back’’ transactions) ofwhich the bank has knowledge. The bank shouldthen file a CTR for the aggregated amount.

Michael L. WilliamsDeputy Assistant Secretary(Law Enforcement)



Administrative Ruling 89–3Section 308.0

Rescinded



Rescinded


Administrative Ruling 89–5(December 21, 1989) Section 310.0


31 C.F.R.103.27—IDENTIFICATIONREQUIRED

Identification of person on whose behalf trans-action was conducted. Pursuant to 31 U.S.C.5313 and 31 C.F.R. 103.22 and 103.28, financialinstitutions must report transactions in currencythat exceed $10,000 on IRS Form 4789, Cur-rency Transaction Report (‘‘CTR’’). The CTRmust include information about the identity ofthe person who conducted the transaction(Part I) and any person on whose behalf thetransaction was conducted (Part II). It is theresponsibility of the financial institution todevelop internal controls and procedures toensure the filing of accurate and complete CTRs.One way that financial institutions can obtaininformation about the person on whose behalfthe transaction is being conducted is to ask theperson conducting the transaction whether he isacting for himself or on behalf of anotherperson. Only if as a result of strong ‘‘know yourcustomer’’ or other internal policies, the finan-cial institution is satisfied that its records containthe necessary information concerning the trueidentity of the person for whom the transactionis conducted, may the financial institution relyon those records in completing the CTR. Theidentifying information concerning the personconducting the transaction must be listed inPart I of the CTR, and the identifying informa-tion concerning the person on whose behalf thetransaction is being conducted must be listed inPart II.

BSA Ruling 89–5

Issue

How does a financial institution fulfill therequirement that it furnish information about theperson on whose behalf a reportable currencytransaction is being conducted?

Facts

No. 1

Linda Scott has had an account relationship withthe Bank for 15 years. Ms. Scott enters the bankand deposits $15,000 in cash into her personalchecking account. The bank knows that Ms.Scott is an artist who on occasions exhibits andsells her art work and that her art work currentlyis on exhibit at the local gallery. The bankfurther knows that cash deposits in the amountof $15,000 are commensurate with Ms. Scott’sart sales.

No. 2

Dick Wallace has recently opened a personalaccount at the Bank. Although the bank verifiedhis identity when the account was opened, thebank has no additional information about Mr.Wallace. Mr. Wallace enters the bank with$18,000 in currency and asks that it be wiredtransferred to a bank in a foreign country.

No. 3

Dorothy Green, a partner at a law firm, makes a$50,000 cash deposit into the firm’s trustaccount.1 The bank knows that this is a trustaccount. The $50,000 represents cash receivedfrom three clients.

No. 4

Carlos Gomez enters a Currency Dealer andasks to buy $12,000 in traveler’s checks withcash.

No. 5

Gail Julian, a trusted employee of Q-mart, alarge retail chain, enters the bank three timesduring one business day and makes three large

1. This type of account is sometimes called a trust account,attorney account or special account. It is an account estab-lished by an attorney into which commingled funds of clientsmay be deposited. It is not necessarily a ‘‘trust’’ in the legalsense of the term.


cash deposits totalling $48,000 into Q-mart’saccount. The Bank knows that Ms. Julian isresponsible for making the deposits on behalf ofQ-mart. Q-mart has an exemption limit of$45,000.

Law and Analysis

Under section 103.28 of the Bank Secrecy Act(‘‘BSA’’) regulations, 31 C.F.R. Part 103, afinancial institution must report on a CurrencyTransaction Report (‘‘CTR’’) the name andaddress of the individual conducting the trans-action, and the identity, account number, and thesocial security or taxpayer identification numberof any person on whose behalf the transactionwas conducted. See 31 U.S.C. 5313. ‘‘A partici-pant acting for another person shall make thereport as the agent or bailee of.the person andidentify the person for whom the transaction isbeing made.’’ Identifying information about theperson on whose behalf the transaction is con-ducted must always be furnished if the transac-tion is reportable under the BSA, regardless ofwhether the transaction involves an account.

This type of account is sometimes called atrust account, attorney account or special account.It is an account established by an attorney intowhich commingled funds of clients may bedeposited. It is not necessarily a ‘‘trust’’ in thelegal sense of the term.

Because the BSA requires financial institu-tions to file complete and accurate CTRs, it isthe financial institution’s responsibility to ascer-tain the real party in interest. 31 U.S.C §5313.One way that a financial institution can obtaininformation about the identity of the person onwhose behalf the transaction is being conductedis to ask the person conducting the transactionwhether he is acting for himself or on behalf ofanother person. Only if as a result of strong‘‘know your customer’’ or other internal controlpolicies, the financial institution is satisfied thatits records contain information concerning thetrue identity of the person on whose behalf thetransaction is conducted, may the financialinstitution rely on those records to complete theCTR.

No. 1

Linda Scott, an artist, is a known customer ofthe bank. The bank is aware that she is exhibit-

ing her work at a local gallery and that cashdeposits in the amount of $15,000 would not beunusual or inconsistent with Ms. Scott’s busi-ness practices. Therefore, if the bank through itsstringent ‘‘know your customer’’ policies issatisfied that the money being deposited by Ms.Scott into her personal account is for her benefit,the bank need not ask Ms. Scott whether she isacting on behalf of someone-else.

No. 2

Because Dick Wallace is a new customer of thebank and because the bank has no additionalinformation about him or his business activity,the bank should ask Mr. Wallace whether he isacting on his own behalf or on behalf of some-one else. This is particularly true given thenature of the transaction—a wire transfer withcash for an individual to a foreign country.

No. 3

Dorothy Green’s cash deposit of $50,000 intothe law firm’s trust account clearly is being doneon behalf of some else. The bank should askMs. Green to identify the clients on whosebehalf the transaction is being conducted.Because Ms. Green is acting both on behalf ofher employer and the clients, the names of thethree clients and the law firm should be includedon the CTR filed by the bank.

No. 4

The currency dealer, having no account relation-ship with Carlos Gomez, should ask Mr. Gomezif he is acting on behalf of someone else.

No. 5

Gail Julian is known to the bank as a trustedemployee of Q-mart, who often deposits cashinto Q-mart’s account. If the bank, through itsstrong ‘‘know your customer’’ policies is satis-fied that Ms. Julian makes these deposits onbehalf of Q-mart, the bank need not ask her ifshe is acting on behalf of someone other thanQ-mart.

Administrative Ruling 89–5 310.0


Holding

It is the responsibility of a financial institution tofile complete and accurate CTRs. This includesproviding identifying information about the per-son on whose behalf the transaction is con-ducted in Part II of the CTR. One way that afinancial institution can obtain information aboutthe true identity of the person on whose behalfthe transaction is being conducted is to ask theperson conducting the transaction whether he isacting for himself or on behalf of another

person. Only if as a result of strong ‘‘know yourcustomer’’ or other internal control policies, thefinancial institution is satisfied that its recordscontain the necessary information concerningthe true identity of the person on whose behalfthe transaction is being conducted, may thefinancial institutions rely on those records incompleting the CTR.

Salvatore R. MartocheAssistant Secretary(Enforcement)





31 U.S.C. 5325—IDENTIFICATIONREQUIRED TO PURCHASECERTAIN MONETARYINSTRUMENTS

31 C.F.R. 103.28—IDENTIFICATION REQUIRED

31 C.F.R. 103.29—PURCHASESOF BANK CHECKS AND DRAFTS,CASHIER’S CHECKS, MONEYORDERS AND TRAVELER’SCHECKS

Identification of elderly or disabled patronsconducting large currency transactions.Finan-cial institutions must file a form 4789, CurrencyTransaction Report (CTR) on transactions incurrency in excess of $10,000, and must verifyand record information about the identity of theperson(s) who conduct(s) the transaction inPart I of the CTR. Financial institutions alsomust record on a chronological log1 sales of, andverify the identity of individuals who purchase,certain monetary instruments with currency inamounts between $3,000 and $10,000, inclu-sive. Many financial institutions have askedTreasury how they can meet the requirement toexamine an identifying document that containsthe person’s name and address when s/he doesnot possess such a document (e.g., a driver’slicense). Financial institutions have indicatedthat this question arises almost exclusively withtheir elderly and/or disabled patrons. ThisAdministrative Ruling answers those inquiries.

Issue

How does a financial institution fulfill therequirement to verify and record the name andaddress of an elderly or disabled individual whoconducts a currency transaction in excess of$10,000 or who purchases certain monetaryinstruments with currency valued between $3,000

and $10,000 when he/she does not possess apassport, alien identification card or other offi-cial document, or other document that is nor-mally acceptable within the banking communityas a means of identification when cashing checksfor nondepositors?

Holding

It is the responsibility of a financial institution tofile complete and accurate CTRs and to maintaincomplete and accurate monetary instrument logspursuant to 31 C.F.R. §§103.27(d) and 103.29of the BSA regulations. It is also the responsi-bility of a financial institution to verify and torecord the identity of individuals conductingreportable currency transactions and/or cash pur-chases of certain monetary instruments asrequired by BSA regulations §§103.28 and103.29. Only if the financial institution is con-fident that an elderly or disabled patron is whos/he says s/he is may it complete these trans-actions. A financial institution shall use what-ever information it has available, in accordancewith its established policies and procedures, todetermine its patron’s identity. This includesreview of its internal records for any informa-tion on file, and asking for other forms ofidentification, including a social security ormedicare/medicaid card along with another docu-ment which contains both the patron’s name andaddress such as an organizational membershipcard, voter registration card, utility bill or realestate tax bill. These forms of identification shallalso be identified as acceptable in the bank’sformal written policy and operating proceduresas identification for transactions involving theelderly or the disabled. Once implemented, thefinancial institution should permit no exceptionto its policy and procedures. In these cases, thefinancial institution should record the word ‘‘Eld-erly’’ or ‘‘Disabled’’ on the CTR and/or chro-nological log and the method used to identifythe elderly, or disabled patron such as ‘‘SocialSecurity and (organization) Membership Cardonly ID.’’

Law and Analysis

Before concluding a transaction for which aCurrency Transaction Report is required pursu-

1. Effective 10-17-94, financial institutions are no longerrequired to maintain the necessary information on a ‘‘mone-tary instrument log.’’


ant to 31 C.F.R. §103.22, a financial institutionmust verify and record the name and addressof the individual conducting the transaction.31 C.F.R. §103.28. Verification of the individu-al’s identity must be made by examination of adocument, other than a bank signature card, thatis normally acceptable within the banking com-munity as a means of identification when cash-ing checks for nondepositors (e.g., a driver’slicense). A bank signature card may be reliedupon only if it was issued after documentsestablishing the identity of the individual wereexamined and a notation of the method andspecific information regarding identification (e.g.state of issuance and driver’s license number)was made on the signature card. In each instance,the specific identifying information noted aboveand used to verify the identity of the individualmust be recorded on the CTR. The notation of‘‘known customer’’ or ‘‘bank signature card onfile’’ on the CTR is prohibited. 31 C.F.R.§103.28.

Before issuing or selling bank checks ordrafts, cashier’s checks, traveler’s checks ormoney orders to an individual(s), for currencybetween $3,000 and $10,000, a financial insti-tution must verify whether the individual has adeposit account or verify the individual’s iden-tity. 31 C.F.R. §103.29. Verification may bemade by examination of a signature card orother account record at the financial institution ifthe deposit accountholder’s name and addresswere verified at the time the account was opened,or at any subsequent time, and that informationwas recorded on the signature card or recordbeing examined.

Verification may also be made by examina-tion of a document that contains the name andaddress of the purchaser and which is normallyacceptable within the banking community as ameans of identification when cashing checksfor nondepositors. In the case of a depositaccountholder whose identity has not been pre-viously verified, the financial institution shallrecord the specific identifying information on itschronological log (e.g. state of issuance anddriver’s license number). In all situations, thefinancial institution must record all the appro-priate information required by §103.29(a)(1)(i)for deposit account holders or 103.29(a)(2)(i)for nondeposit account holders.

Certain elderly or disabled patrons do notpossess identification documents that wouldnormally be considered acceptable within thebanking community (e.g., driver’s licenses,

passports, or state-issued identification cards).Accordingly, the procedure set forth belowshould be followed to fulfill the identificationverification requirements of §§103.28 and 103.29.

Financial institutions may accept as appropri-ate identification a social security, medicare,medicaid or other insurance card presented alongwith another document that contains both thename and address of the patron (e.g.an organi-zation membership or voter registration card,utility or real estate tax bill). Such forms ofidentification shall be specified in the bank’sformal written policy and operating proceduresas acceptable identification for transactionsinvolving elderly or disabled patrons who do notpossess identification documents normally con-sidered acceptable within the banking commu-nity for cashing checks for nondepositors.

This procedure may only be applied if thefollowing circumstances exist. First, the finan-cial institution must establish that the identifica-tion the elderly or disabled patron has is limitedto a social security or medicare/medicaid cardplus another document which contains thepatron’s name and address. Second, the financialinstitution must use whatever information it hasavailable, or policies and procedures it has inplace, to determine the patron’s identity. If thepatron is a deposit accountholder, the financialinstitution should review its internal records todetermine if there is information on file to verifyhis/her identity. Only if the financial institutionis confident that the elderly or disabled patron iswho s/he says s/he is, may the transaction beconcluded. Failure to identify an elderly or adisabled customer’s identity as required by31 C.F.R. §103.28 and as described herein mayresult in the imposition of civil and or criminalpenalties. Finally, the financial institution shallestablish a formal written policy and implementoperating procedures for processing reportablecurrency transactions or recording cash salesof certain monetary instruments to elderly ordisabled patrons who do not have forms ofidentification ordinarily considered ‘‘accept-able.’’ Once implemented, the financial institu-tion shall permit no exceptions to its policyand procedures. In addition, financial institu-tions are encouraged to record the elderly ordisabled patron’s identity and address as well asthe method of identification on a signature cardor other record when it is obtained and verified.

In completing a CTR, if all of the aboveconditions are satisfied, the financial institutionshould enter the words ‘‘Elderly’’ or ‘‘Disabled’’



and the method used to verify the patron’sidentity, such as ‘‘Social Security & (organiza-tion) Membership Cards Only ID,’’ in Item 15a.

Similarly, when logging the cash purchase ofa monetary instrument(s), the financial institu-tion shall enter on its chronological log thewords, ‘‘Elderly’’ or ‘‘Disabled,’’ and the methodused to verify such patron’s identity.

Example

Jesse Fleming, a 75 year old retiree, has beensaving $10 bills for twenty years in order to helppay for his granddaughter’s college education.He enters the Trustworthy National Bank wherehe has no account but his granddaughter hasa savings account, and presents $13,000 in$10 bills to the teller. He instructs the teller todeposit $9,000 into his granddaughter’s savingsaccount, and requests a cashier’s check for$4,000 made payable to State University.

Because of poor eyesight, Mr. Fleming nolonger drives and does not possess a validdriver’s license. When asked for identificationby the teller he presents a social security cardand his retirement organization membership cardthat contains his name and address.

Application of Law to Example

In this example, the Trustworthy National Bankmust check to determine if Mr. Fleming’s social

security and organizational membership cardsare acceptable forms of identification as definedin the bank’s policy and procedures. If so, andthe bank is confident that Mr. Fleming is who hesays he is, it may complete the transaction.Because Mr. Fleming conducted a transaction incurrency which exceeded $10,000 (deposit of$9,000 and purchase of $4,000 monetary instru-ment), First National Bank must complete aCTR. It should record information about Mr.Fleming in Part I of the CTR and in Item 15arecord the words ‘‘Elderly—Social Security and(organization) Membership Cards Only ID.’’The balance of the CTR must be appropriatelycompleted as required by §§103.22 and103.27(d). First National Bank must also recordthe transaction in its monetary instrument saleslog because it issued to Mr. Fleming a cashier’scheck for $4,000 in currency. Mr. Fleming mustbe listed as the purchaser and the bank shouldrecord on the log the words ‘‘Elderly—SocialSecurity and (organization) Membership CardsOnly ID’’ as the method used to verify hisidentity. In addition, because Mr. Fleming is nota deposit accountholder at First National Bank,the bank is required to record on the log all theinformation required under §103.29(a)(2)(i) forcash purchases of monetary instruments by non-deposit accountholders.

Peter K. NunezAssistant Secretary(Enforcement)





31 C.F.R. 103.22—REPORTING OFCURRENCY TRANSACTIONS

31 C.F.R. 103.28—IDENTIFICATION REQUIRED

Proper completion of the Currency TransactionReport (CTR), IRS Form 4789, when reportingmultiple transactions.1 Financial institutionsmust report transactions in currency that exceed$10,000 or an exempted account’s establishedexemption limit and provide certain informationincluding verified identifying information aboutthe individual conducting the transaction. Mul-tiple currency transactions must be treated as asingle transaction, aggregated, and reported on asingle Form 4789, if the financial institution hasknowledge that the transactions are by or onbehalf of any person and result in either cash inor cash out totalling more than $10,000, or theexemption limit, during any one business day.All CTRs must be fully and accurately com-pleted. Some or all of the individual transactionswhich comprise an aggregated CTR are fre-quently below the $10,000 reporting or applica-ble exemption threshold and, as such, are notreportable and financial institutions do not gatherthe information required to complete a CTR.

Issue

How should a financial institution complete aCTR when multiple transactions are aggregatedand reported on a single form and all or part ofthe information called for in the form may notbe known?

Holding

Multiple transactions that total in excess of$10,000, or an established exemption limit,when aggregated must be reported on a CTR ifthe financial institution has knowledge that the

transactions have occurred. In many cases, theindividual transactions being reported are eachunder $10,000, or the exemption limit, and theinstitution was not aware at the time of any oneof the transactions that a CTR would be required.Therefore, the identifying information on the per-son conducting the transaction was not requiredto be obtained at the time the transaction wasconducted.

If after a reasonable effort to obtain theinformation required to complete items 4 through15 of the CTR, all or part of such information isnot available, the institution must check item 3dto indicate that the information is not beingprovided because the report involves multipletransactions for which complete information isnot available. The institution must, however,provide as much of the information as is reason-ably available.

All subsections of item 48 on the CTR mustbe completed to report the number of trans-actions involved and the number of locations ofthe financial institution and zip codes of thoselocations where the transactions were conducted.

Law and Analysis

Sections 103.22(a)(1) and (c) of the BankSecrecy Act (BSA) regulations, 31 C.F.R.Part 103, require a financial institution to file aCTR for each deposit, withdrawal, exchange ofcurrency, or other payment or transfer, by,through, or to the financial institution, whichinvolves a transaction in currency of more than$10,000 or the established exemption limit foran exempt account. Multiple transactions mustbe treated as a single transaction if the financialinstitution has knowledge that they are by, or onbehalf of, any person and result in either cashin or cash out of the financial institution total-ling more than $10,000 or the exemption limitduring any one business day. Knowledge, inthis context, means knowledge on the part ofa partner, director, officer or employee ofthe financial institution or on the part of anyexisting automated or manual system at thefinancial institution that permits it to aggregatetransactions.

The purpose of item 3 on the CTR is toindicate why all or part of the informationrequired in items 4 through 15 is not being

1. New CTR form in effect 10-1-95. Item numbersreflected in this ruling are no longer applicable to the newform.


provided on the form. If the reason informationis missing is solely because the transaction(s)occurred through an armored car service, a maildeposit or shipment, or a night deposit orAutomated Teller Machine (ATM), the financialinstitution must check either box a, b, or c, asappropriate, in item 3. CTR instructions statethat item 3d is to be checked for multipletransactions where none of the individual trans-actions exceeds $10,000 or the exemption limitand all of the required information might not beavailable.

As described in Example No. 5 below, theremay be situations where one transaction amongseveral exceeds the applicable threshold.Item 3d should be checked whenever multipletransactions are being reported and all or part ofthe information necessary to complete items 4through 15 is not available because at the timeof any one of the individual transactions, a CTRwas not required and the financial institution didnot obtain the appropriate information. Whenreporting multiple transactions, the financialinstitution must complete as many of items 4through 15 as possible. In the event the institu-tion learns that more than one person conductedthe multiple transactions being reported, it mustcheck item 2 on the CTR and is encouraged tomake reasonable efforts to obtain and report anyappropriate information on each of the personsin items 4 through 15 on the front and back ofthe CTR form, and if necessary, on additionalsheets of paper attached to the report.

The purpose of item 48 is to indicate thatmultiple transactions are involved in the CTRbeing filed. Items 48 a, b, and c require infor-mation about the number of transactions beingreported and the number of bank branches andthe zip code of each branch where the transac-tions took place. If multiple transactions exceed-ing $10,000 or an account exemption limit occurat the same time, the financial institution shouldtreat the transactions in a manner consistent withits internal transaction posting procedures. Forexample, if a customer presents four separatedeposits, at the same time, totalling over $10,000,the institution may report the transactions initem 48a to be one or four separate transactions.If the transactions are posted as four separatetransactions the financial institution should enterthe number 4 in item 48a and the number 1 initem 48b. If the transactions are posted as onetransaction the institution should enter the num-ber 1 in both 48a and 48b. Reporting thetransactions in this manner will guarantee the

integrity of the paper trail being created, that is,the number of transactions reported on the CTRwill be the same as the number of transactionsshowing in the institution’s records.

These situations should be differentiated fromthose cases where separate transactions occur atdifferent times during the same business day,and which, when aggregated, exceed $10,000 orthe exemption limit. For instance, if the same oranother individual conducts two of the sametype of transactions at different times during thesame business day at two different branches ofthe financial institution on behalf of the sameperson, and the institution has knowledge thatthe transactions occurred and exceed $10,000 orthe exemption limit, then the financial institu-tion must enter the number 2 in items 48a and48b.

Examples and Application of Law toExamples

Example No. 1

Dorothy Fishback presents a teller with threecash deposits to the same account, at the sametime, in amounts of $5,000, $6,000, and $8,500requesting that the deposits be posted to theaccount separately. It is the bank’s procedure topost the transactions separately. A CTR is com-pleted while the customer is at the teller window.

Application of Law to Example No. 1

A CTR is completed based upon the informationobtained at the time Dorothy Fishback presentsthe multiple transactions. Item 3d would not bechecked on the CTR because all of the informa-tion in items 4 through 15 is being providedcontemporaneously with the transaction. As it isthe bank’s procedure to post the transactionsseparately, the number of transactions reportedin item 48a would be 3 and the number ofbranches reported in item 48b would be 1. Thezip code for the location where the transactionswere conducted would be entered in item 48c.

Example No. 2

Andrew Weiner makes a $7,000 cash deposit tohis account at ABC Federal Savings Bank. Laterthe same day, Mr. Weiner returns to the same



teller and deposits $5,000 in cash to a differentaccount. At the time Mr. Weiner makes thesecond deposit, the teller realizes that the twodeposits exceed $10,000 and prepares a CTRobtaining all of the necessary identifying infor-mation directly from Mr. Weiner.


Even though the two transactions were con-ducted at different times during the same busi-ness day, Mr. Weiner conducted both trans-actions at the same place and the appropriateidentifying information was obtained by theteller at the time of the second transaction.Item 3d would not be checked on the CTR. Thenumber of transactions reported in item 48amust be 2 and the number of branches reportedin item 48b would be 1. The zip code for thelocation where the transactions took place wouldbe entered in item 48c.

Example No. 3

Internal auditor Mike Pelzer is reviewing thedaily cash transactions report for People’s Bankand notices that five cash deposits were madethe previous day to account #12345. The totalof the deposits is $25,000 and they were madeat three different offices of the bank. Mikeresearches the account data base and finds thatthe account belongs to a department store andthat the account is exempted for deposits up to$17,000 per day. Each of the five transactionswas under $17,000.


Having reviewed the report of aggregated trans-actions, Mike Pelzer has knowledge that trans-actions exceeding the account exemption limithave occurred during a single business day. ACTR must be filed. People’s Bank is encouragedto make a reasonable effort to provide theinformation for items 4 through 15 on the CTR.Such efforts could include a search of theinstitution’s records or a phone call to thedepartment store to identify the persons thatconducted the transactions. If all of the informa-tion is not contained in the institution’s recordsor otherwise obtained, item 3d must be checked.The number of transactions reported in item 48amust be 5 and the number of branches reportedin 48b would be 3. The zip codes for the three

locations where the transactions occurred mustbe entered in item 48c.

Example No. 4

Mrs. Saunders makes a cash withdrawal, for$4,000, from a joint savings account she ownswith her husband. That day her husband, Mr.Saunders, withdraws $7,000 cash using the sameteller. Realizing that the withdrawals exceed$10,000, the teller obtains identifying informa-tion on Mr. Saunders required to complete aCTR.


In this case, item 2 on the CTR must be checkedbecause the teller knows that more than oneperson conducted the transactions. Informationon Mr. Saunders would appear in Part I and thebank is encouraged to ask him for, or to check itsrecords for the required identifying informationon Mrs. Saunders. If after taking reasonableefforts to locate the desired information, all ofthe required information is not found on file inthe institution’s records or is not otherwiseobtained, box 3d must be checked to indicatethat all information is not being provided becausemultiple transactions are being reported. What-ever information on Mrs. Saunders is containedin the records of the institution must be reportedin the continuation of Part I on the back of Form4789. The number of transactions reported initem 48a must be 2 and the number of branchesreported in item 48b would be 1. The zip codefor the branch where the transactions took placewould be entered in item 48c.

Example No. 5

On another day, Mrs. Saunders makes a depositof $3,000 cash and no information required forPart I of the CTR is requested of her. She isfollowed later the same day by her husband, Mr.Saunders, who deposits $12,000 in currency andwho provides all data required to complete Part Ifor himself.


Item 2 on the CTR must be checked because theteller knows that more than one person con-



ducted the transactions. Information on Mr.Saunders would appear in Part I and the bank isencouraged to ask him for, or to check itsrecords for the required identifying informationon Mrs. Saunders. If after taking reasonableefforts to locate the desired information, all ofthe required information is not found on file inthe institution’s records or is not otherwiseobtained, box 3d must be checked to indicatethat all information is not being provided becausemultiple transactions are being reported. What-ever information on Mrs. Saunders is containedin the records of the institution must be reportedin the continuation of Part I on the back of Form4789. The number of transactions reported initem 48a must be 2 and the number of branchesreported in item 48b would be 1. The zip codefor the branch where the transactions took placewould be entered in item 48c.

Example No. 6

A review of First Federal Bank’s daily cashtransactions report for a given day indicatesseveral cash deposits to a single account totalingmore than $10,000. Two separate deposits weremade in the night depository at the institution’s

main office, and two deposits were conducted atthe teller windows of two other branch loca-tions. Each deposit was under $10,000.


Item 3c should be checked to indicate thatidentifying information is not provided becausetransactions were received through the nightdeposit box. If the tellers involved with the twoface to face deposits remember who conductedthe transactions, institution records can bechecked for identifying information. If therecords contain some of the information requiredby items 4 through 15, that information must beprovided, and item 3d must be checked toindicate that some information is missing becausemultiple transactions are being reported and theinformation was not obtained at the time thetransactions were conducted. Item 48a mustindicate 4 transactions and item 48b must indi-cate 3 locations. The zip codes of those locationswould be provided in item 48c.

Peter K. NunezAssistant Secretary(Enforcement)



Currency Transaction Report(IRS Form 4789) Section 401.0

14 If an individual, describe method used to verify identity:

a Driver’s license/State I.D. b Passport c Alien registration d Other

e Issued by: f Number:

Section A—Person(s) on Whose Behalf Transaction(s) Is Conducted

2 Individual’s last name or Organization’s name 3 First name 4 M.I.

5 Doing business as (DBA) 6 SSN or EIN

9 City 10 State 11 ZIP code 12 Country (if not U.S.) 13 Occupation, profession, or business

Section B—Individual(s) Conducting Transaction(s) (if other than above).If section B is left blank or incomplete, check the box(es) below to indicate the reason(s):

15 Individual’s last name 16 First name 17 M.I.

18 Address (number, street, and apt. or suite no.) 19 SSN

1 Check all boxes that apply:

a Amends prior report b Multiple persons c Multiple transactions

Part I Person(s) Involved in Transaction(s)

OMB No. 1545-0183

Currency Transaction Report Use this 1995 revision effective October 1, 1995.

For Paperwork Reduction Act Notice, see page 3. Please type or print.(Complete all parts that apply—See instructions.)

Form 4789(Rev. October 1995)

Department of the TreasuryInternal Revenue Service

7 Address (number, street, and apt. or suite no.) 8 Date M M D D Y Yofbirth

a Armored Car Service b Mail Deposit or Shipment c Night Deposit or Automated Teller Machine (ATM)

d Multiple Transactions e Conducted On Own Behalf

20 City 21 State 22 ZIP code 23 Country (if not U.S.) 24 Date M M D D Y Yofbirth




Part II Amount and Type of Transaction(s). Check all boxes that apply.

26 Cash In $ 27 Cash Out $

29 Foreign Currency 30 Wire Transfer(s) 31 Negotiable Instrument(s) Purchased

32 Negotiable Instrument(s) Cashed 33 Currency Exchange(s) 34 Deposit(s)/Withdrawal(s)

35 Account Number(s) Affected (if any): 36 Other (specify)

.00

Part III Financial Institution Where Transaction(s) Takes Place

37 Name of financial institution Enter Federal regulator or BSA Examiner code [ ]number from the instructions here.

38 Address (number, street, and apt. or suite no.) 39 SSN or EIN

40 City 41 State 42 Zip Code 43 MICR No.

44 Title of approving official 45 Signature of approving official 46 Date M M D D Y Yofsignature

47 Type or print preparer’s name 48 Type or print name of person to contact 49 Telephone number

( )

Cat. No. 42004W Form 4789 (Rev. 10-95)

SignHere

.00

28 Date M M D D Y YofTransaction

(Country)


Form 4789 (Rev. 10-95) Page 2







9 City 10 State 11 ZIP code 12 Country (if not U.S.) 13 Occupation, profession or business

Section B—Individual(s) Conducting Transaction(s) (if other than above).




Multiple Persons(Complete applicable parts below if box 1b on page 1 is checked.)












9 City 10 State 11 ZIP code 12 Country (if not U.S.) 13 Occupation, profession or business

Section B—Individual(s) Conducting Transaction(s) (if other than above).









Currency Transaction Report 401.0


Form 4789 (Rev. 10-95) Page 3

Paperwork Reduction Act Notice.— -Therequested information has been determined tobe useful in criminal, tax, and regulatoryinvestigations and proceedings. Financialinstitutions are required to provide theinformation under 31 U.S.C. 5313 and 31 CFRPart 103. These provisions are commonlyreferred to as the Bank Secrecy Act (BSA) whichis administered by the U.S. Department of theTreasury’s Financial Crimes EnforcementNetwork (FinCEN).

The time needed to complete this form willvary depending on individual circumstances. Theestimated average time is 19 minutes. If youhave comments concerning the accuracy of thistime estimate or suggestions for making thisform simpler, we would be happy to hear fromyou. You can write to the Internal RevenueService, Attention: Tax Forms Committee,PC:FP, Washington, DC 20224. DO NOT sendthis form to this office. Instead, see When andWhere To File below.

Suspicious TransactionsThis Currency Transaction Report (CTR) shouldNOT be filed for suspicious transactionsinvolving $10,000 or less in currency OR to notethat a transaction of more than $10,000 issuspicious. Any suspicious or unusual activityshould be reported by a financial institution inthe manner prescribed by its appropriate federalregulator or BSA examiner. (See Item 37.) If atransaction is suspicious and in excess of$10,000 in currency, then both a CTR and theappropriate referral form must be filed.

Should the suspicious activity requireimmediate attention, financial institutions shouldtelephone 1-800-800-CTRS. An Internal RevenueService (IRS) employee will direct the call to thelocal office of the IRS Criminal InvestigationDivision (CID). This toll-free number isoperational Monday through Friday, fromapproximately 9:00 am to 6:00 pm EasternStandard Time. If an emergency, consultdirectory assistance for the local IRS CID Office.

General InstructionsWho Must File.— Each financial institution (otherthan a casino, which instead must file Form8362 and the U.S. Postal Service for which thereare separate rules), must file Form 4789 (CTR)for each deposit, withdrawal, exchange ofcurrency, or other payment or transfer, by,through, or to the financial institution whichinvolves a transaction in currency of more than$10,000. Multiple transactions must be treatedas a single transaction if the financial institutionhas knowledge that (1) they are by or on behalfof the same person, and (2) they result in eithercurrency received (Cash In) or currencydisbursed (Cash Out) by the financial institutiontotaling more than $10,000 during any onebusiness day. For a bank, a business day is theday on which transactions are routinely postedto customers’ accounts, as normallycommunicated to depository customers. For allother financial institutions, a business day is acalendar day.

Generally, financial institutions are defined asbanks, other types of depository institutions,brokers or dealers in securities, moneytransmitters, currency exchangers, checkcashers, issuers and sellers of money orders andtraveler’s checks. Should you have questions,see the definitions in 31 CFR Part 103.

When and Where To File.— File this CTR by the15th calendar day after the day of thetransaction with the IRS Detroit ComputingCenter, ATTN: CTR, P.O. Box 33604, Detroit, MI48232-5604 or with your local IRS office. Keep a

copy of each CTR for five years from the datefiled.

A financial institution may apply to file theCTRs magnetically. To obtain an application tofile magnetically, write to the IRS DetroitComputing Center, ATTN: CTR Magnetic MediaCoordinator, at the address listed above.

Identification Requirements.— All individuals(except employees of armored car services)conducting a reportable transaction(s) forthemselves or for another person must beidentified by means of an official document(s).

Acceptable forms of identification include adriver’s license, military, and military/dependentidentification cards, passport, state issuedidentification card, cedular card (foreign),non-resident alien identification cards, or anyother identification document or documents,which contain name and preferably address anda photograph and are normally acceptable byfinancial institutions as a means of identificationwhen cashing checks for persons other thanestablished customers.

Acceptable identification information obtainedpreviously and maintained in the financialinstitution’s records may be used. For example,if documents verifying an individual’s identitywere examined and recorded on a signaturecard when an account was opened, the financialinstitution may rely on that information. Incompleting the CTR, the financial institutionmust indicate on the form the method, type, andnumber of the identification. Statements such as‘‘known customer’’ or ‘‘signature card on file’’ arenot sufficient for form completion.

Penalties.— Civil and criminal penalties areprovided for failure to file a CTR or to supplyinformation or for filing a false or fraudulent CTR.See 31 U.S.C 5321, 5322 and 5324.

For purposes of this CTR, the terms belowhave the following meanings:

Currency.— The coin and paper money of theUnited States or any other country, which iscirculated and customarily used and accepted asmoney.

Person.— An individual, corporation, partnership,trust or estate, joint stock company, association,syndicate, joint venure or other unincorporatedorganization or group.

Organization.— Person other than an individual.

Transaction In Currency.— The physicaltransfer of currency from one person to another.This does not include a transfer of funds bymeans of bank check, bank draft, wire transferor other written order that does not involve thephysical transfer of currency.

Negotiable Instruments.— All checks and drafts(including business, personal, bank, cashier’sand third-party), money orders, and promissorynotes. For purposes of this CTR, all traveler’schecks shall also be considered negotiableinstruments. All such instruments shall beconsidered negotiable instruments whether ornot they are in bearer form.

Specific InstructionsBecause of the limited space on the front andback of the CTR, it may be necessary to submitadditional information on attached sheets.Submit this additional information on plain paperattached to the CTR. Be sure to put theindividual’s or organization’s name andidentifying number (items 2, 3, 4, and 6 of theCTR) on any additional sheets so that if itbecomes separated, it may be associated withthe CTR.

Item 1a. Amends Prior Report.— If this CTR isbeing filed because it amends a report filed

previously, check Item 1a. Staple a copy of theoriginal CTR to the amended one, complete PartIII fully and only those other entries which arebeing amended.

Item 1b. Multiple Persons.— If this transactionis being conducted by more than one person oron behalf of more than one person, check Item1b. Enter information in Part 1 for one of thepersons and provide information on any otherpersons on the back of the CTR.

Item 1c. Multiple Transactions.— If the financialinstitution has knowledge that there are multipletransactions, check Item 1c.

Part I - Person(s) Involved inTransaction(s)Section A must be completed. If an individualconducts a transaction on his own behalf,complete Section A; leave Section B BLANK. Ifan individual conducts a transaction on his ownbehalf and on behalf of another person(s),complete Section A for each person; leaveSection B BLANK. If an individual conducts atransaction on behalf of another person(s),complete Section B for the individual conductingthe transaction, and complete Section A for eachperson on whose behalf the transaction isconducted of whom the financial institution hasknowledge.

Section A. Person(s) on Whose BehalfTransaction(s) Is Conducted.— See instructionsabove.

Items 2, 3, and 4. Individual/OrganizationName.—If the person on whose behalf thetransaction(s) is conducted is an individual, puthis/her last name in Item 2, first name in Item 3and middle initial in Item 4. If there is no middleinitial, leave item 4 BLANK. If the transaction isconducted on behalf of an organization, put itsname in Item 2 and leave Items 3 and 4 BLANK.

Item 5. Doing Business As (DBA).— If thefinancial institution has knowledge of a separate‘‘doing business as’’ name, enter it in Item 5. Forexample, Johnson Enterprises DBA PJ’s Pizzeria.

Item 6. Social Security Number (SSN) orEmployer Identification Number (EIN).— Enterthe SNN or EIN of the person identified in Item 2.If none, write NONE.

Items 7, 9, 10, 11, and 12. Address.— Enter thepermanent street address including zip code ofthe person identified in Item 2. Use the PostOffice’s two letter state abbreviation code. AP.O. Box should not be used by itself and mayonly be used if there is no street address. If aP.O. Box is used, the name of the apartment orsuite number, road or route number where theperson resides must also be provided. If theaddress is outside the U.S., provide the streetaddress, city, province, or state, postat code (ifknown), and the name of the country.

Item 8. Date of Birth. Enter the date of birth.Six numerals must be inserted for each date.The first two will reflect the month of birth, thesecond two the calendar day of birth, and thelast two numerals the year of birth. Zero (0)should precede any single digit number. Forexample, if an individual’s birth date is April 3,1948, Item 8 should read 04 03 48.

Item 13. Occupation, Profession, orBusiness.— Identify fully the occuation,professon or business of the person onwhose behalf the transaction(s) wasconducted. For example, secretary, shoesalesman, carpenter, attorney, housewife,restaurant, liquor store, etc. Do not usenon-specific terms such as merchant,self-employed, businessman, etc.

401.0 Currency Transaction Report


Form 4789 (Rev. 10-95) Page 4

Item 14. If an Individual, Describe MethodUsed To Verify.— If an individual conducts thetransaction(s) on his/her own behalf, his/heridentity must be verified by examination of anacceptable document (see GeneralInstructions ). For example, check box a if adriver’s license is used to verify an individual’sidentity, and enter the state that issued thelicense and the number in items e and f. If thetransaction is conducted by an individual onbehalf on another individual not present or anorganization, enter N/A in item 14.

Secton B. Individual(s) ConductingTransaction(s) (if other than above).— Financialinstitutions should enter as much information asis available. However, there may be instances inwhich Items 15-25 may be left BLANK orincomplete.

If Items 15-25 are left BLANK or incomplete,check one or more of the boxes provided toindicate the reason(s).

Example: If there are multiple transactions that,if only when aggregated, the financial institutionhas knowledge the transactions exceed thereporting threshold, and therefore, did notidentify the transactor(s), check box d forMultiple Transactions.

Item 15, 16, and 17. Individual(s)Name.—Complete these items if anindividual conducts a transaction(s) on behalfof another person. For example, if JohnDoe, an employee of XYZ Grocery Storemakes a deposit to the store’s account,XYZ Grocery Store should be identified inSection A, and John Doe should beidentified in Section B.

Items 18, 20, 21, 22, and 23. Address.— Enterthe permanent street address including zip codeof the individual. (See Items 7, 9, 10, 11, and12.)

Item 19. SSN.— If the individual has an SSN,enter it in Item 19. If the individual does not havean SSN, enter NONE.

Item 24. Date of Birth.— Enter the individual’sdate of birth. See the instructions for item 8.

Item 25. If an Individual, Describe MethodUsed To Verify.— Enter the method by which theindividual’s identity is verified (see GeneralInstructions and Item 14).

Part II - Amount and Type ofTransaction(s)

Complete Part II to Identify the type oftransaction(s) reported and the amount(s)involved.

Items 26 and 27. Cash In/Cash Out.— In thespaces provided, enter the amount of currencyreceived (Cash In) or disbursed (Cash Out) bythe financial institution. If foreign currency isexchanged, use the U.S. dollar equivalent on theday of the transaction.

If less than a full dollar amount is involved,increase that figure to the next highest dollar.For example, if the currency totals $20,000.05,show the total as $20,001.00.

Item 28. Date of Transaction.— Six numeralsmust be inserted for each date. (See Item 8.)

Determining Whether TransactionsMeet the Reporting ThresholdOnly cash transactions that, if alone or whenaggregated, exceed $10,000 should be reportedon the CTR. Transactions shall not be offsetagainst one another.

If there are both Cash In and Cash Outtransactions that are reportable, the amountsshould be considered separately and notaggregated. However, they may be reported ona single CTR.

If there is a currency exchange, it should beaggregated separately with each of the Cash Inand Cash Out totals.

Example 1: A person deposits $11,000 incurrency to his savings account and withdraws$3,000 in currency from his checking account.

The CTR should be completed as follows:Cash In $11,000, and no entry for Cash Out. Thisis because the $3,000 transaction does not meetthe reporting threshold.

Example 2: A person deposts $11,000 incurrency to his savings account and withdraws$12,000 in currency from his checking account.

The CTR should be completed as follows:Cash In $11,000, Cash Out $12,000. This isbecause there are two reportable transactions.However, one CTR may be filed to reflect both.

Example 3: A person deposits $6,000 incurrency to his savings account and withdraws$4,000 in currency from his checking account.Further, he presents $5,000 in currency to beexchanged for the equivalent in French francs.

The CTR should be completed as follows:Cash In $11,000 and no entry for Cash Out. Thisis because in determing whether thetransactions are reportable, the currencyexchange is aggregated with each of the Cash Inand the Cash Out amounts. The result is areportable $11,000 Cash In transaction. The totalCash Out amount is $9,000 which does notmeet the reporting threshold; therefore, it is notentered on the CTR.

Example 4: A person deposits $6,000 incurrency to his savings account and withdraws$7,000 in currency from his checking account.Further, he presents $5,000 in currency to beexchanged for the equivalent in French francs.

The CTR should be completed as follows:Cash In $11,000, Cash Out $12,000. This isbecause in determining whether the transactionsare reportable, the currency exchange isaggregated with each of the Cash In and CashOut amounts. In this example, each of the CashIn and Cash Out totals exceed $10,000 andmust be reflected on the CTR.

Item 29. Foreign Currency.— If foreign currencyis involved, check Item 29 and identify thecountry. If multiple foreign currencues areinvolved, identify the country for which thelargest amount is exchanged.

Items 30-33.— Check the appropriate item(s) toidentify the following type of transaction(s):

30. Wire Transfer(s)

31. Negotiable Instrument(s) Purchased

32. Negotiable Instrument(s) Cashed

33. Currency Exchange(s)

Item 34. Deposits/Withdrawals.— Check thisitem to identify deposits to or withdrewals fromaccounts, e.g., demand deposit accounts,savings accounts, time deposits, mutual fundaccounts or any other account held at thefinancial institution. Enter the account number(s)in item 35.

Item 35. Account Numbers Affected (if any).—Enter the account number of any accountsaffected by the transaction(s) that are maintained

at the financial institution conducting thetransaction(s). If necessary, use additional sheetsof paper to indicate all of the affected accounts.

Example 1: If a person cashes a check drawnon an account held at the financial institution,the CTR should be completed as follows:Indicate Negotiable Instrument(s) Cashed andprovide the account number of the check.

If the transaction does not affect an account,make no entry.

Example 2: A person cashes a check drawn onanother financial institution. In this instance,Negotiable Instrument(s) Cashed would beindicated, but no account at the financialinstitution has been affected. Therefore, item 35should be left BLANK.

Item 36. Other (specify).— If a transaction is notidentified in Items 30–34, check Item 36 andprovide an additional description. For example, aperson presents a check to purchase ‘‘foreigncurrency’’.

Part III - Financial InstitutionWhere Transaction(s) Takes PlaceItem 37. Name of Financial Institution andIdentity of Federal Regulator or BSAExaminer.— Enter the financial institution’s fulllegal name and identify the federal regulator orBSA examiner, using the following codes:

FEDERAL REGULATOROR BSA EXAMINER CODE

Comptroller of the Currency (OCC) . . . . . 1

Federal Deposit Insurance Corporation (FDIC) . 2

Federal Reserve System (FRS) . . . . . . . 3

Office of Thrift Supervision (OTS) . . . . . . 4

National Credit Union Administration (NCUA) . 5

Securities and Exchange Commission (SEC) . 6

Internal Revenue Service (IRS) . . . . . . . 7

U.S. Postal Service (USPS) . . . . . . . . 8

Items 38, 40, 41, and 42. Address.— Enter thestreet address, city, state, and ZIP code of thefinancial institution where the transactionoccurred. If there are multiple transactions,provide information on the office or branchwhere any one of the transactions has occured.

Item 39. EIN or SSN.— Enter the financialinstitution’s EIN. If the financial institution doesnot have an EIN, enter the SSN of the financialinstitution’s principal owner.

Item 43. MICR Number.— If a depositoryinstitution, enter the Magnetic Ink CharacterRecognition (MICR) number.

SignatureItems 44 and 45. Title and Signature ofApproving Official.— The official who reviewsand approves the CTR must indicate his/her titleand sign the CTR.

Item 46. Date the Form Was Signed.— Theapproving official must enter the date the CTR issigned. (See Item 8.)

Item 47. Preparer’s Name.— Type or print thefull name of the individual preparing the CTR.The preparer and the approving official may notnecessarily be the same individual.

Items 48 and 49. Contact Person/TelephoneNumber.— Type or print the name and telephonenumber of an individual to contact concerningquestions about the CTR.

Currency Transaction Report 401.0


Report of International Transportation of Currencyor Monetary Instruments(Customs Form 4790) Section 402.0

Part I FOR INDIVIDUAL DEPARTING FROM OR ENTERING THE UNITED STATES

4. PERMANENT ADDRESS IN UNITED STATES OR ABROAD

11. CURRENCY OR MONETARY INSTRUMENT WAS: (Complete 11A or 11B)

A. EXPORTED B. IMPORTED

ShippedTo

ReceivedFrom

25. TYPE AND AMOUNT OF CURRENCY/MONETARY INSTRUMENTS 26. IF OTHER THAN U.S. CURRENCYIS INVOLVED, PLEASE COMPLETEBLOCKS A AND B. (SEE SPECIALINSTRUCTIONS)

Value in U.S. Dollars

A. Method of Shipment (Auto, U.S. Mail, Public Carrier, etc.)

B. Name of Transporter/Carrier

Part III CURRENCY AND MONETARY INSTRUMENT INFORMATION (SEE INSTRUCTIONS ON REVERSE) (To be completed by everyone)

Part II FOR PERSON SHIPPING, MAILING, OR RECEIVING CURRENCY OR MONETARY INSTRUMENTS

$

$

Coins ....................................................................................................... A.

........................................... C.

(Add lines A, B and C) ............................................................................. TOTALAMOUNT

Currency ................................................................................................. B.

Other Instruments (Specify Type)

▲▲ ▲▲▲▲▲ ▲▲▲

▲▲ ▲▲▲▲▲ ▲▲▲

▲▲ ▲▲▲▲▲ ▲▲▲

Part IV GENERAL - TO BE COMPLETED BY ALL TRAVELERS, SHIPPERS, AND RECIPIENTS

27. WERE YOU ACTING AS AN AGENT, ATTORNEY OR IN CAPACITY FOR ANYONE IN THISCURRENCY OR MONETARY INSTRUMENT ACTIVITY? (If “Yes” complete A, B and C) Yes No

Under penalties of perjury, I declare that I have examined this report, and to the best of my knowledge and belief it is true, correct and complete.

(Replaces IRS Form 4790 which is obsolete.) Customs Form 4790 (031695)

▲▲ ▲▲▲

▲▲ ▲▲▲

Please Type or print.

Control No.

(U. S. Customs Use Only)

31 U.S.C. 5316; 31 CFR 103.23 and 103.25

This form is to be filed with theUnited States Customs Service

For Paperwork Reduction ActNotice and Privacy Act Notice,see back of form.

REPORT OF INTERNATIONALTRANSPORTATION OF CURRENCY

OR MONETARY INSTRUMENTS

DEPARTMENT OF THE TREASURYUNITED STATES CUSTOMS SERVICE

1. NAME (Last or family, first, and middle) 2. IDENTIFYING NO. (See instructions) 3. DATE OF BIRTH (Mo./Day/Yr.)

6. ADDRESS WHILE IN THE UNITED STATES

8. U.S. VISA DATE

Departed From: (City in U.S.)

12. NAME (Last or family, first, and middle)

5. OF WHAT COUNTRY ARE YOU ACITIZEN/SUBJECT?

7. PASSPORT NO. & COUNTRY

10. IMMIGRATION ALIEN NO. (if any)9. PLACE UNITED STATES VISA WAS ISSUED

15. PERMANENT ADDRESS IN UNITED STATES OR ABROAD

17. ADDRESS WHILE IN THE UNITED STATES

19. U.S. VISA DATE

16. OF WHAT COUNTRY ARE YOUA CITIZEN/SUBJECT?

18. PASSPORT NO. & COUNTRY

21. IMMIGRATION ALIEN NO. (if any)20. PLACE UNITED STATES VISA WAS ISSUED

14. DATE OF BIRTH (Mo./Day/Yr.)13. IDENTIFYING NO. (See instructions)

Arrived At: (Foreign City/Country) From: (Foreign City/Country) At: (City in U.S.)

A. Currency Name

B. Country

A. Name B. Address C. Business Activity, occupation, or profession

29. SIGNATURE 30. DATE

22. CURRENCY ORMONETARYINSTRUMENTS

23. CURRENCY ORMONETARYINSTRUMENTS

DATE SHIPPED

DATE RECEIVED

NAME AND ADDRESS 24. IF THE CURRENCY OR MONETARY INSTRUMENT WASMAILED, SHIPPED, OR TRANSPORTED COMPLETEBLOCKS A AND B.

▲▲▲▲▲

PERSON INWHOSE BE-HALF YOUARE ACTING

Form ApprovedOMB No. 1515-0079

▲▲ ▲▲▲▲▲ ▲▲▲

28. NAME AND TITLE


GENERAL INSTRUCTIONS

This report is required by Treasury Department regulations (31 Code of Federal Regulations 103).

Who Must File. --Each person who physically transports, mails, or ships, or causes to be physically transported, mailed, shipped or received currency or other monetaryinstruments in an aggregate amount exceeding $10,000 on any one occasion from the United States to any place outside the United States, or into the United States fromany place outside the United States.

A TRANSFER OF FUNDS THROUGH NORMAL BANKING PROCEDURES WHICH DOES NOT INVOLVE THE PHYSICAL TRANSPORTATION OF CURRENCY ORMONETARY INSTRUMENTS IS NOT REQUIRED TO BE REPORTED.

Exceptions. --The following persons are not required to file reports: (1) a Federal Reserve Bank, (2) a bank, a foreign bank, or a broker or dealer in securities in respect tocurrency or other monetary instruments mailed or shipped through the postal service or by common carrier, (3) a commercial bank or trust company organized under thelaws of any State or of the United States with respect to overland shipments of currency or monetary instruments shipped to or received from an established customermaintaining a deposit relationship with the bank, in amounts which the bank may reasonably conclude do not exceed amounts commensurate with the customary conductof the business, industry, or profession of the customer concerned, (4) a person who is not a citizen or resident of the United States in respect to currency or othermonetary instruments mailed or shipped from abroad to a bank or broker or dealer in securities through the postal service or by common carrier, (5) a common carrier ofpassengers in respect to currency or other monetary instruments in the possession of its passengers, (6) a common carrier of goods in respect to shipments of currency ormonetary instruments not declared to be such by the shipper, (7) a travelers’ check issuer or its agent in respect to the transportation of traveler’s checks prior to theirdelivery to selling agents for eventual sale to the public, nor by (8) a person engaged as a business in the transportation of currency, monetary instruments and othercommercial papers with respect to the transportation of currency or other monetary instruments overland between established offices of banks or brokers or dealers insecurities and foreign persons.

WHEN AND WHERE TO FILE:

A. Recipients. --Each person who receives currency or other monetary instruments shall file Form 4790, within 30 days after receipt, with the Customs officer in charge atany port of entry or departure or by mail with the Commissioner of Customs, Attention: Currency Transportation Reports, Washington DC 20229.

B. Shippers or Mailers: --If the currency or other monetary instrument does not accompany the person entering or departing the United States, Form 4790 may be filed bymail on or before the date of entry, departure, mailing, or shipping with the Commissioner of Customs, Attention: Currency Transportation Reports, Washington DC 20229.

C. Travelers. --Travelers carrying currency or other monetary instruments with them shall file Form 4790 at the time of entry into the United States or at the time ofdeparture from the United States with the Customs officer in charge at any Customs port of entry or departure.

An additional report of a particular transportation, mailing, or shipping of currency or the monetary instruments, is not required if a complete and truthful report has alreadybeen filed. However, no person otherwise required to file a report shall be excused from liability for failure to do so if, in fact, a complete and truthful report has not beenfiled. Forms may be obtained from any United States Customs Service office.

Penalties.--Civil and criminal penalties, including under certain circumstances a fine of not more than $500,000 and imprisonment of not more than f iveyears, are provided for failure to file a report, supply information, and for filing a false or fraudulent report. In addition, the currency or monetar y instrumentmay be subject to seizure and forfeiture. See section 103.47, 103.48 and 103.49 of the regulations.

DEFINITIONS:

Bank. --Each agent, agency, branch or office within the United States of a foreign bank and each agency, branch or office within the United States of any person doingbusiness in one or more of the capacities listed: (1) a commercial bank or trust company organized under the laws of any state or of the United States; (2) a private bank;(3) a savings and loan association or a building and loan association organized under the laws of any state of the United States; (4) an insured institution as defined insection 401 of the National Housing Act; (5) a savings bank, industrial bank or other thrift institution; (6) a credit union organized under the laws of any state or of theUnited States; and (7) any other organization chartered under the banking laws of any state and subject to the supervision of the bank supervisory authorities of a state.

Foreign Bank. --A bank organized under foreign law, or an agency, branch or office located outside the United States of a bank. The term does not include an agent,agency, branch or office within the United States of a bank organized under foreign law.

Broker or Dealer in Securities. --A broker or dealer in securities, registered or required to be registered with the Securities and Exchange Commission under theSecurities Exchange Act of 1934.

IDENTIFICATION NUMBER.--Individuals must enter their social security number, if any. However, aliens who do not have a social security number shoul denter passport or alien registration number. All others should enter their employer identification number.

Investment Security. --An instrument which: (1) is issued in bearer or registered form; (2) is of a type commonly dealt in upon securities exchanges or markets orcommonly recognized in any areas in which it is issued or dealt in as a medium for investment; (3) is either one of a class or series or by its terms is divisible into a classor series of instruments; and (4) evidences a share, participation or other interest in property or in an enterprise or evidences an obligation of the issuer.

Monetary Instruments. --Coin or currency of the United States or of any other country, travelers’ checks, money orders, investment securities in bearer form or otherwisein such form that title thereto passes upon delivery, and negotiable instruments (except warehouse receipts or bills of lading) in bearer form or other is in such form that titlethereto passes upon delivery. The term includes bank checks, travelers’ checks and money orders which are signed but on which the name of the payee has beenomitted, but does not include bank checks, travelers’ checks or money orders made payable to the order of a named person which have not been endorsed or which bearrestrictive endorsements.

Person. --An individual, a corporation, a partnership, a trust or estate, a joint stock company, and association, a syndicate, joint venture or other unincorporatedorganization or group, and all entities cognizable as legal personalities.

SPECIAL INSTRUCTIONS:

You should complete each line which applies to you. Part II. --Line 22, enter the exact date you shipped or received currency or monetary instrument(s). Line 23, checkthe applicable box and give the complete name and address of the shipper or recipient, Part III. --Line 26, if currency or monetary instruments of more than one country isinvolved, attach a schedule showing each kind, country, and amount.

PRIVACY ACT AND PAPERWORK REDUCTION ACT NOTICE

Pursuant to the requirements of Public Law 93-579 (Privacy Act of 1974), notice is hereby given that the authority to collect information on Form 4790 in accordance with5 U.S.C. 552a(e)(3) is Public Law 91-508; 31 U.S.C. 5316; 5 U.S.C. 301; Reorganization Plan No.1 of 1950; Treasury Department No.165, revised, as amended; 31 CFR 103;and 44 U.S.C. 3501.

The principal purpose for collecting the information is to assure maintenance of reports or records where such reports or records have a high degree of usefulness in criminal, tax, orregulatory investigations or proceedings. The information collected may be provided to those officers and employees of the Customs Service and any other constituent unit of theDepartment of the Treasury who have a need for the records in the performance of their duties. The records may be referred to any other department or agency of the FederalGovernment upon the request of the head of such department or agency.

Disclosure of this information is mandatory. Failure to provide all or any part of the requested information may subject the currency or monetary instruments to seizure and forfeiture,as well as subject the individual to civil and criminal liabilities.

Disclosure of the social security number is mandatory. The authority to collect this number is 31 CFR 103.25. The social security number will be used as a means to identify theindividual who files the record.

The collection of this information is mandatory pursuant to 31 U.S.C. 5316.

Statement Required by 5 CFR 1320.21: The estimated average burden associated with this collection of information is 10 minutes per respondent or recordkeeper depending onindividual circumstances. Comments concerning the accuracy of this burden estimate and suggestions for reducing the burden should be directed to U.S. Customs Service,Paperwork Management Branch, Washington DC 20229. DO NOT send completed form(s) to this office.

Report of International Transportation of Currency or Monetary Instruments 402.0


Report of Cash Payments Over $10,000 Received in a Trade orBusiness(IRS Form 8300) Section 403.0

f Debt obligations paidg Exchange of cashh Escrow or trust fundsi Bail bondj Other (specify)

32 Amount of cash received (in U.S. dollar equivalent) (must equal item 29) (see instructions):a U.S. currency $ .00b Foreign currency $ .00c Cashier’s check(s) $ .00d Money order(s) $ .00e Bank draft(s) $ .00f Traveler’s check(s) $ .00

1 Check appropriate box(es) if: a Amends prior report; b Suspicious transaction.

2 If more than one individual is involved, check here and see instructions . . . . . . . . . . . . . . . .

See instructions for definition of cash.Use this form for transactions occurring after July 31, 1997.

Please type or print.

▲▲ ▲▲▲

▲▲ ▲▲▲ OMB No. 1545-0892

Form 8300(Rev. August 1997)


Report of Cash Payments Over $10,000Received in a Trade or Business

▲▲ ▲▲▲

3 Last Name

7 Address (number, street, and apt. or suite no.)

14 Document used to verify identity: a Describe identification .......................................................................................b Issued by

4 First Name 5 M.I. 6 Taxpayer identification number

8 Date of birth. .(see instructions)

M M

9 City

D D Y Y Y Y

▲▲ ▲▲▲

10 State 11 ZIP code 12 Country (if not U.S.) 13 Occupation, profession, or business

c Number

▲▲ ▲▲▲

Part I Identity of Individual From Whom the Cash Was Received

15 If this transaction was conducted on behalf of more than one person, check here and see instructions . . . . . .16 Individual’s last name or Organization’s name 17 First Name 18 M.I. 19 Taxpayer identification number

21 Address (number, street, and apt. or suite no.) 22 Occupation, profession, or business

▲▲ ▲▲▲

Employer identification number

27 Alien identification: a Describe identification .....................................................................................................................b Issued by

23 City

c NumberPart III Description of Transaction and Method of Payment

24 State 25 ZIP code 26 Country (if not U.S.)

▲▲ ▲▲▲

35 Name of business that received cash


36 Employer identification number

Social security number

42 Under penalties of perjury, I declare that to the best of my knowledge the information I have furnished above is true, correct,and complete.

38 City 39 State 40 ZIP code 41 Nature of your business

Signature of authorized official Title of authorized official43 Date

ofsignature

44 Type or print name of contact person 45 Contact telephone number

( )M M D D Y Y Y Y

For Paperwork Reduction Act Notice, see page 4. Form 8300 (Rev. 8-97)Cat. No. 62133S

28 Date cash receivedM M D D Y Y Y Y

29 Total cash received

$ .00

30 If cash was received inmore than one payment,check here . . .

31 Total price if different fromitem 29$ .00

▲▲ ▲▲▲

33 Type of transactiona Personal property purchasedb Real property purchasedc Personal services providedd Business services providede Intangible property purchased

(Amount in $100 bills or higher $ .00 )(Country )

Issuer’s name(s) and serial number(s) of the monetary instrument(s) ..................................................................................................................................................................................................................................................................................

▲▲ ▲▲▲

34 Specific description of property or service shown in 33.(Give serial or registration number, address, docketnumber, etc.) .......................................................................................................................................................................................................................

▲▲ ▲▲▲

▲▲ ▲▲▲

▲▲ ▲▲▲

}

20 Doing business as (DBA) name (see instructions)

Part II Person on Whose Behalf This Transaction Was Conducted

Part IV Business That Received Cash


Form 8300 (Rev. 8-97) Page 2

3 Last Name





M M

9 City

D D Y Y Y Y

▲▲ ▲▲▲


c Number

▲▲ ▲▲▲

3 Last Name





M M

9 City

D D Y Y Y Y

▲▲ ▲▲▲


c Number

▲▲ ▲▲▲

16 Individual’s last name or Organization’s name






23 City

c Number


▲▲ ▲▲▲

16 Individual’s last name or Organization’s name






23 City

c Number


▲▲ ▲▲▲

Multiple Parties(Complete applicable parts below if box 2 or 15 on page 1 is checked)

Part I Continued—Complete if box 2 on page 1 is checked

Part II Continued—Complete if box 15 on page 1 is checked

Report of Cash Payments Over $10,000 403.0


Form 8300 (Rev. 8-97) Page 3

Item You Should NoteClerks of Federal or State courts must nowfile Form 8300 if more than $10,000 incash is received as bail for an individual(s)charged with certain criminal offenses. Forthese purposes, a clerk includes the clerk’soffice or any other office, department,division, branch, or unit of the court that isauthorized to receive bail. If a personreceives bail on behalf of a clerk, the clerkis treated as receiving the bail.

If multiple payments are made in cash tosatisfy bail and the initial payment doesnot exceed $10,000, the initial paymentand subsequent payments must beaggregated and the information returnmust be filed by the 15th day after receiptof the payment that causes the aggregateamount to exceed $10,000 in cash. In suchcases, the reporting requirement can bestatisfied either by sending a single writtenstatement with an aggregate amount listedor by furnishing a copy of each Form 8300relating to that payer. Payments made tosatisfy separate bail requirements are notrequired to be aggregated. See TreasuryRegulations section 1.6050l-2.

Casinos must file Form 8300 fornongaming activities (restaurants, shops,etc.).

General InstructionsWho must file.— Each person engaged ina trade or business who, in the course ofthat trade or business, receives more than$10,000 in cash in one transaction or intwo or more related transactions, must fileForm 8300. Any transactions conductedbetween a payer (or its agent) and therecipient in a 24-hour period are relatedtransactions. Transactions are consideredrelated even if they occur over a period ofmore than 24 hours if the recipient knows,or has reason to know, that eachtransaction is one of a series of connectedtransactions.

Keep a copy of each Form 8300 for 5years from the date you file it.

Voluntary use of Form 8300.— Form 8300may be filed voluntarily for any suspicioustransaction (see Definitions ), even if thetotal amount does not exceed $10,000.

Exceptions.— Cash is not required to bereported if it is received:

• By a financial institution required to fileForm 4789, Currency Transaction Report.

• By a casino required to file (or exemptfrom filing) Form 8362, CurrencyTransaction Report by Casinos, if the cashis received as part of its gaming business.

• By an agent who receives the cash froma principal, if the agent uses all of the cashwithin 15 days in a second transaction thatis reportable on Form 8300 or on Form4789, and discloses all the informationnecessary to complete Part II of Form8300 or Form 4789 to the recipient of thecash in the second transaction.

• In a transaction occurring entirelyoutside the United States. See Pub. 1544,Reporting Cash Payments Over $10,000(Received in a Trade or Business),

regarding transactions occurring in PuertoRico, the Virgin Islands, and territories andpossessions of the United States.

• In a transaction that is not in the courseof a person’s trade or business.

When to file.— File Form 8300 by the 15thday after the date the cash was received.If that date falls on a Saturday, Sunday, orlegal holiday, file the form on the nextbusiness day.

Where to file.— File the form with theInternal Revenue Service, DetroitComputing Center, P.O. Box 32621,Detroit, MI 48232, or hand carry it to yourlocal IRS office.

Statement to be provided.— You mustgive a written statement to each personnamed on a requred Form 8300 on orbefore January 31 of the year following thecalendar year in which the cash isreceived. The statement must show thename, telephone number, and address ofthe information contact for the business,the aggregate amount of reportable cashreceived, and that the information wasfurnished to the IRS. Keep a copy of thestatement for your records.

Multiple payments.— If you receive morethan one cash payment for a singletransaction or for related transactions, youmust report the multiple payments anytime you receive a total amount thatexceeds $10,000 within any 12-monthperiod. Submit the report within 15 days ofthe date you receive the payment thatcauses the total amount to exceed$10,000. If more than one report isrequired within 15 days, you may file acombined report. File the combined reportno later than the date the earliest report, iffiled separately, would have to be filed.

Taxpayer identification number (TIN).—You must furnish the correct TIN of theperson or persons from whom you receivethe cash and, if applicable, the person orpersons on whose behalf the transaction isbeing conducted. You may be subject topenalties for an incorrect or missing TIN.

The TIN for an individual (including asole proprietorship) is the individual’ssocial security number (SSN). For certainresident aliens who are not eligible to getan SSN and nonresident aliens who arerequired to file tax returns, it is an IRSIndividual Taxpayer Identification Number(ITIN). For other persons, includingcorporations, partnerships, and estates, itis the employer identification number.

If you have requested but are not able toget a TIN for one or more of the parties toa transaction within 15 days following thetransaction, file the report and attach astatement explaining why the TIN is notincluded.

Exception: You are not required to providethe TIN of a person who is a nonresidentalien individual or a foreign organization ifthat person does not have incomeeffectively connected with the conduct of aU.S. trade or business and does not havean office or place of business, or fiscal orpaying agent, in the United States. SeePub. 1544 for more information.

Penalties.— You may be subject topenalties if you fail to file a correct andcomplete Form 8300 on time and youcannot show that the failure was due toreasonable cause. You may also besubject to penalties if you fail to furnishtimely a correct and complete statement toeach person named in a required report. Aminimum penalty of $25,000 may beimposed if the failure is due to anintentional disregard of the cash reportingrequirements.

Penalties may also be imposed forcausing, or attempting to cause, a trade orbusiness to fail to file a required report; forcausing, or attempting to cause, a trade orbusiness to file a required report containinga material omission or misstatement offact; or for structuring, or attempting tostructure, transactions to avoid thereporting requirements. These violationsmay also be subject to criminalprosecution which, upon conviction, mayresult in imprisonment of up to 5 years orfines of up to $250,000 for individuals and$500,000 for corporations or both.

DefinitionsCash.—The term ‘‘cash’’ means thefollowing:

• U.S. and foreign coin and currencyreceived in any transaction.

• A cashier’s check, money order, bankdraft, or traveler’s check having a faceamount of $10,000 or less that is receivedin a designated reporting transaction(defined below), or that is received in anytransaction in which the recipient knowsthat the instrument is being used in anattempt to avoid the reporting of thetransaction under section 6050l.

Note: Cash does not include a checkdrawn on the payer’s own account, such asa personal check, regardless of the amount.

Designated reporting transaction.— Aretail sale (or the receipt of funds by abroker or other intermediary in connectionwith a retail sale) of a consumer durable, acollectible, or a travel or entertainmentactivity.

Retail sale.—Any sale (whether or not thesale is for resale or for any other purpose)made in the course of a trade or businessif that trade or business principally consistsof making sales to ultimate consumers.

Consumer durable.—An item of tangiblepersonal property of a type that, underordinary usage, can reasonably beexpected to remain useful for at least 1year, and that has a sales price of morethan $10,000.

Collectible.—Any work of art, rug,antique, metal, gem, stamp, coin, etc.

Travel or entertainment activity.—An itemof travel or entertainment that pertains to asingle trip or event if the combined salesprice of the item and all other itemsrelating to the same trip or event that aresold in the same transaction (or relatedtransactions) exceeds $10,000.

Exceptions.—A cashier’s check, moneyorder, bank draft or traveler’s check is notconsidered received in a designated

403.0 Report of Cash Payments Over $10,000


Form 8300 (Rev. 8-97) Page 4

reporting transaction if it constitutes theproceeds of a bank loan or if it is receivedas a payment on certain promissory notes,installment sales contracts, or downpayment plans. See Pub. 1544 for moreinformation.

Person.— An individual, corporation,partnership, trust, estate, association, orcompany.

Recipient.— The person receiving the cash.Each branch or other unit of a person’strade or business is considered a separaterecipient unless the branch receiving thecash (or a central office linking thebranches), knows or has reason to knowthe identity of payers making cashpayments to other branches.

Transaction.— Includes the purchase ofproperty or services, the payment of debt,the exchange of a negotiable instrumentfor cash, and the receipt of cash to beheld in escrow or trust. A singletransaction may not be broken intomultiple transactions to avoid reporting.

Suspicious transaction.— A transaction inwhich it appears that a person isattempting to cause Form 8300 not to befiled, or to file a false or incomplete form.The term also includes any transaction inwhich there is an indication of possibleillegal activity.

Specific InstructionsYou must complete all parts. However, youmay skip Part II if the individual named inPart I is conducting the transaction on hisor her behalf only.

Item 1.— If you are amending a priorreport, check box 1a. Complete theappropriate items with the correct oramended information only. Complete all ofPart IV. Staple a copy of the original reportto the amended report.

To voluntarily report a suspicioustransaction (see Definitions ), check box1b. You may also telephone your local IRSCriminal Investigation Division or call1-800-800-2877.

Part IItem 2.— If two or more individualsconducted the transaction you arereporting, check the box and completePart I for any one of the individuals.Provide the same information for the otherindividual(s) on the back of the form. Ifmore than three individuals are involved,provide the same information on additionalsheets of paper and attach them to thisform.

Item 6.—Enter the taxpayer identificationnumber (TIN) of the individual named. SeeTaxpayer identification number (TIN)under General Instructions for moreinformation.

Item 8.—Enter eight numerals for the dateof birth of the individual named. Forexample, if the individual’s birth date isJuly 6, 1960, enter 07 06 1960.

Item 13.—Fully describe the nature of theoccupation, profession, or business (forexample, ‘‘plumber,’’ ‘‘attorney,’’ or‘‘automobile dealer’’). Do not use general or

nondescriptive terms such as‘‘businessman’’ or ‘‘self-employed.’’

Item 14.—You must verify the name andaddress of the named individual(s).Verification must be made by examinationof a document normally accepted as ameans of identification when cashingchecks (for example, a driver’s license,passport, alien registration card, or otherofficial document). In item 14a, enter thetype of document examined. In item 14b,identify the issuer of the document. In item14c, enter the document’s number. Forexample, if the individual has a Utahdriver’s license, enter ‘‘driver’s license’’ initem 14a, ‘‘Utah’’ in item 14b, and thenumber appearing on the license in item14c.

Part IIItem 15.— If the transaction is beingconducted on behalf of more than oneperson (including husband and wife orparent and child), check the box andcomplete Part II for any one of thepersons. Provide the same information forthe other person(s) on the back of theform. If more than three persons areinvolved, provide the same information onadditional sheets of paper and attach themto this form.

Items 16 through 19.— If the person onwhose behalf the transaction is beingconducted is an individual, complete items16, 17, and 18. Enter his or her TIN in item19. If the individual is a sole proprietor andhas an employer identification number(EIN), you must enter both the SSN andEIN in item 19. If the person is anorganization, put its name as shown onrequired tax filings in item 16 and its EIN initem 19.

Item 20.— If a sole proprietor ororganization named in items 16 through 18is doing business under a name other thanthat entered in item 16 (e.g., a ‘‘trade’’ or‘‘doing business as (DBA)’’ name), enter ithere.

Item 27.— If the person is NOT required tofurnish a TIN (see Taxpayer identificationnumber (TIN) under GeneralInstructions), complete this item. Enter adescription of the type of official documentissued to that person in item 27a (forexample, ‘‘passport’’), the country thatissued the document in item 27b, and thedocument’s number in item 27c.

Part IIIItem 28.—Enter the date you received thecash. If you received the cash in more thanone payment, enter the date you receivedthe payment that caused the combinedamount to exceed $10,000. See Multiplepayments under General Instructions formore information.

Item 30.—Check this box if the amountshown in item 29 was received in morethan one payment (for example, asinstallment payments or payments onrelated transactions).

Item 31.—Enter the total price of theproperty, services, amount of cashexchanged, etc. (For example, the total cost

of a vehicle purchased, cost of cateringservice, exchange of currency) if differentfrom the amount shown in item 29.

Item 32.—Enter the dollar amount of eachform of cash received. Show foreigncurrency amounts in U.S. dollar equivalentat a fair market rate of exchange availableto the public. The sum of the amountsmust equal item 29. For cashier’s check,money order, bank draft, or traveler’scheck, provide the name of the issuer andthe serial number of each instrument.Names of all issuers and all serial numbersinvolved must be provided. If necessary,provide this information on additionalsheets of paper and attach them to thisform.

Item 33.—Check the appropriate box(es)that describe the transaction. If thetransaction is not specified in boxes a–i,check box j and briefly describe thetransaction (for example, car lease, boatlease, house lease, aircraft rental).

Part IVItem 36.— If you are a sole proprietorship,you must enter your SSN. If your businessalso has an EIN, you must provide the EINas well. All other business entities mustenter an EIN.

Item 41.—Fully describe the nature of yourbusiness, for example, ‘‘attorney,’’ ‘‘jewelrydealer.’’ Do not use general ornondescriptive terms such as ‘‘business’’ or‘‘store.’’

Item 42.—This form must be signed by anindividual who has been authorized to doso for the business that received the cash.

Paperwork Reduction ActNoticeThe requested information is useful incriminal, tax, and regulatory investigations,for instance, by directing the FederalGovernment’s attention to unusual orquestionable transactions. Trades orbusinesses are required to provide theinformation under 26 U.S.C. 6050l.

You are not required to provide theinformation requested on a form that issubject to the Paperwork Reduction Actunless the form displays a valid OMBcontrol number. Books or records relatingto a form or its instructions must beretained as long as their contents maybecome material in the administration ofany Internal Revenue law. Generally, taxreturns and return information areconfidential, as required by Code section6103.

The time needed to complete this formwill vary depending on individualcircumstances. The estimated average timeis 21 minutes. If you have commentsconcerning the accuracy of this timeestimate or suggestions for making thisform simpler, you can write to the TaxForms Committee, Western AreaDistribution Center, Rancho Cordova, CA95743-0001. DO NOT send this form tothis office. Instead, see Where To File onpage 3.

Report of Cash Payments Over $10,000 403.0


Currency Transaction Report by Casinos(IRS Form 8362) Section 404.0

13 Method used to verify identity: a Examined identification credential/document b Known customer - information on file c Organization

Section A—Person(s) on Whose Behalf Transaction(s) Is Conducted (Customer)


6 Permanent address (number, street, and apt. or suite no.) 7 SSN or EIN

8 City 9 State 10 ZIP code 11 Country (if not U.S.) 12 Date M YYYYDM D

-ofbirth

14 Describe identification credential: a Driver’s license/State I.D. b Passport c Alien registration d Other


15 Customer’s Account Number

27 Method used to verify identity: a Examined identification credential/document b Known customer - information on file

Section B—Individual(s) Conducting Transaction(s) - If other than above (Agent)


20 Permanent address (number, street, and apt. or suite no.) 21 SSN


-ofbirth



1 If this Form 8362 (CTRC) is submitted to amend a prior report check here: and attach a copy of the original CTRC to this form.


2 Multiple persons

OMB No. 1506-0005

Currency Transaction Report by CasinosUse this revision for reportable transactions occuring after June 30, 1997.

Please type or print.(Complete all applicable parts—see instructions.)

Form 8362(Rev. July 1997)


Part II Amount and Type of Transaction(s) (Complete all items that apply.)

16 Multiple agents

Part III Casino Reporting Transaction(s)34 Casino’s trade name 35 Casino’s legal name 36 Employer identification number (EIN)

37 Address (number, street, and apt. or suite no.) where transaction occurred

38 City 39 State 40 ZIP code

-

41 Title of approving official 42 Signature of approving official 43 Date M YYYYDM Dofsignature

44 Type or print preparer’s name 45 Type or print name of person to contact 46 Contact telephone number

SignHere

( )

For Paperwork Reduction Act Notice, see page 2. Form 8362 (Rev. 7-97)Cat. No. 62291Z

32 Date of transaction M YYYYDM D(see instructions)

33 Foreign currency used

(Country)

31 CASH OUT: (in U.S. dollar equivalent)

a Redemption(s) of casino chips, tokens, andother gaming instruments $ .

b Withdrawal(s) of deposit (front money or safekeeping) .c Advance(s) on credit (including markers) .d Payment(s) on bet(s) (including slot jackpot(s)) .e Currency paid from wire transfer(s) in .f Negotiable instrument(s) cashed (including checks) .g Currency exchange(s) .h Travel and complimentary expenses and

gaming incentives .i Payment for tournament, contest or other promotions .j Other (specify) .k Enter total amount of CASH OUT transaction(s) $ .

31 CASH IN: (in U.S. dollar equivalent)

a Purchase(s) of casino chips, tokens, andother gaming instruments $ .

b Deposit(s) (front money or safekeeping) .c Payment(s) on credit (including markers) .d Bet(s) of currency .e Currency received from wire transfer(s) out .f Purchase(s) of casino check(s) .g Currency exchange(s) .

h Other (specify) .i Enter total amount of CASH IN transaction(s) $ .

29 Multiple transactions


Form 8362 (Rev. 7-97) Page 2

Paperwork Reduction Act Notice.— Therequested information is useful in criminal,tax, and regulatory investigations andproceedings. Financial institutions arerequired to provide the information under 31U.S.C. 5313 and 31 CFR Part 103, commonlyreferred to as the Bank Secrecy Act (BSA).The BSA is administered by the U.S.Department of the Treasury’s FinancialCrimes Enforcement Network (FinCEN). Youare not required to provide the requestedinformation unless a form displays a validOMB control number.

The time needed to complete this form willvary depending on individual circumstances.The estimated average time is 19 minutes. Ifyou have comments concerning the accuracyof this time estimate or suggestions forimproving this form, you may write to the TaxForms Committee, Western Area DistributionCenter, Rancho Cordova, CA 95743-0001.DO NOT send this form to this address.Instead, see When and Where To File below.

General InstructionsForm 8362.— Use the July 1997 revision ofForm 8362 for reportable transactionsoccurring after June 30, 1997. Use the May1992 revision of Form 8362 for reportabletransactions occurring before July 1, 1997.

Suspicious Transactions.— If a transaction isgreater than $10,000 in currency as well assuspicious, casinos must file a Form 8362and are encouraged to report suspicioustransactions and activities on Form TDF90-22.47, Suspicious Activity Report (SAR).Banks and other depository institutionscurrently are required to use the SAR toreport suspicious activities. A SAR for casinosis under development and, once issued, acasino will use this SAR for reporting asuspicious transaction or activity, rather thanreporting such activity on form TDF 90-22.47.

DO NOT use Form 8362 to (1) reportsuspicious transactions involving $10,000 orless in currency OR (2) indicate that atransaction of more than $10,000 issuspicious.

When a suspicious activity requiresimmediate attention, casinos shouldtelephone 1-800-800-CTRS, Monday throughFriday, from 9:00 a.m. to 6:00 p.m. EasternStandard Time (EST). An Internal RevenueService (IRS) employee will direct the call tothe local office of the IRS CriminalInvestigation Division (CID). In an emergency,consult directory assistance for the local IRSCID office.

Who Must File.— Any organization dulylicensed or authorized to do business as acasino or gambling casino in the UnitedStates (except casinos located in Nevada)and having gross annual gaming revenues inexcess of $1 million must file Form 8362. Thisincludes the principal headquarters and everydomestic branch or place of business of thecasino.

Note: Nevada casinos must file Form 8852,Currency Transaction Report by Casinos -Nevada (CTRC-N), to report transactions asrequired under Nevada Regulation 6A.

What To File.— A casino must file Form 8362for each transaction involving either currencyreceived (Cash In) or currency disbursed(Cash Out) of more than $10,000 in a gamingday. A gaming day is the normal businessday of the casino by which it keeps its booksand records for business, accounting, and taxpurposes. Multiple transactions must betreated as a single transaction if the casinohas knowledge that: (1) they are made by oron behalf of the same person, and (2) theyresult in either Cash In or Cash Out by thecasino totaling more than $10,000 during anyone gaming day. Reportable transactions mayoccur at a casino cage, gaming table, and/or

slot machine. The casino should report bothCash In and Cash Out transactions by or onbehalf of the same customer on a single Form8362. DO NOT use Form 8362 to reportreceipts of currency in excess of $10,000 bynongaming businesses of a casino (e.g., ahotel); instead, use Form 8300, Report ofCash Payments Over $10,000 Received in aTrade or Business.

Exceptions.— A casino does not have toreport transactions with domestic banks,currency dealers or exchangers, orcommercial check cashers.

Identification Requirements.— Allindividuals (except employees conductingtransactions on behalf of armored carservices) conducting a reportabletransaction(s) for themselves or for anotherperson must be identified by means of anofficial or otherwise reliable record.

Acceptable forms of identification include adriver’s license, military or military dependentidentification cards, passport, alienregistration card, state issued identificationcard, cedular card (foreign), or a combinationof other documents that contain anindividual’s name and address and preferablya photograph and are normally acceptable byfinancial institutions as a means ofidentification when cashing checks forpersons other than established customers.

For casino customers granted accounts forcredit, deposit, or check cashing, or on whoma CTRC containing verified identity has beenfiled, acceptable identification informationobtained previously and maintained in thecasino’s internal records may be used as longas the following conditions are met. Thecustomer’s identity is reverified periodically,any out-of-date identifying information isupdated in the internal records, and the dateof each reverification is noted on the internal

Multi ple Persons or Multi ple Agents(Complete applicable parts below if box 2 or box 16 on page 1 is checked.)

Part I Continued

13 Method used to verify identity: a Examined identification credential/document b Known customer - information on file c Organization

Section A—Person(s) on Whose Behalf Transaction(s) Is Conducted (Customer)


6 Permanent address (number, street, and apt. or suite no.) 7 SSN or EIN


-ofbirth



15 Customer’s Account Number

27 Method used to verify identity: a Examined identification credential/document b Known customer - information on file

Section B—Individual(s) Conducting Transaction(s) - If other than above (Agent)


20 Permanent address (number, street, and apt. or suite no.) 21 SSN


-ofbirth



Currency Transaction Report by Casinos 404.0


Form 8362 (Rev. 7-97) Page 3

record. For example, if documents verifyingan individual’s identity were examined andrecorded on a signature card when a depositor credit account was opened, the casinomay rely on that information as long as it isreverified periodically.

When and Where To File.— -File each Form8362 by the 15th calendar day after the dayof the transaction with the:

IRS Detroit Computing CenterATTN: CTRCP.O. Box 32621Detroit, MI 48232-5604

A casino must retain a copy of each Form8362 filed for 5 years from the date of filing.

Penalties.— Civil and/or criminal penaltiesmay be assessed for failure to file a CTRC orsupply information, or for filing a false orfraudulent CTRC. See 31 U.S.C. 5321, 5322,and 5324.

Definitions.— For purposes of Form 8362, theterms below have the following meanings:

Agent. Any individual who conducts acurrency transaction on behalf of anotherindividual or organization.

Currency. The coin and paper money ofthe United States or of any other country thatis circulated and customarily used andaccepted as money.

Customer. Any person involved in acurrency transaction whether or not thatperson participates in the casino’s gamingactivities.

Person. An individual, corporation,partnership, trust or estate, joint stockcompany, association, syndicate, jointventure, or any other unincorporatedorganization or group.

Organization. Person other than anindividual.

Transaction In Currency (CurrencyTransaction). The physical transfer ofcurrency from one person to another.

Negotiable Instruments. All checks anddrafts (including business, personal, bank,cashier’s, and third-party), traveler’s checks,money orders, and promissory notes, whetheror not they are in bearer form.

Specific InstructionsNote: Additional information that cannot fit onthe front and back of Form 8362 must besubmitted on plain paper attached to Form8362. Type or print the individual’s ororganization’s name and identifying number,date of transaction, and casino’s name andemployer identification number (i.e., Items 3,4, 5, 7, 32, 34, 35, and 36) as well as identifythe specific item number on all additionalsheets. This will ensure that if a sheetbecomes separated, it will be associated withthe appropriate Form 8362.

Item 1. Amends prior report.— CheckItem 1 if this Form 8362 amends a previouslyfiled report. Staple a copy of the originalreport behind the amended one. CompletePart III in its entirety, but complete only thoseother entries that are being amended.

Part I. Person(s) Involved inTransaction(s)Note: Section A must be completed in allcases. If an individual conducts a transactionon his/her own behalf, complete only sectionA; leave Section B BLANK. If a transaction is

conducted by an individual on behalf ofanother person(s), complete Section A foreach person on whose behalf the transactionis conducted; complete Section B for theindividual conducting the transaction.

Section A. Person(s) on Whose BehalfTransaction(s) Is Conducted(Customer)Item 2. Multiple persons.— Check Item 2 ifthis transaction is being conducted on behalfof more than one person. For example, ifJohn and Jane Doe cash a check made outto them jointly at the casino, more than oneindividual has conducted the transaction.Enter information in Section A for one of theindividuals; provide information for the otherindividual on page 2, Section A. Attachadditional sheets as necessary.

Items 3, 4, and 5. Individual/Organizationname.— If the person on whose behalf thetransaction(s) is conducted is an individual,put his/her last name in Item 3, first name inItem 4 and middle initial in Item 5. If there isno middle initial, leave them BLANK. If thetransaction is conducted on behalf of anorganization, enter the name in Item 3 andleave Items 4 and 5 BLANK, but identify theindividual conducting the transaction inSection B. If an organization has a separate‘‘doing business as (DBA)’’ name, enter inItem 3 the organization’s legal name (e.g.,Smith Enterprises, Inc.) followed by the nameof the business (e.g., DBA Smith CasinoTours). In this case, use Items 4 and 5 if morespace is needed.

Items 6, 8, 9, 10, and 11. Address.— Enterthe permanent street address, city, two-letterstate abbreviation used by the U.S. PostalService, and ZIP code of the person identifiedin Item 3. Also enter in Item 6 the apartmentor suite number and road or route number.Do not enter a P.O. box number unless theperson has no street address. If the person isfrom a foreign country, enter any provincename as well as the appropriate two-lettercountry code (e.g., ‘‘CA’’ for Canada, ‘‘JA’’ forJapan, etc.). If the country is the UnitedStates, leave Item 11 BLANK.

Item 7. Social security number (SSN) orEmployer identification number (EIN).—Enter the SSN (if an individual) or EIN (if otherthan an individual) of the person identified inItems 3 through 5. If that individual is anonresident alien individual who does nothave an SSN, enter ‘‘NONE’’ in this space.

Item 12. Date of birth.— Enter the customer’sdate of birth (DOB) if it is known to the casinothrough an existing internal record orreflected on an appropriate identificationdocument or credential presented to thecasino to verify the customer’s identity (seeIdentification Requirements above). Internalcasino records can include those for casinocustomers granted accounts for credit,deposit, or check cashing, or on whom aCTRC containing verified identity has beenfiled. If such records do not indicate the DOB,a casino should ask the customer for theDOB. If the DOB is not available from any ofthese sources, the casino should enter NOTAVAILABLE in the space. Eight numeralsmust be inserted for each date. Enter thedate in the format ‘‘mmddyyyy’’, where ‘‘mm’’is the month, ‘‘dd’’ is the day, and ‘‘yyyy’’ isthe year. Zero (0) should precede anysingle-digit number. For example, if the

individual’s birth date is June 1, 1948, enter‘‘06 01 1948’’ in Item 12.

Item 13. Method used to verify identity.— Ifan individual conducts the transaction(s) onhis/her own behalf, his/her name and addressmust be verified by examination of an officialcredential/document or internal recordcontaining identification information on aknown customer (see IdentificationRequirements above). Check box a if youexamined an official identificationcredential/document. Check box b if youexamined an acceptable internal casinorecord (i.e., credit, deposit, or check cashingaccount record, or a CTRC worksheet)containing previously verified identificationinformation on a ‘‘known customer.’’ Checkbox c if the transaction is conducted onbehalf of an organization. If box a or b ischecked, you must complete Item 14. If boxc is checked, do not complete Item 14.

Item 14. Describe identificationcredential.— If a driver’s license, passport, oralien registration card was used to verify theindividual’s identity, check as appropriate boxa, b, or c. If you check box d, you mustspecifically identify the type of documentused (e.g., enter ‘‘military ID’’ for a military ormilitary/dependent identification card). Astatement such as ‘‘known customer’’ inbox d is not sufficient for completion ofForm 8362. Enter in Item 14e the two-letterstate postal code, two-letter country code, orthe name of the issuer for that document,and enter in Item 14f the number shown onthat official document.

Item 15. Customer account number.— Enterthe account number which corresponds tothe transaction being reported and which thecasino has assigned to the person whosename is entered in Item 3. If the person hasmore than one account number affected bythe transaction, enter the account numberthat corresponds to the majority of currencybeing reported. If the transaction does notinvolve an account number, enter ‘‘NOTAPPLICABLE’’ in the space.

Section B. Individual(s) ConductingTransaction(s) – If Other Than Above(Agent)Complete Section B if an individual conductsa transaction on behalf of another person(s)listed in Section A. If an individual conducts atransaction on his/her own behalf, leaveSection B BLANK.

Item 16. Multiple agents.— If, during agaming day, more than one individualconducts transactions on behalf of anindividual or organization listed in Section A,check this box and complete Section B. Listone of the individuals on the front of the formand the other individual(s) on page 2,Section B. Attach additional sheets asnecessary.

Item 17, 18, and 19. Name of individual.—Enter the individual’s last name in Item 17,first name in Item 18, and middle initial inItem 19. If there is no middle initial, leaveItem 19 BLANK. For example, if John Doe, anemployee of the Error Free Rock Band,cashes an $11,000 check for the band, ErrorFree Rock Band is identified in Section A,and John Doe is identified in Section B.

Items 20, 22, 23, 24, and 25. Address.—Enter the permanent street address, includingZIP code, of the individual conducting the

404.0 Currency Transaction Report by Casinos


Form 8362 (Rev. 7-97) Page 4

transaction. If the individual is from a foreigncountry, enter any province name and theappropriate two-letter country code.

Item 21. Social security number (SSN).—Enter the SSN of the individual identified inItems 17 through 19. If that individual is anonresident alien who does not have an SSN,enter ‘‘NONE’’ in the space.

Item 26. Date of birth.— Enter the individual’sdate of birth. For proper format, see theinstructions under Item 12 above.

Item 27. Method used to verify identity.—Any individual listed in Items 17 through 19must present an official document to verifyhis/her name and address. See theinstructions under Item 13 above for moreinformation. After completing Item 27, youmust also complete Item 28.

Item 28. Describe identificationcredential.— Describe the identificationcredential used to verify the individual’s nameand address. See the instructions underItem 14 above for more information.

Part II. Amount and Type ofTransaction(s)Part II identifies the type of transaction(s)reported and the amount(s) involved. Youmust complete all items that apply.

Item 29. Multiple transactions.— Check thisbox if multiple currency transactions, none ofwhich individually exceeds $10,000 comprisethis report.

Items 30 and 31. Cash in and cash out.—Enter in the appropriate spaces provided inItems 30 and/or 31, the specific currencyamount for each ‘‘type of transaction’’ for areportable Cash In or a Cash Out . If the casinoengages in a Cash In or Cash Outtransaction that is not listed in Items 30athrough 30g or Items 31a through 31i, specifythe type of transaction and the amount ofcurrency in Item 30h or 31j, respectively.Enter the total amount of the reportable CashIn transaction(s) in Item 30i. Enter the totalamount of the reportable Cash Outtransaction(s) in Item 31k.

If less than a full dollar amount is involved,increase the fugure to the next higher dollar.For example, if the currency total is$20,500.25, show it as $20,501.00.

If there is a currency exchange, list itseparately with both the Cash In and CashOut totals. If foreign currency is exchanged,use the U.S dollar equivalent on the day ofthe transaction.

Payment(s) on credit, Item 30c, includes allforms of cash payments made by a customeron a credit account or line credit, or inredemption of markers or counter checks.Currency received from wire transfe(s) out,Item 30e, applies to cash received from acustomer when the casino sends a wiretransfer on behalf of a customer.

Currency paid from wire transfer(s) in,Item 31e, applies to cash paid to a customerwhen the casino receives a wire transfer onbehalf of a customer. Travel andcomplimentary expenses and gamingincentives, Item 31h, includesreimbursements for a customer’s travel andentertainment expenses and cashcomplementaries (‘‘comps’’).

Determining Whether TransactionsMeet The Reporting ThresholdOnly cash transactions that, alone or whenaggregated, exceed $10,000 should bereported on Form 8362. A casino must reportmultiple currency transactions when it hasknowledge that such transactions haveoccurred. This includes knowledge gatheredthrough examination of books, records, logs,information retained on magnetic disk, tape orother machine-readable media, or in anymanual system, and similar documents andinformation that the casino maintainspursuant to any law or regulation or within theordinary course of its business.

Cash In and Cash Out transactions for thesame customer are to be aggregatedseparately and must not be offset against oneanother. If there are both Cash In and CashOut transactions which each exceed $10,000,enter the amounts in Items 30 and 31 andreport on a single Form 8362.

Example 1. Person A purchases $11,000 inchips with currency (one Cash In entry); andlater receives currency from a $6,000redemption of chips and a $2,000 slot jackpotwin (two Cash Out entries). Complete Form8362 as follows:

Cash In of ‘‘$11,000’’ is entered in Item 30a(purchase of chips) and Cash In Total of‘‘$11,000’’ is entered in Item 30i. No entry ismade for Cash Out. The two Cash Outtransactions equal only $8,000, which doesnot meet the BSA reporting threshold.

Example 2. Person B deposits $5,000 incurrency to his front money account and pays$10,000 in currency to pay off an outstandingcredit balance (two Cash In entries); receives$7,000 in currency from a wire transfer (oneCash Out entry); and presents $2,000 in smalldenomination U.S. currency to be exchangedfor an equal amount in U.S. $100 bills.Complete Form 8362 as follows:

Cash In of ‘‘$5,000’’ is entered in Item 30b(deposit), ‘‘$10,000’’ is entered in Item 30c(payment on credit), ‘‘$2,000’’ is entered inItem 30g (currency exchange), and Cash InTotal of ‘‘$17,000’’ is entered in Item 30i. Indetermining whether the transactions arereportable, the currency exchange isaggregated with both the Cash In and theCash Out amounts. The result is a reportable$17,000 Cash In transaction. No entry ismade for Cash Out. The total Cash Outamount only equals $9,000, which does notmeet the BSA reporting threshold.

Example 3. Person C deposits $7,000 incurrency to his front money account and pays$9,000 in currency to pay off an outstandingcredit balance (two Cash In entries); receives$2,500 in currency from a withdrawal from asafekeeping account, $2,500 in currency froma wire transfer and cashes a personal checkof $7,500 (three Cash Out entries); andpresents Canadian dollars which areexchanged for $1,500 in U.S. dollarequivalent. Complete Form 8362 as follows:

Cash In of ‘‘$7,000’’ is entered in Item 30b(deposit), ‘‘$9,000’’ is entered in Item 30c(payment on credit), ‘‘$1,500’’ is entered inItem 30g (currency exchange), and a Cash Intotal of ‘‘$17,500’’ is entered in Item 30i. CashOut of ‘‘$2,500’’ is entered in Item 31b(withdrawal of deposit), ‘‘$2,500’’ is entered inItem 31e (wire transfer), ‘‘$7,500’’ is entered in

Item 31f (negotiable instrument cashed),‘‘$1,500’’ is entered in Item 31g (currencyexchange) and a Cash Out Total of ‘‘$14,000’’is entered in Item 31k. In this example, boththe Cash In and Cash Out totals exceed$10,000, and each must be reflected onForm 8362.

Example 4. Person D purchases $10,000in chips with currency and places a $10,000cash bet (two Cash In entries); and laterreceives currency for an $18,000 redemptionof chips and $20,000 from a payment on acash bet (two Cash Out entries). CompleteForm 8362 as follows:

Cash In of ‘‘$10,000’’ is entered in Items30a and 30d and a Cash In total of ‘‘$20,000’’is entered in Item 30i. Cash Out of ‘‘$18,000’’is entered in Item 31a (redemption of chips),‘‘$20,000’’ is entered in Item 31d (payment onbets) and a Cash Out Total of ‘‘$38,000’’ isentered in Item 31k. In this example, both theCash In and Cash Out totals exceed $10,000,and each must be reflected on Form 8362.

Item 32. Date of transaction.— Enter thegaming day on which the transactionoccurred (see What To File above). Forproper format, see the instruction forItem 12 above.

Item 33. Foreign currency.— If foreigncurrency is involved, identify the cuntry ofissuance by entering the appropriatetwo-letter country code. If multiple foreigncurrencies are involved, identify the countryfor which the largest amount in U.S. dollars isexchanged.

Part III. Casino ReportingTransaction(s)Item 34. Casino’s trade name.— Enter thename by which the casino does business andis commonly known. Do not enter acorporate, partnership, or other entity name,unless such name is the one by which thecasino is commonly known.

Item 35. Casino’s legal name.— Enter thelegal name as shown on required tax filings,only if different from the trade name shown inItem 34. This name will be defined as thename indicated on a charter or otherdocument creating the entity, and which isidentified with the casino’s established EIN.

Item 36. Employer identification number(EIN).—Enter the casino’s EIN.

Items 37, 38, 39, and 40. Address.— Enterthe street address, city, state, and ZIP codeof the casino (or branch) where thetransaction occurred. Do not use a P.O. boxnumber.

Items 41 and 42. Title and signature ofapproving official.— The official who isauthorized to review and approve Form 8362must indicate his/her title and sign the form.

Item 43. Date the form is signed.— Theapproving official must enter the date theForm 8362 is signed. For proper format, seethe instructions for Item 12 above.

Item 44. Preparer’s name.— Type or printthe full name of the individual preparingForm 8362 The preparer and the approvingofficial may be different individuals.

Item 45 and 46. Contact person/telephonenumber.— Type or print the name andcommercial telephone number of aresponsible individual to contact concerningany questions about this Form 8362.

Currency Transaction Report by Casinos 404.0


Report of Foreign Bank and Financial Accounts(Form TD F 90-22.1) Section 405.0

Report of Foreign Bankand Financial Accounts

For the calendar year 19 - - - - - -

Do not file this form with your Federal Tax Return.

Department of the Treasury

TD F 90-22.1 (10/92)

SUPERSEDES ALL PREVIOUSEDITIONS

Form Approved: OMB No. 1505-0063

Privacy Act NotificationPursuant to the requirements of Public Law 93-579 (Privacy Act of 1974), notice is hereby given that the authority to collect information on TD F90-22.1 in accordance with 5 U.S.C. 552(e)(3) is Public Law 91-508; 31 U.S.C. 1121; 5 U.S.C. 301, 31 CFR Part 103.

The principal purpose of collecting the information is to assure maintenance of reports or records where such reports or records have a highdegree of usefulness in criminal, tax, or regulatory investigations or proceedings. The information collected may be provided to those officersand employees of any constituent unit of the Department of the Treasury who have a need for the records in the performance of their duties.The records may be referred to any other department or agency of the Federal Government upon the request of the head of such department oragency for use in a criminal, tax, or regulatory investigation or proceeding.

Disclosure of this information is mandatory. Civil and criminal penalties, including under certain circumstances a fine of not more than$500,000 and imprisonment of not more than five years, are provided for failure to file a report, supply information, and for filing a false orfraudulent report.

Disclosure of the social security number is mandatory. The authority to collect this number is 31 CFR 103. The social security number will beused as a means to identify the individual who files the report.

This form should be used to report financial interest in or signature authority or other authority over one or more bank accounts, securities accounts, orother financial accounts in foreign countries as required by Department of the Treasury Regulations (31 CFR 103). You are not required to file a report ifthe aggregate value of the accounts did not exceed $10,000. Check all appropriate boxes. See instructions on back for definitions. File this form withDept. of the Treasury, P.O. Box 32621, Detroit, MI 48232.

Cat. No. 12996D

3 Name in item 1refers to

Individual

Partnership

Corporation

Fiduciary

2 Social security number oremployer identification number ifother than individual

1 Name (Last, First, Middle)

4 Address (Street, City, State, Country, ZIP)

5 I had signature authority over one or more foreign accounts, but had no “financial interest” in such accounts (see Instruction J).Indicate these accounts:

a Name and social security number or taxpayer identification number of each owner

b Address of each owner

(Do not complete item 9 for these accounts)

6 I had a “financial interest” in one or more foreign accounts owned by a domestic corporation, partnership or trust which is required to

file TD F 90-22.1 (See instruction L). Indicate for these accounts:

a Name and taxpayer identification number of each such corporation, partnership or trust

b Address of each such corporation, partnership or trust

(Do not complete item 9 for these accounts)

7 I had a “financial interest” in one or more foreign accounts but the total maximum value of these accounts (see instruction l) did notexceed $10,000 at any time during the year. (If you checked this box, do not complete item 9.)

8 I had a “financial interest” in 25 or more foreign accounts. (If you checked this box, do not complete item 9.)

9 If you had a “financial interest” in one or more but fewer than 25 foreign accounts which are required to be reported, and the totalmaximum value of the accounts exceeded $10,000 during the year (see instruction I), write the total number of those accounts in the boxbelow:

Complete items a through f below for one of the accounts and attach a separate TD F 90-22.1 for each of theothers. Items 1, 2, 3, 9, and 10 must be completed for each account.

Check here if this is an attachment:

a Name in which account is maintained b Name of bank or other person with whom account is maintained

c Number and other account designation, if any d Address of office or branch where account is maintained

e Type of account. (If not certain of English name for the type of account, give the foreign language name and describe the nature ofthe account. Attach additional sheets if necessary.)

Bank Account Securities Account Other (specify)

10 Signature 11 Title (Not necessary if reporting a personal account) 12 Date

f Maximum value of account (see instruction I)

Under $10,000 $10,000 to $50,000 $50,000 to $100,000 Over $100,000


TD F 90-22.1 (10/92) Page 2

InstructionsA. Who Must File a Report.— Each UnitedStates person who has a financial interest in orsignature authority or other authority over bank,securities, or other financial accounts in a foreigncountry, which exceeds $10,000 in aggregatevalue at any time during the calendar year, mustreport that relationship each calendar year byfiling TD F 90-22.1 with the Department of theTreasury on or before June 30, of thesucceeding year.

An officer or employee of a commercial bankwhich is subject or the supervision of theComptroller of the Currency, the Board ofGovernors of the Federal Reserve System, or theFederal Deposit Insurance Corporation need notreport that he has signature or other authorityover a foreign bank, securities, or other financialaccount maintained by the bank unless he has apersonal financial interest in the account.

In addition, an officer or employee of adomestic corporation whose securities are listedupon national securities exchanges or which hasassets exceeding $1 million and 500 or moreshareholders of record need not file such areport concerning his signature authority over aforeign financial account of the corporation, if hehas no personal financial interest in the accountand has been advised in writing by the chieffinancial officer of the corporation that thecorporation has filed a current report whichincludes that account.

B. United States Person.— The term ‘‘UnitedStates Person’’ means (1) a citizen or resident ofthe United States, (2) a domestic partnership,(3) a domestic corporation, or (4) a domesticestate or trust.

C. When and Where to File.— This report shallbe filed on or before June 30 each calendar yearwith the Department of the Treasury, Post OfficeBox 32621, Detroit, MI 48232, or it may be handcarried to any local office of the InternalRevenue Service for forwarding to theDepartment of the Treasury, Detroit, MI.

D. Account in a Foreign Country.— A ‘‘foreigncountry’’ includes all geographical areas locatedoutside the United States, Guam, Puerto Rico,and the Virgin Islands.

Report any account maintained with a bank(except a military banking facility as defined inInstruction E) or broker or dealer in securitiesthat is located in a foreign country, even if it is apart of a United States bank or other institution.Do not report any account maintained with abranch, agency, or other office of a foreign bankor other institution that is located in the UnitedStates, Guam, Puerto Rico, and the VirginIslands.

E. Military Banking Facility.— Do not consideras an account in a foreign country, an accountin an institution known as a ‘‘United Statesmilitary banking facility’’ (or ‘‘United Statesmilitary finance facility’’) operated by a UnitedStates financial institution designated by theUnited States Government to serve U.S.Government installations abroad, even if theUnited States military banking facility is locatedin a foreign country.

F. Bank, Financial Account.— The term ‘‘bankaccount’’ means a savings, demand, checking,deposit, loan or any other account maintainedwith a financial institution or other personengaged in the business of banking. It includescertificates of deposit.

The term ‘‘securities account’’ means anaccount maintained with a financial institution orother person who buys, sells, holds, or tradesstock or other securities for the benefit ofanother.

The term ‘‘other financial account’’ means anyother account maintained with a financialinstitution or other person who accepts deposits,exchanges or transmits funds, or acts as abroker or dealer for future transactions in anycommodity on (or subject to the rules of) acommodity exchange or assosiation.

G. Financial Interest.— A financial interest in abank, securities, or other financial account in aforeign country means an interest described ineither of the following two paragraphs:

1. A United States person has a financialinterest in each account for which such personis the owner of records or has legal title, whetherthe account is maintained for his or her ownbenefit or for the benefit of others includingnon-United States persons. If an account ismaintained in the name of two persons jointly, orif several persons each own a partial interest inan account, each of those United States personshas a financial interest in that account.

2. A United States person has a financialinterest in each bank, securities, or otherfinancial account in a foreign country for whichthe owner of record or holder of legal title is:(a) a person acting as an agent, nominee,attorney, or in some other capacity on behalf ofthe U.S. person; (b) a corporation in which theUnited States person owns directly or indirectlymore than 50 percent of the total value of sharesof stock; (c) a partnership in which the UnitedStates person owns an interest in more than 50percent of the profits (distributive share ofincome); or (d) a trust in which the United Statesperson either has a present beneficial interest inmore than 50 percent of the assets or fromwhich such person receives more than 50percent of the current income.

H. Signature or Other Authority Over anAccount.—

Signature Authority.—A person has signatureauthority over an account if such person cancontrol the disposition of money or otherproperty in it by delivery of a documentcontaining his or her signature (or his or hersignature and that of one or more other persons)to the bank or other person with whom theaccount is maintained.

Other authority exists in a person who canexercise comparable power over an account bydirect communication to the bank or otherperson with whom the account is maintained,either orally or by some other means.

I. Account Valuation.— For items 7, 9, andInstruction A, the maximum value of an accountis the largest amount of currency andnon-monetary assets that appear on anyquarterly or more frequent account statementissued for the applicable year. If periodicaccount statements are not so issued, themaximum account asset value is the largestamount of currency and non-monetary assets inthe account at any time during the year. Convertforeign currency by using the official exchangerate at the end of the year. In valuing currency ofof a country that uses multiple exchanges rates,use the rate which would apply if the currency inthe account were converted into United Statesdollars at the close of the calendar year.

The value of stock, other securities or othernon-monetary assets in an account reported onTD F 90-22.1 is the fair market value at the endof the calendar year, or if withdrawn from theaccount, at the time if the withdrawal.

For purposes of items 7, 9, and Instruction A,if you had a financial interest in more than oneaccount, each account is to be valuedseparately in accordance with the foregoing twoparagraphs.

If you had a financial interest in one or morebut fewer than 25 accounts, and you are unableto determine whether the maximum value ofthese accounts exceeded $10,000 at any timeduring the year, check item 9 (do not checkitem 7) and complete item 9 for each of theseaccounts.

J. United States Persons with Authority Overbut No Interest in an Account.— Except asprovided in Instruction A and the followingparagraph, you must state the name, address,and identifying number of each owner of anaccount over which you had authority, but if youcheck item 5 for more than one account of thesame owner, you need identify the owner onlyonce.

If you check item 5 for one or more accountsin which no United States person had a financialinterest, you may state on the first line of thisitem, in lieu of supplying information about theowner, ‘‘No U.S. person had any financialinterest in the foreign accounts.’’ This statementmust be based upon the actual belief of theperson filing this form after he or she has takenreasonable measures to endure its correctness.

If you check item 5 for accounts owned by adomestic corporation and its domestic and/orforeign subsidiaries, you may treat them as oneowner and write in the space provided, the nameof the parent corporation, followed by ‘‘andrelated entities,’’ and the identifying number andaddress of the parent corporation.

K. Consolidated Reporting.— A corporationwhich owns directly or indirectly more than 50percent interest in one or more other entities willbe permitted to file a consolidated report onTD F 90-22.1, on behalf of itself and such otherentities provided that a listing of them is madepart of the consolidated report. Such reportsshould be signed by an authorized official of theparent corporation.

If the group of entities covered by aconsolidated report has a financial interest in 25or more foreign financial accounts, the reportingcorporation need only note that fact on the form,it will, however, be required to provide detailedinformation concerning each account when sorequested by the Secretary or his delegate.

L. Avoiding Duplicate Reporting.— If you hadfinancial interest (as defined in instruction G2(b),(c), or (d)) in one or more accounts which areowned by a domestic corporation, partnership ortrust which is required to file TD F 90-22.1 withrespect to these accounts in lieu of completingitem 9 for each account you may check item 6and provide the required information.

M. Providing Additional Information.— Anyperson who does not complete item 9, shallwhen requested by the Department of theTreasury provide the information called for initem 9.

N. Signature (Item 10).— This report must besigned by the person named in item 1. If thereport is being filed on behalf of a partnership,corporation, or fiduciary, it must be signed by anauthorized individual.

O. Penalties.— For criminal penalties for failureto file a report, supply information, and for filinga false or fraudulent report, see 31 U.S.C.5322(a), 31 U.S.C. 5322(b), and 18 U.S.C. 1001.

The estimated average burden associated with this collection of information is 10 minutes per respondent or recordkeeper depending on individualcircumstances. Comments concerning the accuracy of this burden estimate and suggestions for reducing the burden should be directed to theDepartment of the Treasury, Office of Financial Enforcement, Room 5000 Treasury Annex Building, Washington, DC 20220, and to the Office ofManagement and Budget, Paperwork Reduction Project (1505-0063), Washington, DC 20503.

Report of Foreign Bank and Financial Accounts 405.0


Suspicious Activity Report(Federal Reserve Form 2230) Section 406.0

SuspiciousActivity Report

FRB: FR 2230 OMB No. 7100-0212FDIC: 6710/06 OMB No. 3064-0077OCC: 8010-9,8010-1 OMB No. 1557-0180OTS: 1601 OMB No. 1550-0003NCUA: 2362 OMB No. 3133-0094TREASURY: TD F 90-22.47 OMB No. 1506-0001

Expires September 30, 1998ALWAYS COMPLETE ENTIRE REPORT

1 Check appropriate box:

a Initial Report b Corrected Report c Supplemental Report

Part I Reporting Financial Institution Information2 Name of Financial Institution

4 Address of Financial Institution

5 City 6 State 7 Zip Code 8 EIN or TIN

9 Address of Branch Office(s) where activity occurred 10 Asset size of financial institution

$ .00

11 City 12 State 13 Zip Code 14 If institution closed, date closed

(MMDDYY)

15 Account number(s) affected, if any 16 Have any of the institution’s accounts related to this matter been closed?

a a Yes b No If yes, identifyb

Part II Suspect Information17 Last Name or Name of Entity 18 First Name 19 Middle Initial

20 Address 21 SSN, EIN, TIN (as applicable)

22 City 23 State 24 Zip Code 25 Country 26 Date of Birth (MMDDYY)

/ /

27 Phone Number - Residence (include area code) 28 Phone Number - Work (include area code)

( ) ( )

29 Occupation

30 Forms of Identification of Suspect:

a Driver’s License b Passport c Alien Registration d Other

e Number f Issuing Authority

31 Relationship to Financial Institution:

a Accountant d Attorney g Customer j Officer

b Agent e Borrower h Director k Shareholder

c Appraiser f Broker i Employee l Other

32 Is insider suspect still affiliated with the financial institution? 33 Date of Suspension, 34 Admission/Confession

Termination, Resigna- a Yes b No

tion (MMDDYY)

/ /

1

3 Primary Federal Regulator

a Federal Reserve d OCC

b FDIC e OTS

c NCUA

/ /

a Yes If no, specify{ c Suspended e Resigned

b No d Terminated


37 Summary characterization of suspicious activity::

a Bank Secrecy Act/Structuring/ g Counterfeit Check m False Statement

Money Laundering h Counterfeit Credit/Debit Card n Misuse of Position or

b Bribery/Gratuity i Counterfeit Instrument (other) Self-Dealing

c Check Fraud j Credit Card Fraud o Mortgage Loan Fraud

d Check Kiting k Debit Card Fraud p Mysterious Disappearance

e Commercial Loan Fraud l Defalcation/Embezzlement q Wire Transfer Fraud

f Consumer Loan Fraud

r Other

Part III Suspicious Activity Information

38 Amount of loss prior to recovery 39 Dollar amount of recovery(if applicable) (if applicable)

$ .00 $ .00

41 Has institution’s bonding company been notified?

a Yes b No

44 City 45 State 46 Zip Code

43 Address

235 Date of suspicious activity (MMDDYY) 36 Dollar amount involved in known or suspicious activity

/ / $ .00

40 Has the suspicious activity had amaterial impact on or otherwise affectedthe financial soundness of the institution?

a Yes b No

42 Has any law enforcement agency already been advised by telephone, written communication, or otherwise?If so, list the agency and local address.

Agency

47 Last Name 48 First Name 49 Middle Initial

Part IV Witness Information

50 Address 51 SSN

52 City 53 State 54 Zip Code 55 Date of Birth (MMDDYY)

/ /

56 Title 57 Phone number (include area code) 58 Interviewed

( ) a Yes b No

Part V Preparer Information

Part VI Contact for Assistance (If different than Preparer Information in Part V)


62 Title 63 Phone Number (include area code) 64 Date (MMDDYY)

( ) / /


68 Title 69 Phone Number (include area code)

( )

70 Agency (if applicable)

Suspicious Activity Report 406.0


Part VII Suspicious Activity Information Explanation/Description 3

Paperwork Reduction Act Notice: The purpose of this form is to provide an effective and consistent means for financial institutions to notify appropriate law enforcementagencies of known or suspected criminal conduct or suspicious activities that take place at or were perpetrated against financial institutions. This report is required by law,pursuant to authority contained in the following statutes. Board of Governors of the Federal Reserve System: 12 U.S.C. 324, 334, 611a, 1844(b) and (c), 3105(c) (2) and3106(a). Federal Deposit Insurance Corporation: 12 U.S.C. 93a, 1818, 1881-84, 3401-22. Office of the Comptroller of the Currency: 12 U.S.C. 93a, 1818, 1881-84, 3401-22.Office of Thrift Supervision: 12 U.S.C. 1463 and 1464. National Credit Union Administration: 12 U.S.C. 1766(a), 1786(q). Financial Crimes Enforcement Network: 31 U.S.C.5318(g). Information collected on this report is confidential (5 U.S.C. 552(b)(7) and 552a(k)(2), and 31 U.S.C. 5318(g)). The Federal financial institutions regulatory agenciesand the U.S. Departments of Justice and Treasury may use and share the information. Public reporting and recordkeeping burden for this information collection is estimated toaverage 36 minutes per response, and includes time to gather and maintain data in the required report, review the instructions, and complete the information collection. Sendcomments regarding this burden estimate, including suggestions for reducing the burden, to the Office of Management and Budget, Paperwork Reduction Project, Washington,DC 20503 and, depending on your primary Federal regulatory agency, to Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551; or AssistantExecutive Secretary, Federal Deposit Insurance Corporation, Washington DC 20429; or Legislative and Regulatory Analysis Division, Office of the Comptroller of the Currency,Washington, DC 20219; or Office of Thrift Supervision, Enforcement Office, Washington DC 20552; or National Credit Union Administration, 1775 Duke Street, Alexandria, VA22314; or Office of the Director, Financial Crimes Enforcement Network, Department of the Treasury, 2070 Chain Bridge Road, Vienna, VA 22182.

Explanation/description of known or suspected violation of law orsuspicious activity. This section of the report is critical . The carewith which it is written may make the difference in whether ornot the described conduct and its possible criminal nature areclearly understood. Provide below a chronological and completeaccount of the possible violation of law, including what isunusual, irregular or suspicious about the transaction, using thefollowing checklist as you prepare your account. If necessary,continue the narrative on a duplicate of this page.

a Describe supporting documentation and retain for 5 years.b Explain who benefited, financially or otherwise, from the

transaction, how much, and how.c Retain any confession, admission, or explanation of the

transaction provided by the suspect and indicate towhom and when it was given.

d Retain any confession, admission, or explanation of thetransaction provided by any other person and indicateto whom and when it was given.

e Retain any evidence of cover-up or evidence of an attemptto deceive federal or state examiners or others.

f Indicate where the possible violation took place(e.g., main office, branch, other).

g Indicate whether the possible violation is an isolatedincident or relates to other transactions.

h Indicate whether there is any related litigation; if so,specify.

i Recommend any further investigation that might assist lawenforcement authorities.

j Indicate whether any information has been excluded from thisreport; if so, why?

For Bank Secrecy Act/Structuring/Money Laundering reports,include the following additional information:

k Indicate whether currency and/or monetary instrumentswere involved. If so, provide the amount and/or description.

l Indicate any account number that may be involved oraffected.

406.0 Suspicious Activity Report


Suspicious Activity Report Instructions

Safe Harbor Federal law (31 U.S.C. 5318(g)(3)) provides complete protection from civil liability for all reports ofsuspected or known criminal violations and suspicious activities to appropriate authorities, including supportingdocumentation, regardless of whether such reports are filed pursuant to this report’s instructions or are filed on avoluntary basis. Specifically, the law provides that a financial institution, and its directors, officers, employees andagents, that make a disclosure of any possible violation of law or regulation, including in connection with thepreparation of suspicious activity reports, “shall not be liable to any person under any law or regulation of the UnitedStates or any constitution, law, or regulation of any State or political subdivision thereof, for such disclosure or forany failure to notify the person involved in the transaction or any other person of such disclosure.”

Notification Prohibited Federal law (31 U.S.C. 5318(g)(2)) requires that a financial institution, and its directors,officers, employees and agents who, voluntarily or by means of a suspicious activity report, report suspected orknown criminal violations or suspicious activities may not notify any person involved in the transaction that thetransaction has been reported.

WHEN TO MAKE A REPORT:

1. All financial institutions operating in the United States, including insured banks savings associations,savings association service corporations, credit unions, bank holding companies, nonbank subsidiaries ofbank holding companies, Edge and Agreement corporations, and U.S. branches and agencies of foreignbanks, are required to make this report following the discovery of:

a. Insider abuse involving any amount. Whenever the financial institution detects any known orsuspected Federal criminal violation, or pattern of criminal violations, committed or attempted againstthe financial institution or involving a transaction or transactions conducted through the financialinstitution, where the financial institution believes that it was either an actual or potential victim of acriminal violation, or series of criminal violations, or that the financial institution was used to facilitatea criminal transaction, and the financial institution has a substantial basis for identifying one of itsdirectors, officers, employees, agents or other institution-affiliated parties as having committed oraided in the commission of a criminal act regardless of the amount involved in the violation.

b. Violations aggregating $5,000 or more where a suspect can be identified. Whenever the financialinstitution detects any known or suspected Federal criminal violation, or pattern of criminal violations,committed or attempted against the financial institution or involving a transaction or transactionsconducted through the financial institution and involving or aggregating $5,000 or more in funds orother assets, where the financial institution believes that it was either an actual or potential victim ofa criminal violation, or series of criminal violations, or that the financial institution was used tofacilitate a criminal transaction, and the financial institution has a substantial basis for identifying apossible suspect or group of suspects. If it is determined prior to filing this report that the identifiedsuspect or group of suspects has used an “alias,” then information regarding the true identity of thesuspect or group of suspects, as well as alias identifiers, such as drivers’ licenses or social securitynumbers, addresses and telephone numbers, must be reported.

c. Violations aggregating $25,000 or more regardless of a potential suspect. Whenever the financialinstitution detects any known or suspected Federal criminal violation, or pattern of criminal violations,committed or attempted against the financial institution or involving a transaction or transactionsconducted through the financial institution and involving or aggregating $25,000 or more in funds orother assets, where the financial institution believes that it was either an actual or potential victim ofa criminal violation, or series of criminal violations, or that the financial institution was used tofacilitate a criminal transaction, even though there is no substantial basis for identifying a possiblesuspect or group of suspects.

d. Transactions aggregating $5,000 or more that involve potential money laundering or violations of theBank Secrecy Act. Any transaction (which for purposes of this subsection means a deposit,withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or

In situations involving violations requiring immediate attention, such as when a reportable violation isongoing, the financial institution shall immediately notify, by telephone, appropriate law enforcement andfinancial institution supervisory authorities in addition to filing a timely suspicious activity report.



sale of any stock, bond, certificate of deposit, or other monetary instrument or investment security, orany other payment, transfer, or delivery by, through, or to a financial institution, by whatever meanseffected) conducted or attempted by, at or through the financial institution and involving oraggregating $5,000 or more in funds or other assets, if the financial institution knows, suspects, orhas reason to suspect that:

i. The transaction involves funds derived from illegal activities or is intended or conducted in order tohide or disguise funds or assets derived from illegal activities (including, without limitation, theownership, nature, source, location, or control of such funds or assets) as part of a plan to violateor evade any law or regulation or to avoid any transaction reporting requirement under Federal law;

ii. The transaction is designed to evade any regulations promulgated under the Bank Secrecy Act; or

iii. The transaction has no business or apparent lawful purpose or is not the sort in which theparticular customer would normally be expected to engage, and the financial institution knows ofno reasonable explanation for the transaction after examining the available facts, including thebackground and possible purpose of the transaction.

The Bank Secrecy Act requires all financial institutions to file currency transaction reports(CTRs) inaccordance with the Department of the Treasury’s implementing regulations (31 CFR Part 103).These regulations require a financial institution to file a CTR whenever a currency transaction exceeds$10,000. If a currency transaction exceeds $10,000 and is suspicious, the institution must file both aCTR (reporting the currencts transaction) and a suspicious activity report (reporting the suspicious orcriminal aspects of the transaction). If a currency transaction equals or is below $10,000 and issuspicious, the institution should only file a suspicious activity report.

2. A financial institution is required to file a suspicious activity report no later than 30 calendar days afterthe date of initial detection of facts that may constitute a basis for filing a suspicious activity report.If no suspect was identified on the date of detection of the incident requiring the filing, a financialinstitution may delay filing a suspicious activity report for an additional 30 calendar days to identify asuspect. In no case shall reporting be delayed more than 60 calendar days after the date of initialdetection of a reportable transaction.

3. This suspicious activity report does not need to be filed for those robberies and burglaries that arereported to local authorities, or (except for savings associations and service corporations) for lost,missing, counterfeit or stolen securities that are reported pursuant to the requirements of 17 CFR240.17f-1.

HOW TO MAKE A REPORT:

1. Send each completed suspicious activity report to:

FinCEN, Detroit Computing Center, P.O. Box 33980, Detroit, MI 48232

2. For items that do not apply or for which information is not available, leave blank.

3. Complete each suspicious activity report in its entirety, even when the suspicious activity report is acorrected or supplemental report.

4. Do not include supporting documentation with the suspicious activity report. Identify and retain a copyof the suspicious activity report and all original supporting documentation or business record equivalentfor 5 years from the date of the suspicious activity report. All supporting documentation must be madeavailable to appropriate authorities upon request.

5. If more space is needed to complete an item (for example, to report an additional suspect or witness),a copy of the page containing the item should be used to provide the information.

6. Financial institutions are encouraged to provide copies of suspicious activity reports to stateand local authorities, where appropriate.



Currency and Foreign Transactions Reporting ActExemption Handbook Section 501.0


501.0 Currency and Foreign Transactions Reporting Act


Department of the TreasuryOffice of Financial Enforcement

andInternal Revenue Service

Currency and Foreign Transactions Reporting Act 501.0


TABLE OF CONTENTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1I. Determining Which Customers

to Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3A. EXCEPTED TRANSACTIONS . . . . . . . . . . 3B. UNILATERAL EXEMPTIONS . . . . . . . . . . 3

1. Retail and Other SpecifiedBusinesses . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

a. Retail Businesses . . . . . . . . . . . . . . . . . . . 3i. Definition of retail type of

business . . . . . . . . . . . . . . . . . . . . . . . . 3ii. Payment in currency . . . . . . . . . . . . 3

iii. United States operation . . . . . . . . . . 4iv. Nonexemptible retail business

accounts . . . . . . . . . . . . . . . . . . . . . . . . 4b. Specified Businesses . . . . . . . . . . . . . . . . 4

i. Sports arena . . . . . . . . . . . . . . . . . . . 4ii. Race track . . . . . . . . . . . . . . . . . . . . . 4

iii. Amusement park . . . . . . . . . . . . . . 4iv. Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4v. Restaurant . . . . . . . . . . . . . . . . . . . . . 4

vi. Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . 4vii. Licensed check cashing

service . . . . . . . . . . . . . . . . . . . . . . . . . 4viii. Vending machine company . . . . 5

ix. Theater . . . . . . . . . . . . . . . . . . . . . . . . 5x. Regularly scheduled passenger

carrier . . . . . . . . . . . . . . . . . . . . . . . . . 5xi. Public utility . . . . . . . . . . . . . . . . . . . 5

c. Multi-Faceted Businesses . . . . . . . . . . . 5d. Limitations on Exemptions for

Accounts of Retail and OtherSpecified Businesses . . . . . . . . . . . . . . . 5i. ‘‘Deposits or withdrawals of

currency’’ . . . . . . . . . . . . . . . . . . . . . . . 6ii. ‘‘Existing account by an

established depositor’’ . . . . . . . . . . . 6• ‘‘Existing account’’ . . . . . . . . . . . . . 6• ‘‘Established depositor’’ . . . . . . . . 6

iii. ‘‘United States resident’’ . . . . . . . . . 62. Government Agencies . . . . . . . . . . . . . . . . 73. Payroll Withdrawals . . . . . . . . . . . . . . . . . 7

C. SPECIAL EXEMPTIONS . . . . . . . . . . . . . . . 7

1. General Criteria . . . . . . . . . . . . . . . . . . . . . . 72. Nonexemptible Entities . . . . . . . . . . . . . . . 8

D. CTR REPORTING ON CERTAINTRANSACTIONS BY EXEMPTEDCUSTOMERS . . . . . . . . . . . . . . . . . . . . . . . . . . 8

II. How to Exempt Customers . . . . . . . . . . . . . . 9A. REVIEW OF BANK RECORDS . . . . . . . . . 9

1. Two Consecutive Months ofActivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. Review of Other AvailableInformation . . . . . . . . . . . . . . . . . . . . . . . . . . 9

B. PREPARATION OF EXEMPTIONSTATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 10

1. Statements for Customers ExemptedAfter October 27, 1986 . . . . . . . . . . . . . . . 10

2. Statements for Customers Exemptedon or Before October 27, 1986 . . . . . . . . 10

3. Form for Exemption Statements . . . . . 104. Customer Information and

Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . 105. Completion of Exemption

Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 11C. EXEMPTION LIMITS . . . . . . . . . . . . . . . . . 11

1. General Criteria . . . . . . . . . . . . . . . . . . . . . 112. Seasonal and ‘‘Monday-Only’’

Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12D. MULTIPLE-ESTABLISHMENT

CUSTOMERS . . . . . . . . . . . . . . . . . . . . . . . . . 13E. SPECIAL EXEMPTION REQUESTS . . . . 14

III. Recordkeeping for ExemptedCustomers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

A. EXEMPTION LIST . . . . . . . . . . . . . . . . . . . . 15B. EXEMPTION STATEMENTS . . . . . . . . . . 15

IV. Monitoring Exemptions and Discoveryof Improper Exemptions . . . . . . . . . . . . . . . 17

A. MONITORING EXEMPTIONS . . . . 17B. DISCOVERY OF IMPROPER

EXEMPTIONS . . . . . . . . . . . . . . . . . . . . 17V. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24



INTRODUCTION

The Bank Secrecy Act (‘‘BSA’’), 31 U.S.C.§5311–5324, and the BSA regulations, 31 C.F.R.Part 103, that the Department of the Treasury(‘‘Treasury’’) has issued, require domestic fi-nancial institutions (other than casinos and theU.S. Postal Service) to file a report of each sin-gle or multiple ‘‘deposit, withdrawal, exchangeof currency or other payment or transfer, by,through, or to such financial institution whichinvolves a transaction in currency of more than$10,000.’’ 31 CFR 103.22(a)(1). These reports,which are filed on IRS Form 4789, the Cur-rency Transaction Report (‘‘CTR’’), have a highdegree of usefulness in criminal, tax, and reg-ulatory investigations and proceedings. Infor-mation from CTRs is routinely used in a widevariety of criminal and tax investigations andprosecutions, as investigative leads,intelligence for the tracking of currency flows,corroborating information, and probativeevidence.*

Treasury’s experience in enforcing the BSA,however, has shown that certain legitimatebusinesses engage in regular and frequent cur-rency transactions with domestic banks. Theroutine reporting of these transactions is lesslikely to be useful to law enforcement agen-cies. Treasury has therefore included in theBSA regulations provisions that permit banksto exempt government agencies and the ac-counts of certain customers from the CTR re-porting requirements. In some instances,banks may unilaterally exempt governmentagencies and the accounts of particular cus-tomers without prior approval from Treasuryor the Internal Revenue Service (‘‘IRS’’). Inother instances, banks must obtain additionalauthority from the IRS, through the IRS DataCenter in Detroit, Michigan, to grant exemp-tions to particular accounts of customers. TheIRS has been delegated this authority fromTreasury.

Treasury encourages banks to make full useof the exemption provisions. The use of theexemption provisions can yield substantialbenefits for banks and Treasury. By eliminatingCTR reporting on properly exempted accountsand certain transactions by government agen-cies, banks can reduce the cost of filing CTRs.These costs can be substantial, particularly forlarger banks in major metropolitan areas thathave many accounts by businesses and trans-actions by government agencies that areexemptible. The reduction in the number ofCTRs filed by the banks, in turn, reducesTreasury’s and IRS’s cost of processing, com-puterizing, and storing CTRs. In addition, byreducing the number of CTRs which are not ofvalue to law enforcement, Treasury can moreeffectively analyze and utilize the remainingCTR information.

For these same reasons, Treasury and theIRS have implemented procedures which allowbanks to magnetically file CTRs. Treasury andIRS believe that magnetic filings will, likewise,reduce the costs to the banks and the govern-ment of complying with the BSA, while assur-ing a complete and accurate data base whichcan be utilized effectively to combat crime.

The exemption provisions specify the proce-dures and categories of accounts and govern-ment agencies for which a bank may grantunilateral exemptions, or obtain additional au-thority from the IRS to grant special exemp-tions. This booklet is intended to help banksunderstand the exemption provisions and im-prove compliance with the exemption require-ments. It will explain how to determinewhether a particular customer’s account orgovernment agency qualifies for an exemption,the process for exempting that account oragency, and the actions the bank should takeafter granting an exemption.

* One of the more prominent examples of the reports’ utility isUnited States v. Badalamenti, (794F.2d 821 (2d Cir. 1986),appeal pending, No. 87-1303 (2d Cir., filed June 29, 1987),informally known as the ‘‘Pizza Connection’’ case. This case in-volved heroin smuggling into the United States by Italian andU.S. organized crime groups. During the investigation, Federalauthorities discovered a number of BSA reports that indicatedthat a Swiss national was making large cash transactions. Thesereports led authorities to an extensive money laundering opera-

tion that involved the transfer of tens of millions of dollarsthrough banks and investment houses in New York City to finan-cial institutions in Switzerland and Italy. Ultimately, 20 defen-dants were convicted in Federal court for heroin conspiracy, rack-eteering, and BSA violations. All received prison sentences, and15 defendants received sentences ranging from 15–45 years. Inaddition, the Swiss national was convicted and imprisoned bySwiss authorities for violations of Swiss law relating to hismoney laundering activities.

1



These guidelines address questionsfrequently asked by banks about the exemp-tion provisions. Treasury welcomes your com-ments and invites you to submit suggestionsfor improvements in future editions of theseguidelines to:

DirectorFinCENU.S. Department of the Treasury1500 Pennsylvania Avenue, N.W.Washington, D.C. 20220(202) 622-0400

In addition, if you have a question that isnot addressed by these guidelines, Treasury

strongly encourages you to call or writeFinCEN above or:

Compliance Review GroupIRS Data CenterP.O. Box 32063Detroit, Michigan 48232(313) 234-1613

This booklet is intended only to provide ad-vice on the exemption process and is not in-tended to create any right or benefit, substan-tive or procedural, enforceable at law by aparty against the United States, its agencies,its officers, or any person.

2



I. DETERMINING WHICH CUSTOMER ACCOUNTS ORGOVERNMENT AGENCIES TO EXEMPT

A. EXCEPTED TRANSACTIONS

In developing exemption policies and proce-dures, banks should be aware that two typesof transactions are specifically excepted fromthe CTR reporting requirements. (See Appen-dix A.) This means that a bank simply doesnot have to file CTRs on the following transac-tions and, therefore, need not exempt them:

1. Transactions with Federal Reserve Banksor Federal Home Loan Banks. This categoryincludes all types of cash receipts ordisbursements at Federal Reserve Banks orFederal Home Loan Banks.2. Transactions between domestic banks.This category includes all types of currencytransactions between ‘‘banks’’ as defined in31 C.F.R. 103.11(a) (e.g., commercial banks,savings and loan associations, and creditunions). This category does not permit banksto except transactions with nonbank financialinstitutions (e.g., casinos, currencyexchanges, securities brokers). In addition,with the exception of the U.S. Postal Serviceand certain check cashing agencies, nonbankfinancial institutions may not be exemptedfrom the reporting requirements. Thus,banks must file CTRs on their transactionswith foreign banks and with all nonbankfinancial institutions other than the U.S.Postal Service or check cashing services thathave been granted an exemption (asdescribed below).

B. UNILATERAL EXEMPTIONS

The regulations establish certain categories ofbusiness accounts and transactions of custom-ers and government agencies that a bank mayunilaterally exempt without having to obtainadvance approval from Treasury or the IRS: (1)Retail and other specified businesses; (2) gov-ernment agencies; and (3) payroll withdrawals.

1. Retail and Other Specified Businesses

A bank may unilaterally exempt ‘‘(d)eposits orwithdrawals of currency from an existing ac-count by an established depositor who is aUnited States resident and operates a retailtype of business in the United States.’’ 31 CFR

103.22(b)(2)(i). A bank also may unilaterallyexempt ‘‘(d)eposits or withdrawals of currencyfrom an existing account by an established de-positor who is a United States resident andoperates a sports arena, race track, amusementpark, bar, restaurant, hotel, check cashing ser-vice licensed by state or local governments,vending machine company, theater, regularlyscheduled passenger carrier or any public util-ity.’’ 31 CFR 103.22(b)(2)(ii).

a. Retail Businessesi. Definition of retail type of business

The term ‘‘retail type of business’’ means ‘‘abusiness primarily engaged in providing goodsto ultimate consumers and for which the busi-ness is paid in substantial portions bycurrency . . . .’’ 31 CFR 103.22(b)(2)(i). Abusiness that is primarily engaged in providingservices, rather than goods, to ultimate consum-ers (e.g., a car wash, a dry cleaning store, anappliance repair shop, or a health spa) doesnot come within the scope of this exemption.In addition, a business that is primarily en-gaged in selling goods wholesale rather thanretail, is not within the scope of this exemp-tion. If a business provides both goods andservices to ultimate consumers or sells goodsboth wholesale and retail, a bank may exemptthat business account only if more than 50% ofthe business’ gross revenues at the time of theexemption is attributable to the retail sale ofgoods to ultimate consumers. Thus, a storethat sells women’s clothing off the rack andthat also offers custom alterations on the pre-mises may have its accounts exempted underthese provisions if more than 50% of its grossrevenues are attributable to the store’s sale ofclothing and not to the custom alterations.Similarly, if a bakery sells baked goods to ulti-mate consumers and to supermarkets for pur-poses of resale, the bank may exempt the bak-ery’s account only if more than 50% of itsgross revenues are from the sale of bakedgoods to ultimate consumers. (See AppendixA.)

ii. Payment in currency

The phrase ‘‘for which the business is paid insubstantial portions by currency’’ is intended

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to limit this exemption to businesses that, inthe ordinary course of business, routinely re-ceive currency in payment for the goods thatthey offer (e.g., a bookstore or a drug store).To qualify, the business must be paid in cur-rency on a regular and frequent basis.

iii. United States operationThe term ‘‘operates a retail type of business inthe United States’’ is intended to limit this ex-emption to retail businesses that actually aredoing business in the United States. A foreigncitizen or corporation operating a retail busi-ness solely outside the United States couldestablish an account at a U.S. bank, but couldnot have transactions involving that accountexempted under these provisions. On theother hand, a corporation whose shares areowned by foreign individuals or corporations,but which is organized and is doing a retailbusiness in the United States, could have itstransactions involving that account exemptedunder these provisions.

iv. Nonexemptible retail business accountsIt is important to remember that accounts of‘‘dealerships which buy or sell motor vehicles,vessels, or aircraft,’’ while retail sellers ofgoods, may not be exempted by either unilat-eral or special exemption from the CTR report-ing requirements. 31 CFR 103.22(b)(2)(i). Thisapplies to all types of motor vehicles, vessels,and aircraft, including airplanes, automobiles,boats, construction equipment (e.g., roadgraders and backhoes), farm equipment (e.g.,combines and tractors), mopeds, motorcycles,recreational vehicles, sailplanes, scooters,ships, snowmobiles, trucks, and yachts.

b. Specified BusinessesIn addition to permitting an exemption for theaccounts of retail types of businesses, the reg-ulations permit unilateral exemptions for thefollowing types of businesses: sports arenas,race tracks, amusement parks, bars, restau-rants, hotels, licensed check cashing services,vending machine companies, theaters, regu-larly scheduled passenger services and publicutilities. (See Appendix A.) Each of these busi-nesses is discussed briefly below.

i. Sports arenaThis includes a stadium or arena that regularlyaccommodates either a single sport (e.g., base-

ball, football, ice skating, jai alai, riding, soc-cer, or tennis) or multiple sports that are opento attendance or participation by the generalpublic. A promoter who arranges for the pre-sentation of sporting or other entertainmentevents at a sports arena does not come withinthe scope of this provision.

ii. Race track

This includes all tracks that hold races of bicy-cles, dogs, horses, or motor vehicles on a regu-lar basis, whether or not betting on these racesis permitted at the tracks, and that are open toattendance by the general public. A businessorganized to handle commercial activities foran automobile race that occurs once a year in aparticular city (e.g., a grand prix) does notcome within the scope of this provision.

iii. Amusement park

This includes any business that derives morethan 50% of its gross revenues from rides andgames (other than gambling devices) and thesale of food, drink, and souvenirs. It does notinclude traveling carnivals.

iv. Bar

This includes any business that serves food ordrink to its patrons for consumption on or offthe premises, and that derives more than 50%of its gross revenues from the sale of alcoholicbeverages for consumption on the premises.

v. Restaurant

This includes any business that serves food ordrink to its patrons for consumption on or offthe premises, and that derives more than 50%of its gross revenues from the sale of food forcomsumption on or off the premises.

vi. Hotel

This includes any business (other than a cruiseship) that derives more than 50% of its grossrevenues from providing temporary lodging toits patrons.

vii. Licensed check cashing service

This currently includes any business that, for afee, cashes checks for its customers and that isspecifically licensed to do so by an agency orinstrumentality of a state or local government.(But see Appendix A.) A check cashing service

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that is unlicensed, or that has only a generalbusiness license, does not come within thescope of this provision. If a bank wishes togrant a unilateral exemption to a licensedcheck cashing service it should do so only forwithdrawals of currency, not deposits, becausecurrency deposits are generally not attributableto check cashing activities of the business.

viii. Vending machine company

This includes any business that operates vend-ing devices which provide either a product(e.g., beverages, candy, food, newspapers, orchange) or a service (e.g., a coin-operatedlaundry) when activated by inserting coins orsmall-denomination currency.

A business that primarily operatescoin-operated juke boxes, or coin-operatedvideo games that do not constitute gamblingdevices, is within the scope of this provision.A business that operates coin-operated gam-bling devices of the type used in casinos (e.g.,slot machines or video poker) does not comewithin the scope of this provision.

ix. Theater

This includes any theater that shows films orthat presents live entertainment.

x. Regularly scheduled passenger carrier

This includes any business that is principallyengaged in providing transportation of passen-ger by airplane, boat, bus, limousine, ferry, ortrain on a regular and publicly available sched-ule. A business that is principally engaged inoperating a taxicab or limousine service, ortransporting passengers on a charter basis byairplane, bus, or train, does not come withinthe scope of this exemption.

xi. Public utility

This includes any business that is principallyengaged in operating a public utility (e.g.,electric power, telephone service, or water).

c. Multi-Faceted Businesses

In some cases, a particular business entity mayoffer more than one type of good or service tothe public. So long as more than 50% of thegross revenues of the customer whose accountis being considered for an exemption is de-rived from a unilaterally exemptible business

or businesses (e.g., bar and restaurant) andthe remainder of the business is derived froma business for which the bank may obtain au-thority from the IRS to grant a special exemp-tion, the bank may unilaterally grant an ex-emption for the account. Thus, for instance, ifa bakery were to sell its baked goods to ulti-mate consumers (retail) and to supermarkets(wholesale), the bank would be able to unilat-erally exempt the bakery’s account only if thebakery derived more than 50% of its gross rev-enues from the retail business and not thewholesale operation.

If more than 50% of the gross revenues isderived from a type of business that cannot beunilaterally exempted, but that may be granteda special exemption, the bank may not grantthat account a unilateral exemption. For exam-ple, if a bank has knowledge that one of itscustomers, a local bar, has been deriving themajority of its gross revenues from operatingan unlicensed check cashing service, it maynot unilaterally exempt the customer’s account.Instead, the bank should contact the IRS torequest a special exemption.

Finally, if the bank’s customer is a businessentity that operates exemptible and nonexemptible(as opposed to unilaterally exemptible and spe-cially exemptible) businesses and the fundsfrom both types of businesses (e.g., auto partsdepartment and a car dealer) are commingledin the same account, the bank may not grantthe account of that customer a unilateral ex-emption and should not write to the IRS inDetroit to request a special exemption. This istrue even if more than 50% of the gross reve-nues is derived from the exemptible business.If the bank has any questions, it should con-tact FinCEN at Treasury for guidance, at theaddress listed on page 2 above.

d. Limitations on Exemptions for Retail andOther Specified Businesses

There are three limitations that apply to allexemptions for accounts of retail or other speci-fied businesses: (1) they may only be grantedfor ‘‘deposits or withdrawals of currency,’’(2) they may only be granted for ‘‘an existingaccount by an established customer.,’’ and(3) they may only be granted for a ‘‘UnitedStates resident.’’ These limitations are explainedin more detail below. 31 CFR 103.22(b)(2)(i),(ii).

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i. ‘‘Deposits or withdrawals of currency’’

The term ‘‘(d)eposits or withdrawals of cur-rency’’ limits these exemptions to currency de-posits or withdrawals or both, involving the ac-count of a properly exempted customer. Thus,under these exemption provisions, a bank maynot exempt any other type of transaction in-volving that account (e.g., the purchase ofcashier’s checks or money orders, exchanges ofcurrency, or cash disbursement of loan pro-ceeds). In addition, if a bank customerpresents several third-party checks and obtains‘‘cash back’’ without actually depositing thechecks into an account, that transaction is notconsidered a deposit or withdrawal underthese exemptions. This is true even if the bankhas granted a unilaterally exemptible business(e.g., a retail business or licensed checkcasher) an exemption for currency depositsinto and withdrawals from that account; it stillmust file CTRs on any ‘‘cash back’’ transactionby that customer that does not involve the ac-tual deposit of the checks into, and the actualwithdrawal of more than $10,000 in cash from,the customer’s account.

ii. ‘‘Existing account by an establised depositor’’

• Existing Account

Banks frequently ask whether they should granta unilateral exemption for each separate accountof a customer that has multiple accounts or forthe customer (i.e., an exemption that coversmultiple accounts of the same customer with asingle taxpayer identification number (TIN)). Theterm ‘‘existing account’’ means that for this typeof exemption, the bank can only grant a unilat-eral exemption for an individual account, not foran individual customer. If a particular customerhas separate accounts at the bank, each accountshould be considered separately by the bank todetermine whether an exemption should begranted. The bank should not grant a single ex-emption covering multiple accounts of that cus-tomer, even if those accounts have the sameTIN. If the bank has already granted any of itscustomers a single exemption covering multipleaccounts, the bank should contact FinCEN at theaddress listed on page 2 for guidance. In addi-tion, if the bank determines that it wants to grantexemptions for more than one account, it shouldprepare an exemption statement for each account

and establish a separate exemption limit. (Seepp. 10–11 below.)

Thus, for example, if three fast-food restau-rants owned by the same corporation eachhave separate deposit accounts at the samebank, that bank may not grant one exemptionthat covers all three accounts. Instead, thebank should consider each account separatelyfor an exemption. If the bank decides that allthree accounts should be exempted, the bankshould prepare three separate exemption state-ments and establish separate exemption limitsfor each account.

• Established DepositorThe term ‘‘established depositor’’ is intendedto make clear that a bank may not exempt theaccount of a business at the time that the busi-ness opens the account. As these guidelineswill later explain, a bank must establish a dol-lar limit for an exemption in an amount thatdoes not exceed an amount ‘‘commensuratewith the customary conduct of the lawful, do-mestic business of that customer. . . .’’ 31CFR 103.22(c). If a bank has not had a prioraccount relationship with a customer, it cannotdetermine, from a history of its transactionswith that customer, what dollar limit would becommensurate with that customer’s lawful,domestic business.

For this reason, the bank generally shouldnot unilaterally exempt the account of a busi-ness for at least the first two months of thatbusiness’ depositor relationship with the bank.After reviewing at least two months of cur-rency transactions of the account being consid-ered for exemption, the bank may then set alimit. If the customer has had an account atthe bank for more than two months, the bankgenerally should review at least the most re-cent two months of transactions involving thataccount, unless those months are not repre-sentative of the customary conduct of the cus-tomer’s lawful domestic business. (See p.9below).

iii. ‘‘United States resident’’The term ‘‘United States resident’’ is intendedto limit these exemptions to accounts of busi-ness entities that are physically residing in theUnited States at the time of the exemption.The term includes a sole proprietorship oper-

6



ated by a U.S. citizen or permanent resident,alien, a corporation, a partnership, an associa-tion, or any other form of corporate organiza-tion, which is physically located in and doingbusiness in the United States. The term doesnot include a foreign embassy or consulate inthe United States, or a foreign business entitythat does business, but does not have a placeof business, in the United States.

2. Government Agencies

The regulations permit a bank unilaterally toexempt ‘‘(d)eposits or withdrawals, exchangesof currency or other payments and transfers bylocal or state governments, or the UnitedStates or any of its agencies or instrumentali-ties.‘‘ 31 CFR 103.22(b)(2)(iii). By its terms,this exemption applies to all types of currencytransactions conducted by the Federal Govern-ment or any of its agencies or instrumentali-ties, as well as any state or local (e.g., countyor municipal) government or any of its agen-cies or instrumentalities whether or notthrough an account. Government agencies andinstrumentalities do not have to be‘‘established depositors’’ as described above.The only restriction on these types of exemp-tions is that the exemptions must be ‘‘inamounts which are customary and commensu-rate with the authorized activities of theagency or instrumentality.’’ 31 CFR 103.22(c).(See discussion p.9 below.)

A bank may therefore exempt the cash trans-actions involving any government agency (e.g.,the Treasury Department, the Justice Depart-ment, and Federal law enforcement agencies)or government instrumentality (e.g.,state-supported colleges and universities), evenif that agency or instrumentality does not con-stitute ‘‘an established depositor,’’ as defined onpage 6 above. If the government agency (e.g.,state-supported college) has a privately ownedbusiness (e.g., bookstore) that is operated onits grounds, the business may not be exemptedunder this exemption but may be exemptedunder another exemption (e.g., retailbusiness). A union or fraternal associationwhose membership consists of officials or em-ployees of a government agency or instrumen-tality also does not come within the scope ofthese provisions.

Although the regulations generally do notpermit banks to exempt their transactions with

nonbank financial institutions (see page 8below), a bank may use this exemption to ex-empt its transactions with the U.S. Postal Ser-vice, which the regulations have designated asa nonbank financial institution with respect toits sales of postal money orders.

3. Payroll Withdrawals

The regulations also permit a bank unilaterallyto exempt ‘‘(w)ithdrawals for payroll purposesfrom an existing account by an established de-positor who is a United States resident andoperates a firm that regularly withdraws morethan $10,000 in order to pay its employees incurrency.’’ 31 CFR 103.22(b)(2)(iv). This ex-emption is limited to withdrawals of currencyby an employer that actually pays its employ-ees with the currency it has withdrawn. Itdoes not include an employer that pays its em-ployees by check, but then cashes employees’paychecks and presents the employees’ checksat a bank to receive ‘‘cash back.’’ Similarly, anemployer that withdraws cash to offer a check-cashing service to its employees does not comewithin the scope of this exemption.

The terms ‘‘existing account by anestablished depositor’’ and ‘‘United States resi-dent’’ have the same scope as those terms de-scribed on page 6 above.

C. SPECIAL EXEMPTIONS

1. General Criteria

Even if a particular customer’s account doesnot come within one of the categories of ex-emptions that a bank may unilaterally grant,the bank may still be able to exempt the de-posits and withdrawals of cash of that custom-er’s account that exceed $10,000 from the CTRreporting requirements. If a bank determinesthat one of its customers appears to be operat-ing a legitimate business, and the customaryconduct of the lawful domestic business of thatcustomer involves regular and frequent cur-rency deposits or withdrawals, the bank mayapply to the IRS for additional authority toexempt deposits or withdrawals involving anaccount of that customer. If the bank receivesadditional authority from the IRS, it may thengrant a ‘‘special exemption.’’

Because there are numerous types of busi-nesses that may qualify for special exemptions,Treasury has refrained from developing a com-

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prehensive list of those businesses. However,Appendix A contains a list of some of thetypes of businesses that have been approvedin the past for special exemptions. The IRSwill not grant additonal authority for specialexemptions of businesses such as automobileclubs that offer travelers’ checks for sale, pre-cious metal or coin dealers, scrap metal deal-ers, and gambling operations, whether charita-ble or for profit.

2. Nonexemptible Entities

Transactions by certain types of businessesmay not be the subject of a unilateral or spe-cial exemption under any circumstances: (SeeAppendix A).

a. Transactions by a bank with nonbank fi-nancial institutions (e.g., casinos, currencyexchanges, issuers of traveler’s checks, andsecurities brokers or dealers) other than theU.S. Postal Service and check-cashing ser-vices.b. Transactions between a domestic bankand a foreign bank.c. Transactions by a bank with commoditiesbrokers and dealers.d. Transactions by a bank with a motor ve-hicle, vessel, or aircraft dealer, as describedabove.e. Transactions by a bank with a foreign

government, or any agency, instrumentality,or office thereof (e.g., foreign embassies andconsulates).

D. CTR REPORTING ON CERTAIN TRANS-ACTIONS BY EXEMPTED CUSTOMERS

In using the exemption provisions of the regu-lations, banks must bear in mind that theirgranting of exemptions to certain accounts andcustomers does not mean that they will neverhave to file CTRs on those accounts and cus-tomers. Even after granting an exemption andsetting a dollar limit for that exemption, abank must continue to file CTRs on two typesof currency transactions:

1. All currency transactions that are of thetype exempted, but that exceed the dollarlimit. Thus, if the exemption limit on a par-ticular customer’s account is for daily depos-its that do not exceed $20,000 when aggre-gated, the bank still must report the totalamount of deposits into that account if thetotal of all deposits in the same banking dayexceeds $20,000 (e.g., $20,000.01).

2. All non-exempted currency transactionsinvolving an account. Thus, if the account isthe subject of an exemption for currencywithdrawals up to $19,000, the bank must re-port any and all currency deposits into thataccount that exceed $10,000.

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II. HOW TO EXEMPT CUSTOMERS

Once a bank has determined that the accountof a particular customer may qualify for a uni-lateral or special exemption, it is encouraged toinitiate the process for granting the exemption.Under the regulations, only the bank (and notthe customer) has the authority to grant unilat-eral exemptions or to apply to Treasury forspecial exemptions. In general, if a businesscustomer specifically requests an exemptionbefore the bank has contacted it, the bankshould carefully scrutinize the customer’s ac-tivity at the bank before deciding whether togrant an exemption. This is because the cus-tomer may be seeking the exemption to hideits transactions from the government.

A. REVIEW OF BANK RECORDS

As the first step, the bank should review thecustomer’s transaction history, including itscash deposit or withdrawal transactions. Thisreview is necessary to determine whether thecustomary conduct of a business entity’s lawfuldomestic business involves currency depositsor withdrawals exceeding $10,000 that occurregularly and frequently (e.g., daily or severaltimes per week, or in some cases, weekly orbiweekly). If the bank’s records do not indicatethat that entity has had regular and frequentcurrency deposits or withdrawals exceeding$10,000, then the bank should not proceed anyfurther with the exemption process, notwith-standing the nature of the customer’s business.

1. Two Consecutive Months of Activity

The bank should review at least two consecu-tive months of transactions, including currencydeposits or withdrawals, by its customer. Thetwo months of deposits or withdrawals shouldbe the most recent months unless thosemonths are not truly representative of the cus-tomary conduct of the customer’s lawful do-mestic business. For example, if the currencydeposits or withdrawals of an established cus-tomer during the months of November andDecember far exceed that customer’s currencydeposits or withdrawals in other months be-cause of seasonal shopping trends, the bankshould review deposits or withdrawals thatoccurred in two consecutive months that donot include either November or December.

While the regulations do not require that agovernment agency or instrumentality be an‘‘established depositor,’’ the bank may still findit helpful to review at least the most recent twomonths’ account activity of that agency, to aidin establishing an exemtpion limit that is ‘‘com-mensurate with the authorized activities ofthe agency or instrumentality.’’ 31 CFR103.22(c). However, if the customer whose ac-count is being considered for exemption is agovernment law enforcement agency thatopened the account for deposits of seized cashfor transactions conducted in relation to crimi-nal investigations or similar types of transac-tions, the bank need not review two consecu-tive months of account activity. These types oftransactions are by their nature less regularand frequent than other transactions by othergovernment agencies.

2. Review of Other Available Information

In addition, the bank should review any otherinformation taht it has concerning its customerwhich might assist the bank in reviewing thatcustomer’s transaction history. If the customerhas a longstanding depositor relaitonship withthe bank, the bank may have made extensionsof credit or conducted other business with thecustomer that generated additional recordsabout the customer’s business. If the customeris a government agency or instrumentality, thebank should also ask for official identificationfrom the person who is opening the accountor conducting the transaction as a representa-tive of that agency. These steps not only areconsistent with a bank’s marketing strategy of‘‘knowing its customer,’’ but also may aid inthe determination of wehther the customer, infact, comes within one of the categories ofexemptible businesses.

In some cases, criminals have succeeded inhaving a ‘‘front’’ company paced on the ex-emption list. Often, the address given to thebank was a vacant lot or a storefront wherelegitimate business could not be carried on.Treasury therefore encourages banks to knowtheir customers. If a bank is not familiar with aparticular business entity that it is consideringfor an exemption, Treasury urges the bank totake some steps to see if the customer appears

9



to be conducting a legitimate bsusiness bychecking the telephone directory to verify thebusiness’ address and telephone number, orpreferably by walking or driving past the busi-ness. The bank also may want to maintain arecord of all of the steps that it took in deter-mining whether the customer was eligible foran exemption.

B. PREPARATION OF EXEMPTIONSTATEMENTS

1. Statements for Customers Exempted AfterOctober 27, 1986

After the bank has reviewed the customer’stransaction history and other information, anddetermined that the customer appears to be eli-gible for an exemption, it must then prepare aseparate ‘‘exemption statement’’ for each accountof the customer to be exempted. Pursuant to a1986 amendment to the Bank Secrecy Act, theregulations state that after October 27, 1986 (thedate on which the amendment became law), ‘‘abank may not place any customer on its exemptlist without first preparing a written statement,signed by the customer, describing the custom-ary conduct of the lawful domestic business ofthat customer and a detailed statement of rea-sons why such person is qualified for an exemp-tion.’’ 31 CFR 103.22(d).

2. Statements for Customers Exempted on orbefore October 27, 1986

For customers granted an exemption on or be-fore October 27, 1986, the bank should preparean exemption statement if there is any changein the business or in the type of exemptionother than a change in address or in the dollaramount of the existing exemption. These in-stances would include a change in the name ofthe business, a change from one form of entityto another (e.g., sole proprietorship to corpo-ration), a change from one type of business toanother (e.g., a retail type of business to a res-taurant), a change in ownership of the custom-er’s business, or a change in the nature of theexisting exemption (e.g., from withdrawals todeposits or from withdrawals only to with-drawals and deposits). The exemption state-ment should reflect the current informationabout the customer.

3. Form for Exemption Statements

Treasury has not issued a form that all banksare required to use for their exemption state-

ments. Instead, in response to many inquiries,Treasury has developed model form (see Ap-pendix B) that banks may use. As stated atpage 6 above, the bank must prepare a sepa-rate exemption statement for each customeraccount to be exempted. However, any exemp-tion statement that a bank prepares must, un-der the regulations, include the followingitems:

a. The name, address (i.e., complete streetaddress), nature of business, taxpayer identi-fication number, and account number of thecustomer being exempted. In addition, inorder to ensure that an account is beingproperty exempted under 103.22(a), it isrecommended that the customer also con-firm that the funds being deposited into theaccount being exempted do indeed comefrom the business for which the account wasestablished.

b. A statement, following the information inparagraph ‘‘a’’ above, that reads as follows:‘‘The information contained above is trueand correct to the best of my knowledge andbelief. I understand that this informationwill be read and relied upon by the Govern-ment.’’

c. A space, following that statement, for thesignature of the person who is attesting tothe accuracy of the information concerningthe name, address, nature of business, andtax identification number of the customer.This space must also list the signer’s titleand position (i.e., the office or division ofthe customer in which the person signing isemployed), and should include the date ofthe signature.

d. An indication by the bank whether theexemption covers deposits, withdrawals, orboth, as well as the dollar limit of the ex-emption for both deposits and withdrawals.

e. An indication by the bank whether theexemption is limited to certain types of de-posits or withdrawals (e.g., withdrawals forpayroll purposes).

4. Customer Information and Signature

To prepare the exemption statement, the bank,after compiling whatever information it needsfor reviewing the customer’s transaction historyand other information, should contact the

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customer, explain the need for the statementand its relationship to the exemption, obtainfrom the customer the information listed initem 3a on page 10 above, and have the cus-tomer place an original signature on the state-ment. Facsimile signatures are not acceptablefor completion of the statement.

The signature on the statement need not bethat of the highest ranking officer or employeeof the business (or government agency) whosetransactions are to be exempted. However, thebank should inform the customer that the sig-nature should be that of an appropriatesupervisory-level officer or employee who haspersonal knowledge of (and can therefore at-test to the accuracy of) the information listedin item 3a above. In the case of an account es-tablished for the local store of a multiple-establishment business (e.g., fast food) or thelocal office of a government agency, the bankmay accept the signature of a supervisory-levelofficer or employee in that local store or office.

5. Completion of Exemption Statement

After obtaining the customer’s signature on theexemption statement, the bank should thencomplete the remainder of the statement. Theregulations require that the statement includenot only a description of ‘‘the customary con-duct of the lawful domestic business of thatcustomer,’’ but also ‘‘a detailed statement ofreasons why such person is qualified for anexemption.’’ 31 CFR 103.22(d). Summary state-ments such as ‘‘retail,’’ ‘‘qualified under103.22(b)(2)(ii),’’ or ‘‘government’’ will not suf-fice to describe the business.

The following are examples of descriptionsof businesses that will suffice:

1. retail women’s shoe store;2. retail and wholesale bakery with 70% ofthe gross revenues attributable to the retailbusiness; and3. a restaurant/bar with check cashing ser-vices that derives 80% of its gross revenuesfrom the restaurant/bar.The statement should include the period

covered by the transaction history that thebank reviewed, the range (i.e., the maximumand minimum amounts) of the transactionsduring that period, and any other informationthat the bank may have about the business orits account activity. The bank must indicate in

the statement whether the exemption coversdeposits, withdrawals, or both, and the dollarlimit of the exemption. 31 CFR 103.22(d). Thisinforamtion should note whether the transac-tions exempted are limited to a certain type(e.g., withdrawals for payroll purposes). Fi-nally, the bank should note on the statementthe date on which it granted the exemption.

C. EXEMPTION LIMITS

1. General Criteria

In conjunction with its review of the custom-er’s account activity, the bank must also deter-mine for the exempted account the applicabledollar limit for the exempted deposits or with-drawals. 31 CFR 103.22(d). This determinationrequires the bank to establish two types of dol-lar limits for the currency transactions that areexempted:

a. For exemptions pertaining to governmentagencies or instrumentalities, the dollar lim-its must be ‘‘in amounts which are custom-ary and commensurate with the authorizedactivities of the agency or instrumentality.’’31 CFR 103.22(c).

b. For all other categories of unilateral ex-emptions, the dollar limits must be ‘‘inamounts that the bank may reasonably con-clude do not exceed amounts commensuratewith the customary conduct of the lawfuldomestic business of that customer.’’ 31 CFR103.22(c).

This language indicates that there must be areasonable relationship between the maximumamounts of the currency transactions that thebank reviewed and the dollar limit that it setsfor a particular exemption. If, for example, themajority of the currency transactions reviewedrange from $20,000 to a maximum of $25,000,the bank must not arbitrarily set the dollarlimit at an amount so high (e.g., $60,000) thatno CTRs will ever be filed on the exemptedaccount.

The bank must therefore carefully review thetransaction history of the exempted account, todetermine what limit would bear a reasonablerelationship to the currency transactions re-viewed. If one transaction amount recurs morefrequently than any other, the bank may sim-ply set the dollar limit at that amount, or atthe amount of other transactions that do notsubstantially exceed that amount. Thus, for

11



example, if the bank had reviewed at least twomonths of currency transactions, and saw thatthe following pattern of transactions in a par-ticular month was representative of the num-ber and dollar amounts in all monthsreviewed,

March 1 - $15,000 March 18 - $45,000March 2 - $43,000 March 21 - $30,000March 4 - $40,000 March 22 - $28,000March 7 - $42,000 March 23 - $35,000March 8 - $18,000 March 25 - $40,000March 9 - $38,000 March 28 - $40,000March 11 - $45,000 March 29 - $20,000March 15 - $40,000 March 30 - $41,000March 16 - $30,000 March 31 - $40,000

it could select $40,000 as the exemption limitbecause that amount recurs more frequentlythan any other and most of the other amountsare within a $35,000 to $45,000 range. How-ever, Treasury suggests an exemption limit of$45,000, as that amount occurs twice; it is notsubstantially greater than $40,000; and thereare other transactions (i.e., $41,000, $42,000,and $43,000) that fall between $40,000 and$45,000.

To aid in its review of a customer’s currencytransactions, a bank may find it helpful to de-velop a chart that shows the number of cur-rency transactions that fall within certainranges. If the bank reviewing the transactionhistory set forth above had used this method,the chart of the transactions under reviewwould look like this:

$10,001 - $15,000 X$15,001 - $20,000 XX$20,001 - $25,000$25,001 - $30,000 XXX$30,001 - $35,000 X$35,001 - $40,000 XXXXXX$40,001 - $45,000 XXXXX$45,001 - $50,000

This chart graphically demonstrates thatwhile the bank could select $40,000 as the ex-emption limit, $45,000 would be an appropriateexemption limit in this case because of thegrouping of the transactions from $35,000 to$45,000.

If no amount recurs frequently enough toserve as a guide for the exemption limit, thebank may still establish an exemption limitbased upon the range of any currency transac-

tions that it has reviewed. Thus, for example,if a bank had reviewed at least two months oftransactions, and saw that the following pat-tern of currency transactions in a particularmonth was representative of the number anddollar amounts in all months reviewed,

April 1 - $12,000 April 14 - $13,000April 4 - $25,500 April 18 - $21,500April 5 - $15,000 April 21 - $26,000April 7 - $22,500 April 22 - $12,300April 8 - $19,000 April 25 - $21,000April 11 - $22,000 April 27 - $24,000April 13 - $17,000 April 29 - $25,000

it could select the highest amount, $26,000, asthe exemption limit. This is because most ofthe transactions are between $15,000 and$26,000, and $26,000 does not substantiallyexceed the $24,000, $25,000, and $25,500transactions, as demonstrated below:

$10,001 - $15,000 XXXX$15,001 - $20,000 XX$20,001 - $25,000 XXXXXX$25,001 - $30,000 XX

On the other hand, if the highest currencytransaction or transactions substantially exceedthe amount of most of the currency transac-tions, the bank should not establish the ex-emption limit at the amount of the highesttransaction. Thus, for example, if the highesttransaction in the last example had been$46,000 rather than $26,000, the bank shouldnot select an amount that is higher than$25,500 as the exemption limit. This is trueeven if there were two or more higher transac-tions (i.e., $46,000 and $65,000), as theseamounts are substantially greater than theother currency transactions and they do notoccur frequently or regularly. The key is tomake sure that the amount selected as the ex-emption limit is commensurate with the cus-tomary conduct of the customer’s lawful do-mestic business and that those amounts thatare unusual (i.e., higher than the customarytransactions) can be easily detected andreported on CTRs.

2. Seasonal and ‘‘Monday-Only’’ Limits

Banks should take note of two special situa-tions in establishing and setting dollar limitsfor exempted currency transactions. If a bankis dealing with a business account that can be

12



exempted either unilaterally or specially, andthat business is seasonal in nature (e.g., a ho-tel on the beach), the bank may establish anexemption that covers only the season inwhich that business has its peak activity, orthat sets a high dollar limit for the business’peak season and a lower dollar limit for theother months of the year. Similarly, if an ex-emptible business proves to have a higheramount of currency transactions on a particu-lar day (i.e., Monday or the day after a holi-day, Friday, or the first and fifteenth of themonth), than on other days of the week ormonth (i.e., because of greater business activ-ity on weekends, more currency depositsmade through night deposits or automatedteller machines, or factory paydays), the bankmay establish an exemption that covers onlycurrency transactions posted on that day, orthat sets a higher dollar limit for currencytransactions on that day and a lower dollarlimit for other days of the week.

Thus, for example, if the bank had reviewedat least two months of currency transactions,and saw that the following pattern of transac-tions in a particular month was representativeof the number and dollar amounts in allmonths reviewed,

April 1 - $15,000 April 14 - $17,000April 4 - $46,000 April 18 - $53,000April 5 - $ 5,000 April 21 - $22,000April 7 - $19,000 April 22 - $26,000April 8 - $24,000 April 25 - $50,000April 11 - $52,000 April 27 - $25,000April 13 - $21,000 April 29 - $22,000

the bank should try to determine whether thehigher amount of currency transactions reflectedactivity on the same day of the week every week(i.e., Mondays). If it did, it may be appropriatefor the bank to set two exemption limits: (1) adaily exemption limit of $26,000; and (2) a Mon-day or the day after a holiday limit of $53,000.

D. MULTIPLE-ESTABLISHMENT CUSTOMERS

Another special situation of which banksshould take note is the process of exemptingmultiple-establishment customers. Forpurposes of the regulations, a multiple-establishment customer is a customer that fallsinto one of the following categories:

1. An operator of the same type of exempt-ible business at several geographic locations

(e.g., a fast-food restaurant with the sametrade name), which has established a singleaccount that all of the locations use to makedeposits and withdrawals;

2. An operator of several different types ofexemptible businesses at one or more geo-graphic locations which has established asingle account that all of the businesses itoperates use to make deposits andwithdrawals;

3. An operator of the same type of exempt-ible business at several geographic locations,when each location has its own separateaccount; and

4. An operator of several different types ofexemptible businesses at one or more geo-graphic locations, when each location has itsown separate account.

In the first two situations above, which in-volve only a single account, the bank shouldestablish a single exemption for that accountand set a single dollar limit that will apply toall transactions of the type exempted that in-volve that account.

In the latter two situations described above,which involve separate accounts for each loca-tion, the bank should establish a separate ex-emption for each account and separate dollarlimit for each exemption. Because section103.22(b)(2)(i), (ii), and (iv) of the regulationsprovides for exemption from an existing ac-count by an established depositor who is aUnited States resident, the bank should granta separate unilateral exemption for each indi-vidual account, not for each individual cus-tomer or business. If one customer has an ac-count for each of its business establishments,the bank should separately consider each indi-vidual account (but not the customer) for anexemption. A single exemption should not begranted that covers multiple accounts, even ifthey have the same taxpayer identificationnumber. If the bank has any questions aboutthis, it should contact the FinCEN at theaddress listed on page 2. In addition, if thebank decides that it wants to grant an exemp-tion for more than one account, a separateexemption statement should be obtained foreach account and a separate dollar limitestablished.

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E. SPECIAL EXEMPTION REQUESTS

Finally, if a bank wishes to exempt depositsinto or withdrawals from an account by a cus-tomer that does not fall within one or more ofthe categories of unilaterally exemptible cus-tomers, it must apply to the IRS Data Centerin Detroit, Michigan, for additional authorityto exempt that account under the regulations.See 31 CFR 103.22(e). To apply for such addi-tional authority, the bank must submit its re-quest to:

ChiefCurrency and Banking Reports DivisionCompliance Review GroupInternal Revenue Service Data CenterP.O. Box 32063Detroit, Michigan 48232The request must be accompanied by a state-

ment of the circumstances that the bank be-lieves warrant a special exemption, as well as a

copy of the exemption statement (signed bythe customer whose acount is proposed forthe special exemption) that meets all of therequirements described above for exemptionstatements for unilateraly exempted accounts.The request should also include a listing ofdaily amounts of currency deposited and with-drawn during the two-month period reviewed,what percentage of the amount of the depositsor withdrawals is ordinarily in $100 bills orgreater, a suggested dollar limit for the exemp-tion, and the name and telephone number ofthe bank official whom the IRS may contact forfurther information concerning the exemptionrequest. The request, if complete, will then bereviewed by the Compliance Review Group ofthe Data Center. A bank may not exempt a cus-tomer’s account that does not qualify for a uni-lateral exemption until it has received noticefrom the IRS that it has granted the bank theadditional authority to do so.

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III. RECORDKEEPING FOR EXEMPTED CUSTOMERS

After it has granted an exemption involving a par-ticular account of a customer, the bank is responsi-ble for keeping two principal types of records per-taining to that exemption: (1) a centralizedexemption list and (2) exemption statements.

A. EXEMPTION LIST

The bank must keep ‘‘(a) record of each exemp-tion granted . . . and the reason therefore. . . ina centralized list.’’ 31 CFR 103.22(f). This list,known as the ‘‘exemption list’’ or ‘‘exempt list,’’must include the name, complete street address,type of business, taxpayer identification number,and account number of each customer (whethera business entity or a government agency)whose transactions have been exempted, as wellas an indication of whether the exemption coverswithdrawals, deposits, or both, and the dollarlimit of that exemption. For a special exemption,the bank should include the date the exemptionwas granted by Treasury or the IRS. For banksthat manually revise their exemption lists, Trea-sury suggests the following format for the re-quired information:

1. ABC Supermarket, Inc.1234 Dixie HighwayClear Springs, Florida 33123Retail GroceryAccount Number: 123456Deposits Exemption Limit: $20,000Withdrawals Exemption Limit: $25,000TIN: 59-2345678

2. BCD Citrus GrowersRoute 5Clear Springs, Florida 33123Orange GrowerAccount Number: 1234567Withdrawals for Payroll Exemption Limit:$25,000TIN: 59-1234567

3. Jones Beverage Co.5432 Main StreetClear Springs, Florida 33123Beer WholesalerAccount Number: 2345678Deposits Exemption Limit: $20,000

(Special exemption authority granted3/21/87)

TIN: 59-3456789

4. Clear Springs National Bank5420 Main StreetClear Springs, Florida 33123

The last entry on the sample format reflectsthe requirement in the Bank Secrecy Act regu-lations that a bank must also include on itsexemption list the names and addresses of alldomestic banks with which the bank conductscurrency transactions that are exempted fromthe CTR reporting requirements. See 31 CFR103.22(f). As stated on page 3 above, transac-tions between domestic banks are exceptedfrom those reporting requirements. Even if thebank does not have an exemption list, it stillmust maintain the names and addresses ofsuch domestic banks on a centralized list.

Again, because the bank’s transactions withdomestic banks are not included within thereporting requirement, the bank does not haveto decide whether to exempt those transactionsor to set an exemption dollar limit for them.Accordingly, the bank should not include adollar limit for those domestic banks that itplaces on the exemption list.

Whenever a bank generates a list of its ex-empted customers, it must retain either theoriginal or a copy of that list for a period offive years. The retention period for an exemp-tion list begins on the day on which the origi-nal of that list was generated, either manuallyor through the use of an automated system.See 31 CFR 103.38(d). In addition, the regula-tions require that the exemption lists, likeother records required to be retained under theBank Secrecy Act regulations, ‘‘be filed orstored in such a way as to be accessible withina reasonable period of time, taking into con-sideration the nature of the record, and theamount of time expired since the record wasmade.’’ 31 CFR 103.38(d).

B. EXEMPTION STATEMENTS

The second principal category of records that abank must keep concerning an exempted ac-count is the exemption statement that the bankhas obtained from a customer whose transac-tions involving that account have beenexempted. After the bank has obtained such astatement, it must retain the original of thestatement for a unilateral exemption (or a copy

15



of the statement for a special exemption) aslong as the customer is on the exemption list,and for a period of five years after that cus-

tomer has been removed from the exemptionlist. 31 CFR 103.22(d).

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IV. MONITORING EXEMPTIONS AND DISCOVERYOF IMPROPER EXEMPTIONS

A. MONITORING EXEMPTIONS

Banks should also continue to monitor the ex-emptions they have granted. A company thatwas appropriate for an exemption at one timemay go out of business and be used as a‘‘front’’ to conceal the movement of illegallyobtained funds. It also may experience someother significant change in its operations, suchas expansion of its business activities, thatchanges the nature of its business or that re-quires it to move to a new location. In addi-tion, improvements or declines in the com-pany’s business may make the originallygranted exemption limit inappropriate. Overtime, the exemption limit for a particular ac-count and customer may need to be increasedor decreased so that it remains at a level thatthe bank may reasonably conclude does not‘‘exceed amounts commensurate with the cus-tomary conduct of the lawful domestic busi-ness of that customer.’’ 31 CFR 103.22(d).

For these reasons, Treasury recommendsthat a bank review its exemption list at leastonce a year, and preferably once every sixmonths. In keeping with the general policythat banks should know their customers, eachreview should include a contact with the cus-tomer of each exempted account to determinewhether there are any changes in the custom-er’s situation (such as the customer’s name,address, or nature of business) since the lastdate of review. If the bank learns, either di-rectly from the customer or through any othermeans, that any of the information to whichthat customer attested on the exemption state-ment has changed, it should obtain a new ex-emption statement from that customer thatcorrectly reflects the relevant information fromthat customer. If that customer’s account wasgranted a special exemption, the bank mustthen send a copy of the new exemption state-

ment to the IRS Data Center in Detroit andrequest additional authority for continuing thatspecial exemption in light of the new informa-tion to which the customer has attested.

If the only item on a customer’s exemptionstatement that a bank determines is no lognerappropriate is the exemption dollar limit (anitem to which the customer does not attest),the bank may increase or decrease the dollarlimit unilaterally if the customer was unilater-ally exempted, and need not obtain a new ex-emption statement from the customer. If thecustomer’s account was the subject of a specialexemption, the bank must obtain permissionfrom the IRS Data Center before increasing thedollar limit.

B. DISCOVERY OF IMPROPEREXEMPTIONS

If a bank discovers that it has improperlyexempted one or more customer accounts, itshould promptly take several actions. The bankshould first rescind all of the exemptions that itdetermines were improperly granted, and imme-diately remove those exemptions from the ex-emption list. It should then contact:


The bank should not begin to backfile CTRson the currency transactions it determineswere improperly exempted until it obtainsguidance from FinCEN. That office mayrequest additional information concerningthose exemptions and currency transactionsto determine whether the bank should bedirected to backfile CTRs on particularcustomers.

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V. CONCLUSION

This set of guidelines should cover most of theissues that banks are likely to encounter in us-ing the exemption provisions of the regula-tions. For further guidance on the exemptionprovisions, banks are encouraged to consultwith IRS contact representatives at:

Compliance Review GroupIRS Data CenterP.O. Box 32063Detroit, Michigan 48232(313) 234-1613

or the FinCEN, Department of the Treasury at:


As new situations arise that, in Treasury’sjudgment, are likely to be of general interest tothe banking community concerning the properuse of exemptions, Treasury will issue specificadministrative rulings to deal with those situa-tions, and may also amend these guidelines inappropriate circumstances.

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APPENDIX A

The following lists identify various types ofbusiness accounts and their general exemptionstatus under section 103.22 of the Bank SecrecyAct regulations or the Department of the Trea-sury’s exemption policy. In the case ofaccounts of businesses that are unilaterally orspecially exemptible, the bank must make surethat the customer meets all of the exemptioncriteria outlined in section 103.22 and conductscurrency transactions exceeding $10,000 on aregular and frequent basis. These items arediscussed elsewhere in this booklet.

The lists are not all inclusive and are not neces-sarily determinative of whether a particular busi-ness account qualifies for an exemption. They aremeant to provide guidance to banks and provideexamples of the types of business accounts that maybe appropriately exempted from the CTR reportingrequirements. If a bank has a question regardingthe exemptibility of a customer, it should con-tract the Compliance Review Group at the In-ternal Revenue Service Data Center in Detroit,Michigan.

EXCEPTED TRANSACTIONS

Currency transactions with the following fi-nancial institutions are automatically exceptedfrom the reporting requirements. Thus, banksshould not file CTRs on their transactions withthese banks. However, banks must maintainthe name and address of any domestic bankwith which they conduct currency transactionson their exemption list.

The Federal Reserve Bank and Federal HomeLoan Bank which provide currency and coinservice should not be listed on the exemptionlist.

Commercial Bank (Domestic)Cooperative Bank (Domestic)Credit Union (Domestic)Federal Home Loan BankFederal Reserve BankSavings and Loan (Domestic)Savings Bank (Domestic)

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EXEMPTIBLE BY BANK UNILATERALLY

The following is a list of businesses which abank generally may unilaterally exempt. Insome instances, the businesses listed belowmay sell both retail and wholesale goods ormay sell retail goods and provide a service.Such business accounts may be unilaterallyexempted only if more than 50% of the grossrevenues of the business are derived from theretail sale of goods and the remainder of theirbusiness is eligible for either a unilateral orspecial exemption. If the remainder of thebusiness is of a type that may not be granted aunilateral or special exemption (e.g., an autoparts store that sells cars) the account of thebusiness may not be granted either a unilateralor special exemption.

FinCEN is currently reviewing the exemptionstatus of check cashing services. If it is decidedthat an exemption will no longer be allowed,notice will be published in the Federal Registerand banks having received additional authorityto grant special exemptions in the past may benotified directly.

Airline/Commercial (Scheduled)

Amusement Park

Appliance Store

Art Supply Store

Auto Parts Store

Bakery

Bar

Book Store

Building Materials (Retail)

Bus Line (Commercial)

Candy Store

Car Wash (Coin Operated)

Check Cashing (Licensed)

Clothing Store

College/State or Local Government

Community College/State or LocalGovernment

Computer StoreConcession/Food (Retail)Convenience StoreDelicatessenDepartment Store

Drug StoreDry Goods Merchandise (Misc.)Duty Free ShopElectric UtilityElectronics StoreFast Food RestaurantFilm SalesFish MarketFloristFurniture SalesGarden CenterGas Company (Utility)Gas/Oil Retail SalesGeneral StoreGift ShopGovernment AgencyGrocery StoreHardware StoreHealth Food StoreHotelIce Cream StoreLaundry (Coin Operated)Law Enforcement AgencyLiquor StoreLumber StoreMeat MarketMotelMovie (Stage or Theater)Musical Instrument StoreNewspapers (Retail Sales)Paint StorePetroleum (Home Heating)Public TransportationRace TrackRailroad (Passenger Service)Record StoreResort/HotelRestaurantSchool (Public)Seafood StoreShoe StoreSporting Goods Store

20



Sports ArenaStationery StoreSupermarketTelephone CompanyTelevision Video RentalsTobacco Store

Toy StoreUniform StoreU.S. Postal ServiceUniversity (State Supported)Vending Machine CompanyWater Company

21



SPECIAL EXEMPTION—REQUIRES IRSAPPROVAL

If the following types of businesses conductregular and frequent cash transactions, a bankshould request additional authority from theIRS to grant a special exemption for the cus-tomer’s account. IRS is receptive to requestsfor special exemptions involving service-typebusinesses.

Auto RepairBakery DistributorBeauty Supplies DistributorBeverage DistributorBoat ToursBowling AlleyBowling LeagueBus Line (Chartered)Cable TVCandy (Wholesale)Car RentalsCar WashCheese DistributorChurchCollege (Private)Cosmetics DistributorCountry ClubDairy DistributorDelivery ServiceDry CleanersElectrical Supplies DistributorFarmingFerry ServiceFilm ProcessorFireworks DistributorFlower DistributorFood Catering

Food DistributorFood ProcessorFood ServiceFrozen Food/WholesaleGarage (Parking)Gas/Oil DistributorGolf CourseHospitalInsurance CompanyLimousine ServiceLiquor DistributorLumber MillLumber DistributorMeat/WholesaleMedical ClinicMuseum (Admission fees, gift shop)Nonprofit OrganizationOff Track Betting (NY only)Parking FacilityPetroleum DistributorPoultry DistributorPrivate Mail CarrierProduce Distributor/WholesalerProfessional Sports TeamsProperty ManagementReal Estate ManagementRecreational Camps-SchoolsReligious OrganizationSchool (Private)Shoe DistributorSki ResortTaxi Cab CompanyTicket Agency (Entertainment/sports)Tobacco DistributorUniversity (Private)Warehouse Rental

22



NOT EXEMPTIBLE

The following types of business accounts maynot be exempted unilaterally and will not begranted a special exemption.

AccountantsAircraft SalesAttorneysAuction HouseAutomobile Clubs with Travelers Check

ServicesAuto DealerBank/ForeignBingoBoat SalesCard ClubsCasinoCharter Ships, Airplanes, BusesCheck Cashing (Unlicensed)Commodity Brokers/DealersCruise Lines (Ships)Currency ExchangerDoctorsEmbassy

Escrow CompanyFarm Equipment SalesForeign BankForeign Currency ExchangeIndividualsInvestment AdvisorInvestment BankerBoat DealerMobile Home SalesMoney Order CompanyMotorcycle DealerPawn ShopsReal Estate BrokerRecreational Vehicle DealerScrap Metal DealerSecurities Brokers/DealersTelegraph CompanyTitle CompanyTravelers Check Issuer/Seller/RedeemerTruck DealerUnionsWire Transmitters of Funds

23



APPENDIX BMODEL CUSTOMER EXEMPTION STATEMENT

Part I: Identity of Customer(To be completed by customer)

1. Legal Name of Customer:

2. Trade Name of Customer (if different from legal name):

3. Complete Street Address(es) of Customer (Include street, city, state, and zip code for all streetaddresses of customer’s locations using account to be exempted):

4. Taxpayer Identification Number of Customer:

5. Type and Number of Account To Be Exempted:

6. Nature of Business (Please include complete description):

7. The monies deposited into the account described in No. 5 are funds generated solely from thebusiness described in No. 6.

Yes No

The information contained above is true and correct to the best of my knowledge and belief. Iunderstand that this information will be read and relied upon by the Government.

Signature of Authorized Official Date Signed

Name of Authorized Official(Please type or print)

Title/Position of Official

24



Part II: Information on Customer and Account to Be Exempted(To be completed by bank only)

8. Period of Account Activity Reviewed (Should include at least two consecutive months of transac-tions, as set forth in bank’s records, that are representative of the customary conduct of the lawfuldomestic business of customer):

9. Highest Cash Transactions During Period Reviewed (Complete all that apply to account to beexempted): Deposits: Withdrawals: Withdrawals for Payroll Purposes:

10. Lowest Cash Transactions During Period Reviewed (Complete all that apply to account to beexempted): Deposits: Withdrawals: Withdrawals for Payroll Purposes:

11. Additional Information on Account Activity:

12. Reason(s) Customer Qualified for Exemption (Should include detailed description of type ofbusiness and relation of cash transactions to that business):

13. (For special exemption only) Date on Which Treasury/IRS Granted Additional Authority to Exempt:

Based upon an independent verification of the activity of account (using available bankrecords pertaining to that account), and a review of the information to which the customer hascertified in Part I above, I have determined that the following types of currency transactionsinvolving account are eligible for exemption from the requirements of the Bank SecrecyAct regulations pertaining to Currency Transaction Reports:

(Check one or more boxes, and fill in amounts, as appropriate)

Daily deposits not exceeding $

Daily withdrawals not exceeding $

Daily withdrawals for payroll purposes not exceeding $

Other exemptible transactions (e.g., government agency, Monday-only deposits, seasonal) notexceeding $ (Please specify type of customer and transactions exempted)

The dollar limits of these types of transactions do not exceed amounts commensurate with thecustomary conduct of the lawful domestic business of the customer.

Signature of Bank Official Date of Signature

Name of Bank Official(Please type or print)

Title/Position of Bank Official

25



Part III: Identification of Exempting Bank(To be completed by bank only)

14. Name of Bank:

15. Complete Street Address of Bank (Include street, city, state, and zip code):

16. Employer Identification Number of Bank:

17. MICR Number of Bank:

18. Supervisory Agency (check one):OCC FDIC FRS FHLBB NCUA

Other (specify):

U.S. Government Printing Office: 1988–202-014/94503

26



Interim Exemption RuleSection 502.0

FEDERAL REGISTERVol. 61, No. 80

Rules and Regulations

DEPARTMENT OF THETREASURYFinancial Crimes EnforcementNetwork (FinCEN)

31 CFR Part 103

RIN 1506-AA10; 1506-AA11

Amendment to the Bank Secrecy ActRegulations—Exemptions From theRequirement To Report Transactionsin Currency

Part III

61 FR 18204

DATE: Wednesday, April 24, 1996

ACTION: Interim rule with request forcomments.

SUMMARY: This document contains an interimrule eliminating the requirement to report trans-actions in currency in excess of $10,000, betweendepository institutions and certain classes of‘‘exempt persons’’ defined in the rule. Theinterim rule applies to currency transactionsoccurring after April 30, 1996. It is adopted asa major step in reducing the burden imposedupon financial institutions by the Bank SecrecyAct and increasing the cost-effectiveness of thecounter-money laundering policies of theDepartment of the Treasury. The interim rule ispart of a process to achieve the reduction set bythe Money Laundering Suppression Act of 1994in the number of currency transaction reportsfiled annually by depository institutions.

DATES: Effective date.The interim rule iseffective May 1, 1996.

Comment deadline.Comments must bereceived by August 1, 1996.

Applicability. This interim rule applies totransactions in currency occurring afterApril 30, 1996.

ADDRESSES: Written comments should besubmitted to: Office of Regulatory Policy andEnforcement, Financial Crimes EnforcementNetwork, Department of the Treasury, 2070Chain Bridge Road, Vienna, Virginia 22182-2536, Attention: Interim CTR Exemption Rule.

Submission of comments. An original andfour copies of any comment must be submitted.All comments will be available for publicinspection and copying, and no material in anysuch comments, including the name of anyperson submitting comments, will be recognizedas confidential. Accordingly, material notintended to be disclosed to the public should notbe submitted.

Inspection of comments. Comments may beinspected at the Department of the Treasurybetween 10:00 a.m. and 4:00 p.m., in the Finan-cial Crimes Enforcement Network (‘‘FinCEN’’)reading room, on the third floor of the TreasuryAnnex, 1500 Pennsylvania Avenue, N.W., Wash-ington, D.C. 20220. Persons wishing to inspectthe comments submitted should request anappointment by telephoning (202) 622-0400.

FOR FURTHER INFORMATION CONTACT: PamelaJohnson, Assistant Director, Office of Financial InstitutionsPolicy, FinCEN, at (703) 905-3920; Charles Klingman, Officeof Financial Institutions Policy, FinCEN, at (703) 905-3920;Stephen R. Kroll, Legal Counsel, FinCEN, at (703) 905-3590;or Cynthia A. Langwiser, Office of Legal Counsel, FinCEN, at(703) 905-3590.

SUPPLEMENTARY INFORMATION

I. Introduction

This document adds, as an interim rule, a newparagraph (h) (the ‘‘Interim Rule’’) to 31 CFR103.22. The Interim Rule exempts, from therequirement for the reporting of transactionsin currency in excess of $10,000, transactionsoccurring after April 30, 1996, between deposi-tory institutions1 and certain classes of exemptpersons defined in the Interim Rule. The InterimRule is adopted to implement the terms of31 U.S.C. 5313(d) (and related provisions of31 U.S.C. 5313 (f) and (g)), which were added to

1 As explained below, the text of the rule itself uses theterm ‘‘bank,’’ which as defined in 31 CFR 103.11 (c) includesboth banks and other classes of depository institutions.


the Bank Secrecy Act by section 402(a) of theMoney Laundering Suppression Act of 1994(the ‘‘Money Laundering Suppression Act’’),Title IV of the Riegle Community Developmentand Regulatory Improvement Act of 1994,Pub. L. 103-325 (September 23, 1994).

II. Background

A. Statutory Provisions

The Bank Secrecy Act, Titles I and II of Pub. L.91-508, as amended, codified at 12 U.S.C. 1829b,12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5330,authorizes the Secretary of the Treasury, interalia, to issue regulations requiring financialinstitutions to keep records and file reports thatare determined to have a high degree of useful-ness in criminal, tax, and regulatory matters, andto implement counter-money laundering pro-grams and compliance procedures. Regulationsimplementing Title II of the Bank Secrecy Act(codified at 31 U.S.C. 5311-5330) appear at31 CFR Part 103. The authority of the Secretaryto administer Title II of the Bank Secrecy Acthas been delegated to the Director of FinCEN.

The reporting by financial institutions of trans-actions in currency in excess of $10,000has long been a major component of the Depart-ment of the Treasury’s implementation of theBank Secrecy Act. The reporting requirementis imposed by 31 CFR 103.22, a rule issuedunder the broad authority granted to the Secre-tary of the Treasury by 31 U.S.C. 5313(a) torequire reports of domestic coin and currencytransactions.

Four new provisions (31 U.S.C. 5313 (d)through (g)) concerning exemptions were addedto 31 U.S.C. 5313 by the Money LaunderingSuppression Act. Subsection (d)(1) providesthat the Secretary of the Treasury shall exempt adepository institution from the requirement toreport currency transactions with respect totransactions between the depository institutionand the following categories of entities:

(A) Another depository institution.(B) A department or agency of the United

States, any State, or any political subdivision ofany State.

(C) Any entity established under the laws ofthe United States, any State, or any politicalsubdivision of any State, or under an interstatecompact between 2 or more States, which exer-cises governmental authority on behalf of the

United States or any such State or politicalsubdivision.

(D) Any business or category of business thereports on which have little or no value for lawenforcement purposes.

Subsection (d)(2) states that:

The Secretary of the Treasury shall publish in theFederal Register at such times as the Secretarydetermines to be appropriate (but not less fre-quently than once each year) a list of all of theentities whose transactions with a depository insti-tution are exempt under this subsection from the[currency transaction] reporting requirements.

The companion provisions of 31 U.S.C.5313(e) authorize the Secretary to permit adepository institution to grant additional, discre-tionary, exemptions from currency transactionreporting. Subsection (f) places limits on theliability of a depository institution in connectionwith a transaction that has been exempted fromreporting under either subsection (d) or subsec-tion (e) and provides for the coordination of anyexemption with other Bank Secrecy Act provi-sions, especially those relating to the reportingof suspicious transactions. New subsection (g)defines ‘‘depository institution’’ for purposes ofthe new exemption provisions.

Section 402(b) of the Money LaunderingSuppression Act states simply that in adminis-tering the new statutory exemption procedures:

the Secretary of the Treasury shall seek to reduce,within a reasonable period of time, the number ofreports required to be filed in the aggregate bydepository institutions pursuant to section 5313(a)of title 31 by at least 30 percent of the number filedduring the year preceding [September 23, 1994,]the date of enactment of [the Money LaunderingSuppression Act].

During the period September 24, 1993 throughSeptember 23, 1994, approximately 11.2 millioncurrency transaction reports were filed. Of thatnumber, approximately 10.9 million reports werefiled by depository institutions. Thus the statutecontemplates a reduction of at least approxi-mately 3.3 million filings per annum.

B. Shortcomings of the PresentExemption System

The enactment of 31 U.S.C. 5313 (d) through (g)reflects a Congressional intention to ‘‘reform the

502.0 Interim Exemption Rule


procedures for exempting transactions betweendepository institutions and their customers.’’ SeeH.R. Rep. 103-652, 103d Cong., 2d Sess. 186(August 2, 1994). The administrative exemptionprocedures at which the statutory changes aredirected are found in 31 CFR 103.22(b)(2) and(c) through (f); those procedures have not suc-ceeded in eliminating routine currency trans-actions by businesses from the operation of thecurrency transaction reporting requirement.

Several reasons have been given for this lackof success. The first is the retention by banks ofliability for making incorrect exemption deter-minations. The risk of potential liability is mademore serious by the complexity of the adminis-trative exemption procedures (which requirebanks, for example, to assign dollar limits toeach exemption based on the amounts of cur-rency projected to be needed for the customaryconduct of the exempt customer’s lawful busi-ness). Finally, advances in technology havemade it less costly for some banks to report allcurrency transactions rather than to incur theadministrative costs (and risks) of exemptingcustomers and then administering the terms ofparticular exemptions properly.

The problems created by the administrativeexemption system include that system’s failureto provide the Treasury with information neededfor thoughtful administration of the Bank SecrecyAct. Although banks are required to maintaina centralized list of exempt customers andto make that list available upon request, see31 CFR 103.22 (f) and (g), there is no way shortof a bank-by-bank request for lists (with thetime and cost such a request would entail bothfor banks and government) for Treasury to learnthe extent to which routine transactions areeffectively screened out of the system or (forthat matter) the extent to which exemptions havebeen granted in situations in which they are notjustified.

In crafting the 1994 statutory provisionsrelating to mandatory and discretionary exemp-tions, Congress sought to alter the burden ofliability and uncertainty that the administrativeexemption system created. The statutory provi-sions embraced several categories of transac-tions that were either already partially exempt orplainly eligible for exemption under the admin-istrative exemption system.2 In addition, Con-

gress authorized the Treasury to exempt underthe mandatory rules, as indicated above, ‘‘[a]nybusiness or category of business the reports onwhich have little or no value for law enforce-ment purposes.’’ 31 U.S.C. 5313 (d)(1)(D).

C. Objectives of the Interim Rule

As indicated above, the Interim Rule is the firststep in the use of section 402 of the MoneyLaundering Suppression Act to transform theBank Secrecy Act provisions relating to cur-rency transaction reporting. That transformationhas four objectives.

The first is to reduce the burden of currencytransaction reporting. That reduction comes inpart through the issuance of a blanket regulatoryexemption covering transactions in currencybetween one depository institution and anotherwithin the United States and between depositoryinstitutions and government departments andagencies at all levels. But at least an equal (andlikely a significantly greater) part of the reduc-tion comes from the decision to treat as being oflittle interest to law enforcement transactions incurrency between depository institutions andcorporations whose common stock is listed oncertain national stock exchanges.

That decision reflects a second, related objec-tive of the Interim Rule: to begin the processof limiting currency transaction reports to trans-actions for which the benefits of the reportingrequirement (both providing usable informationto enforcement officials and creating a deterrentagainst attempts to misuse the financial system)justify the costs of supplying the information tothe Treasury. It is unlikely that reports of routinecurrency transactions for a company of suffi-cient size to be traded on a national securitiesexchange can be of significant use, by them-selves, to law enforcement, regulatory, or taxauthorities.

The third objective is to focus the BankSecrecy Act reporting system on transactionsthat signal matters of clear interest to lawenforcement and regulatory authorities. In pub-lishing the final rule relating to the reporting of

2. Thus, as noted below, transactions in currency betweendomestic banks are already exempt from reporting, see31 CFR 103.22(b)(1)(ii), and ‘‘[d]eposits or withdrawals,

exchanges of currency or other payments and transfers bylocal or state governments, or the United States or any of itsagencies or instrumentalities’’ are one of the categories oftransactions specifically described as eligible for exemptionby banks. See 31 CFR 103.22(b)(2)(iii).

Interim Exemption Rule 502.0


suspicious transactions under the Bank SecrecyAct, Treasury stated ‘‘its judgment that report-ing of suspicious transactions in a timely fashionis a key component of the flexible and cost-efficient compliance system required to preventthe use of the nation’s financial system forillegal purposes.’’ See 61 FR 4326, 4327 (Feb-ruary 5, 1996). The Interim Rule re-enforces thecentral importance of suspicious transactionreporting to Treasury’s counter-money launder-ing program; expanded suspicious transactionreporting forms a basis for steps to reducesharply the extent to which routine currencytransactions by ongoing businesses are requiredto be reported. Currency transactions, likenon-currency transactions, are required to bereported under the terms of new 31 CFR 103.21,if they constitute suspicious transactions asdefined in that section; nothing in the InterimRule reduces or alters the obligations imposedby 31 CFR 103.21. See 31 U.S.C. 5313(f)(2)(B).

The relationship between required suspicioustransaction reporting and expanded and simpli-fied exemptions from routine currency trans-action reporting is a strong one; each rule formsan integral part of the policy of the other. Thesubstitution of suspicious transaction reportingfor routine reporting of all currency transactionsby exempt persons in effect defines what aroutine transaction for an exempt person is. Thatis, a routine currency transaction, in the case ofan exempt person, is a transaction that does nottrigger the suspicious transaction reportingrequirements, because the transaction does not,for example, give the bank a reason to suspectmoney laundering, a violation of a reportingrequirement, or the absence of a business pur-pose. See 31 CFR 103.21(a)(2)(i)–(iii).

The fourth objective of the Interim Ruleis to create an exemption system that works.Thus choices have been made with an eyeto achieving ease of administration andcomprehensibility—the very factors whoseabsence hindered the prior administrativeexemption process.

FinCEN has attempted to craft a rule that willbe easily understood by the banking profession-als who must apply it. That meant painting witha broad brush; any general exemption rule willalmost certainly include within its terms someresults that are not optimal when viewed inisolation.

FinCEN understands that the changeoverto the new system will require an initial periodof effort by both the Treasury and banking

institutions; it is impossible to reduce thevolume of currency transaction reports to theextent that the Interim Rule tries to do withoutcreating some small degree of temporary incon-venience as the terms of the system change.FinCEN believes, however, that the transitionperiod will be relatively short and that thenew greatly streamlined exemption procedures,once in place, will be self-sustaining andwill produce a leaner, less burdensome, andmore cost effective exemption system than nowexists.

FinCEN is eager to improve the terms of therule as necessary to eliminate temporary incon-gruities. Comments on ways in which the rulecould be improved in this regard are specificallyinvited.

D. Additional Relief Under Study

The Interim Rule is the first result of FinCEN’swork to put in place the new exemption systemcontemplated by the provisions of 31 U.S.C.5313 (d) through (g). The goal of FinCEN’swork in this area, like the Congress’ goal inshaping the Money Laundering Suppression Actprovisions on exemptions, is to reduce the costof Bank Secrecy Act compliance and to furthera fundamental restructuring of the Bank SecrecyAct. The restructuring emphasizes cost-effectivecollection of only that information that is likelyto benefit law enforcement and regulatoryauthorities.

In solving the issues posed by implementa-tion of the new statutory exemption rules,FinCEN has consulted regularly with bankingindustry representatives. For example, under theauspices of Bank Secrecy Act Advisory Groupit convened a working session of bank officialsto discuss possible structures for the newexemption system and the constraints thatbank operating procedures posed for broad-scalerelief from unnecessary currency transactionreporting.

In this connection, FinCEN is aware that theInterim Rule and any final rule resulting there-from may well affect the operation of largebanks in urban areas more than the operation ofsmaller community-based institutions, if onlybecause larger companies tend to do businesswith larger banks and because the Interim Ruledoes not simplify the exemption system withrespect to transactions by privately held com-panies, large and small, whose banking history



and business would also justify a simplifiedexemption system.

Accordingly, FinCEN is working now on anotice of proposed rulemaking implementingthe discretionary exemption authority containedin 31 U.S.C. 5313(e) and will at the appropriatetime consult with the banking community inshaping proposals to implement that authority.Meanwhile, banks will still be able to maintainany exemptions properly granted under the cur-rent administrative system. Commenters on thisInterim Rule are invited to include in theircomments any suggestions on the projectedsecond stage of the exemption effort.

III. Specific Provisions

A. 103.22(a). Reports of CurrencyTransactions

A new sentence is added following the firstsentence of paragraph (a) of 31 CFR 103.22 toprovide a cross-reference in that paragraph tothe provisions of new paragraph (h) added bythe Interim Rule.

B. 103.22(h)(1). Currency Transactions ofExempt Persons With Banks OccurringAfter April 30, 1996

Paragraph (h)(1) states the general effect of theInterim Rule. That is, simply and directly: nocurrency transaction report is required to be filedby a bank for a transaction in currency by anexempt person occurring after April 30, 1996.

The Interim Rule uses the term ‘‘bank’’ ratherthan ‘‘depository institution’’ to define the classof financial institutions to which the InterimRule applies. Although 31 U.S.C. 5313(d) speaksof exemptions for transactions with ‘‘depositoryinstitutions’’ (as the latter term is defined in31 U.S.C. 5313(g)), FinCEN believes that thebroad definition of bank contained in 31 CFR301.11(c) includes all of the categories of insti-tutions included in the statutory ‘‘depositoryinstitution’’ definition; because the term ‘‘bank’’is familiar to bank officials who work with theBank Secrecy Act, substitution of a new termwhose effect is the same does not appear eithernecessary or advisable.

The Interim Rule applies only to transactionsbetween exempt persons and banks, to reflect

the terms of 31 U.S.C. 5313(d); it does not applyto transactions between exempt persons andfinancial institutions other than banks. Com-ments are invited about whether the rule shouldextend to transactions with such other classes offinancial institutions.

Although 31 U.S.C. 5313(d) speaks of ‘‘man-datory’’ exemptions, the Interim Rule does notaffirmatively prohibit banks from continuing toreport routine currency transactions with exemptpersons. Treasury believes that the incentivescreated by the Interim Rule are, as Congressintended them to be, sufficiently great to leadbanks to take advantage of the new exemptionsystem to a far greater extent than they tookadvantage of the prior administrative exemptionsystem.

The Interim Rule, however, is not simply aregulatory relief measure. As indicated above, itis part of a fundamental restructuring of theBank Secrecy Act’s administration. Treasuryhopes and expects that banks will be willing toundertake the one-time effort necessary to makethe new, substantially different system work.

C. 103.22(h)(2). Exempt Person

Under the Interim Rule, the crucial exemptiondeterminant is whether a particular entity is an‘‘exempt person.’’ That term is defined in newparagraph (h)(2).

The first three categories of exempt personsspecified in paragraph (h)(2) are those to whomexemption is required to be granted by 31 U.S.C.5313(d)(1)(A)–(C).3

Banks.The first category of exempt person isbanks themselves, with the result that transac-tions between banks will not require reporting.In most cases, no reporting is required at presentfor such transactions; 31 CFR 103.22(b)(1)(ii)states flatly that the currency transaction report-ing requirement does not ‘‘require reports oftransactions between domestic banks.’’ The defi-nition is limited to banking operations andtransactions within the United States. Thus atransfer of currency by a bank inside the UnitedStates to a bank outside the United States is notexempt under the Interim Rule.

3. The language of 31 U.S.C. 5313(d)(1)(A)–(C) is quotedin section IIA of this Supplementary Information section,above.



Departments and Agencies of theUnited States and of States andTheir Political Subdivisions

The second category of exempt person includesdepartments and agencies of the United States,of any state, and of any political subdivision ofany state. The definition of ‘‘United States’’used in 31 CFR 103.11 includes not only thestates but also the District of Columbia and thevarious territories and insular possessions of theUnited States. See 31 CFR 103.11(nn); as ofAugust 1, 1996, the definition will also includethe Indian lands. See 61 FR 7054, 7056 (Febru-ary 23, 1996). Thus departments and agencies ofthe governments of these areas are also classi-fied as exempt persons under the definition.

Entities Exercising Governmental Authority

The third category of exempt person includesany entity established under the laws of theUnited States,4 of any state, or of any politicalsubdivision of any state, or under an interstatecompact between two or more states, that exer-cises governmental authority on behalf of theUnited States or any such state or politicalsubdivision. Operating rules for making deter-minations about the governmental entities areincluded in paragraph (h)(4), discussed below.

Listed Corporations

The fourth category of person subject to man-datory exemption under 31 U.S.C. 5313(d) is‘‘any business or category of business the reportson which have little or no value for law enforce-ment purposes.’’ Treasury is making use of thatprovision to treat as an exempt person anycorporation whose common stock (i) is listed onthe New York Stock Exchange or the AmericanStock Exchange (but not including stock listedon the Emerging Company Marketplace of theAmerican Stock Exchange), or (ii) has beendesignated as a Nasdaq National Market Secu-rity listed on the Nasdaq Stock Market (but notincluding stock listed under the separate ‘‘NasdaqSmall-Cap Issues’’ category). For convenience,this class of exempt persons is referred to in thisdiscussion as ‘‘listed corporations.’’

The ‘‘listed corporation’’ formulation has beenadopted for several reasons. First, Treasurybelieves that the formulation is a convenient andaccurate way of describing many, if not most,large-scale enterprises that make extensive rou-tine use of currency in their normal businessoperations. Second, the list of corporationsdescribed in the formulation is readily availableand is published in general circulation news-papers each morning. Finally, the scale of enter-prises listed on the nation’s largest securitiesexchanges, and the variety of internal andexternal controls to which they are subject—whether as a matter of market discipline orgovernment regulation—make their use for thesort of money laundering or tax evasion markedby anomalous transactions in currency, or thatcould be detected by a simple examination ofcurrency transaction reports, sufficiently unlikelythat the benefits of a uniform formulation farexceed the apparent risks of such a formulation.This is especially true because of the continuingapplicability of the suspicious transaction report-ing rules to all (non-currency and currency)transactions between listed corporations andbanks.

The determination whether a company is acorporation for purposes of the Interim Ruledepends solely upon the formal manner of itsorganization; if the company has a corporatecharter, it is a corporation, and if it does not, itis not a corporation, for purposes of the InterimRule. The sort of ‘‘corporate equivalence’’ analy-sis required, for example, for certain purposes todetermine an entity’s status under the InternalRevenue Code is neither called for nor permittedby the Interim Rule.5

At present the Interim Rule applies only tocorporations, even though Treasury understandsthat the equity interests of some partnershipsand business trusts are also listed on the namedsecurities exchanges. Comments are invited asto whether the definition of exempt personshould be extended to all persons whose equityinterests are so listed.

4. Again, the broad definition of ‘‘United States’’ applies.

5. Again, there may be a limited group of entities, listed onthe national securities exchanges but organized abroad, forwhich such a distinction raises issues of interpretation thatcannot be dealt with effectively in the Interim Rule. Guidanceis requested on whether such issues exist and, if so, how theyshould be resolved.



Consolidated Subsidiaries of ListedCorporations

Many, if not most, listed corporations includegroups of subsidiary operating corporationswhose treatment under the Interim Rule raisessignificant issues. Such subsidiaries are notnamed in stock exchange listings, but the policyof the statute and Interim Rule cannot be effec-tively implemented without the inclusion ofsuch subsidiaries in the exempt person category.

That fact raises an issue of what might becalled the ‘‘burden’’ of reducing regulatory bur-den. Many definitions of parent-subsidiary rela-tionship are quite technical and of importanceonly to legal, accounting, and investment spe-cialists; even definitions phrased only in termsof stock ownership often devolve into questionsof direct or indirect stock ownership that can beextremely difficult to resolve.

In that context, mindful of the need to provideas simple a formulation as possible, the InterimRule treats as a subsidiary any corporation thatfiles a consolidated income tax return with alisted corporation. The choice of this standardwas not any easy one; its chief rationale is thatthe fact of consolidation (as opposed to, say,eligibility for consolidation) is relatively easy todetermine by asking corporate customers (andby asking corporate officials to ask their tax oraccounting departments if necessary).

Franchisees of listed corporations (or of theirsubsidiaries) are not included within the defini-tion of exempt person, unless such franchiseesare independently exempt as listed corporationsor listed corporation subsidiaries. A local cor-poration that holds a McDonald’s franchise, forexample, is not an exempt person simply becauseMcDonald’s Corporation is a listed corporation;a McDonald’s outlet owned by McDonald’sCorporation directly, on the other hand, wouldbe an exempt person, because McDonald’s Cor-poration’s common stock is listed on the NewYork Stock Exchange.

Still, the definition is not optimal. It intro-duces a note of complexity into the InterimRule, and Internal Revenue Service (‘‘IRS’’)statistics indicate that at best only 70 to 80 per-cent of the companies eligible to file consoli-dated income tax returns with their parent com-panies actually do so. The success of the InterimRule in reducing the volume of currency trans-action reports will depend in part upon theeffectiveness and acceptance of the definition ofsubsidiary company, and comments are encour-

aged about the appropriateness of the definition.FinCEN would especially welcome ideas aboutother formulations, based upon sound bankingpractice, that bank employees would find easy toapply and that would accomplish the goals ofthe Interim Rule more effectively than a defini-tion based upon consolidation for income taxfiling purposes.

D. 103.22(h)(3). Designation of ExemptPersons

The Interim Rule imposes one condition on abank’s exemption of currency transactions of acustomer who satisfies the definition of exemptperson. That condition is that a single form befiled designating the exempt person and thebank that recognizes it as such. The designationis to be made by a bank by filing for eachexempt person a single Internal Revenue Ser-vice Form 4789 (the form now used by banksand others to report a transaction in currency)that is marked (in the Form’s line 36) to indicateits purpose and that provides identifying infor-mation about the exempt person and bankinvolved.

The designation requirement must be satis-fied, for existing customers, on or beforeAugust 15, 1996. The requirement is a conditionsubsequent; that is, a bank may recognize acustomer as an exempt person on April 30, andstop filing currency transaction reports as per-mitted by the Interim Rule, even though it doesnot satisfy the designation requirement for thecustomer until August 15, 1996.

The designation of new customers as exemptpersons must be made no later than 30 daysfollowing the first transaction in currency inexcess of $10,000 between a bank and thenew customer. (Because persons may becomenew customers during the period April 30–August 15, 1996, a new customer to whom the30 day designation rule applies is, technically, acustomer who satisfies the exempt person defi-nition and who becomes a customer, or whoseeks to engage in its first transaction in cur-rency, after July 15, 1996.)

Under the Interim Rule, each bank that dealswith an exempt person must satisfy the desig-nation requirement. FinCEN hopes to be able touse the results of the designation filings tocompile a list of exempt persons that can itselfbe published in the Federal Register, as contem-plated by 31 U.S.C. 5313(d)(2), in place of the



shorter descriptive notice of exempt persons thatis published contemporaneously with the publi-cation of the Interim Rule. The designationfilings will also be used to review the effective-ness of the Interim Rule (and of any final rulethat is derived from it) and the extent to whichits terms are understood and used by banks.

E. 103.22(h)(4). Operating Rules forApplying Definition of Exempt Person

The Interim Rule contains several provisionsthat are designed to assist banks in applying thedefinition of ‘‘exempt person.’’

1. General Rule

As indicated above, every effort has been madeto craft a rule that is as simple to understand andto administer as its broad objective will permit.Application of the Interim Rule requires insteadthat banks simply make one or more determina-tions about the status of particular customers.The rule does not specify detailed proceduresfor making or documenting the determinationsrequired. (Indeed, one defect of the administra-tive exemption system was its need for detailedprocedural steps for authorizing exemptions.See 31 CFR 103.22(d).) Instead, paragraph(h)(4)(i) explains that banks are expected toperform the same degree of due diligence indetermining whether a customer is an exemptperson (and documenting that determination)that a reasonable and prudent bank would per-form in the conduct of its own business inavoiding losses from fraud or misstatement. Inother words, FinCEN’s objective is to leave it tobankers, who have already designed businessprocedures and protocols to deal with similarproblems, to adapt their present procedures toachieve the results sought by the Interim Rule.

An assessment of compliance with the termsof the Interim Rule will focus not on whether abank necessarily makes every judgment per-fectly, but on whether it takes the steps areasonable and prudent banker would take tocreate systems to apply the Interim Rule’s terms.Such an approach is a corollary to the limita-tions on liability set by 31 U.S.C. 5318(f)(1) andrepeated in paragraph (h)(6) of the Interim Rule;under the liability limitations a bank remainssubject to penalties if, inter alia, it has a reasonto believe that a particular customer or trans-

action does not meet the criteria established forthe granting of an exemption.

2. Government Status

Paragraph (h)(4)(ii) permits a bank to determinethe status of a customer as a government depart-ment, agency, or instrumentality based on itsname or community knowledge, much like theso-called ‘‘eyeball test,’’ cf. Treas. Reg. 1.6049-4(c)(1)(ii), for the determination of exemptrecipient status for the purposes of informationreporting and withholding with respect to inter-est payments under applicable provisions of theInternal Revenue Code.

The determination whether an entity exercises‘‘governmental authority’’ is unfortunately notamenable to such a simple test, and the secondsentence of paragraph (h)(4)(ii) states a generaldefinition of governmental authority for use bybanks.

3. Status as Listed Corporation

Paragraph (h)(4)(iii) permits a bank to rely onany New York, American, or Nasdaq StockMarket listing published in a newspaper ofgeneral circulation. Such listings are easily iden-tified. For example, in the Wall Street Journal,which is published and distributed nationally,the listings are entitled, respectively, ‘‘NEWYORK STOCK EXCHANGE COMPOSITETRANSACTIONS,’’ ‘‘AMERICAN STOCKEXCHANGE COMPOSITE TRANSAC-TIONS,’’ AND ‘‘NASDAQ NATIONAL MAR-KET ISSUES.’’ Because such listings oftenmake use of the trading symbols (abbreviatedcompany names) for each stock, banks may alsorely on any commonly accepted or publishedstock symbol guide in reviewing the newspaperlistings to determine if the listings include theircustomers.

4. Consolidated Return Status

The treatment of a corporation as an exemptperson because it is included in the consolidatedincome tax return of a listed corporation pre-sents one of the more difficult issues of admin-istration in the Interim Rule. The corporationsincluded on any consolidated return are requiredto be shown on Internal Revenue ServiceForm 851 (Affiliation Schedule) filed with the



return; a bank may rely upon any reasonablyauthenticated photocopy of Form 851 (or theequivalent thereof for the appropriate tax year)in determining the status of a particular corpo-ration, or it may rely upon any other reasonablyauthenticated information (for example, anofficer’s certificate) relating to a corporation’sfiling status.

F. 103.22(h)(5). Limitation on Exemption

The exemption for transactions by an exemptperson applies only with respect to transactionsinvolving that person’s own funds. The exemp-tion does not apply to situations in which anexempt person is engaging in a transaction as anagent on behalf of another, beneficial owner ofcurrency. (If the principal for whom the agent isacting is itself an exempt person, the exemptstatus of the principal is what causes the trans-action to be exempt.) In other words, an exemptperson cannot lend its status, for a fee orotherwise, to another person’s transactions.

G. 103.22(h)(6). Effect of Exemption;Limitation on Liability

The designation requirement applies equally toexempt persons who have previously been thesubject of bank-initiated exemptions under theadministrative exemption system as it does toother customers.

Once a bank has complied with the terms ofthe Interim Rule, it is generally protected, by31 U.S.C. 5313(f) and paragraph (h)(6) of theInterim Rule, from any penalty for failure to filea currency transaction report with respect to acurrency transaction by an exempt person. Theprotection does not apply if the bank knowinglyfiles false or incomplete information relating tothe exempt person (for example on an designa-tion filing) or with respect to the transaction (forexample on a suspicious activity report). Theprotection also does not apply if the bank hasreason to believe at the time the exemption isgranted that the customer does not satisfy thedefinition of exempt person or if the transactionis not a transaction of the exempt person.

It is anticipated that the Interim Rule willsupersede the administrative exemption systemwith respect to categories of exempt personsnamed in the Interim Rule, 60 days after a finalrule based on the Interim Rule is published. At

that time, transactions in currency with exemptpersons after April 30, 1996 will be exemptfrom reporting by banks only to the extent thatthe new terms are satisfied.

H. 103.22(h)(7). Obligation To FileSuspicious Activity Reports, etc.

The provisions of the Interim Rule create anexemption only with respect to the currencytransaction reporting requirement. The InterimRule does not create any exemption, and in facthas no effect of any kind, on the requirementthat banks file suspicious activity reports withrespect to transactions, including currencyand non-currency transactions, that satisfy therequirements of the rules of FinCEN and thefederal bank supervisory agencies relating tosuspicious activity reporting.6 (Indeed, as indi-cated above, the reduction in currency trans-action report volume reflects in part Treasurypolicy to rely to the greatest extent possible onreports of truly suspicious activity.)

For example, multiple exchanges of smalldenominations of currency into large denomina-tions of currency or currency transactions thatare not (or whose amounts are not) commensu-rate with the stated business or other activity ofthe exempt person conducting the transaction, oron whose behalf the transaction is conducted,may indicate the need to file suspicious activityreports with respect to transactions in currency.Similarly a sudden need for currency by abusiness that never before had such a need canform a basis for the determination that a suspi-cious activity report is due. In all cases, whethersuch a report is required is governed by the rulesof 31 CFR 103.21, rules on whose applicationthe Interim Rule has no effect.

I. 103.22(h)(8). Revocation

The Interim Rule makes clear that the status ofan exempt person as such may be revoked at anytime by the Treasury Department. Revocation

6. See 61 FR 4326, 4332, 4338 (February 5, 1996) (FinCEN,Office of the Comptroller of the Currency and Federal ReserveBoard); 61 FR 6095, 6100 (February 16, 1996) (FederalDeposit Insurance Corporation and Office of Thrift Supervi-sion); and 61 FR 11526 (March 21, 1996) (National CreditUnion Administration).



will be prospective in all cases except those towhich the protections of liability conferred by31 U.S.C. 5313(f) and 31 CFR 103.22(h)(6) donot apply.

IV. Regulatory Matters

A. Executive Order 12866

The Department of the Treasury has determinedthat this interim rule is not a significant regula-tory action under Executive Order 12866.

B. Unfunded Mandates Act of 1995Statement

Section 202 of the Unfunded Mandates ReformAct of 1995 (‘‘Unfunded Mandates Act’’),Pub. L. 104-4 (March 22, 1995), requires that anagency prepare a budgetary impact statementbefore promulgating a rule that includes a fed-eral mandate that may result in expenditure bystate, local and tribal governments, in theaggregate, or by the private sector, of $100 mil-lion or more in any one year. If a budgetaryimpact statement is required, section 202 of theUnfunded Mandates Act also requires an agencyto identify and consider a reasonable number ofregulatory alternatives before promulgating arule. FinCEN has determined that it is notrequired to prepare a written statement undersection 202 and has concluded that on balancethis interim rule provides the most cost-effectiveand least burdensome alternative to achieve theobjectives of the rule.

C. Administrative Procedure Act

Because the Interim Rule implements the statuteand grants significant relief from existing regu-latory requirements, it is found to be impracti-cable to comply with notice and public proce-dure under 5 U.S.C. 553(b). Because the InterimRule grants exemptions to current requirements,it may be made effective before 30 days havepassed after its publication date. See 5 U.S.C.553(d).

D. Regulatory Flexibility Act

The provisions of the Regulatory Flexibility Actrelating to an initial and final regulatory flex-

ibility analysis (5 U.S.C. 604) are not applicableto this Interim Rule because the agency was notrequired to publish a notice of proposed rule-making under 5 U.S.C. 553 or any other law.

E. Paperwork Reduction Act

This Interim Rule is being issued without priornotice and public procedure pursuant to theAdministrative Procedure Act (5 U.S.C. 553).By expanding the applicable exemptions froman information collection that has been reviewedand approved by the Office of Management andBudget (OMB) under control number 1505-0063, the Interim Rule significantly reduces theexisting burden of information collection under31 CFR 103.22. Thus, although the Interim Ruleadvances the purposes of the Paperwork Reduc-tion Act of 1995, 44 U.S.C. 3501, et seq., and itsimplementing regulations, 5 CFR Part 1320, thePaperwork Reduction Act does not requireFinCEN to follow any particular procedures inconnection with the promulgation of the InterimRule.

F. Compliance With 5 U.S.C. 801

Prior to the date of publication of this documentin the Federal Register, FinCEN will have sub-mitted to each House of the Congress and to theComptroller General the information required tobe submitted or made available with respect tothe Interim Rule by the provisions of 5 U.S.C.801 (a)(1)(A) and (a)(1)(B).

List of Subjects in 31 CFR Part 103

Administrative practice and procedure, Author-ity delegations (Government agencies), Banks,banking, Currency, Foreign Banking, Foreigncurrencies, Gambling, Investigations, Lawenforcement, Penalties, Reporting and record-keeping requirements, Securities, Taxes.

Amendment

For the reasons set forth above in the preamble,31 CFR Part 103 is amended as set forth below:



PART 103—FINANCIALRECORDKEEPING ANDREPORTING OF CURRENCY ANDFOREIGN TRANSACTIONS

1. The authority citation for Part 103 contin-ues to read as follows:

Authority: 12 U.S.C. 1829b and 1951-1959;31 U.S.C. 5311-5330.

2. Section 103.22 is amended by adding anew sentence immediately following the firstsentence in paragraph (a)(1) and by adding anew paragraph (h) to read as follows:

§103.22—Reports of currencytransactions.

(a)(1) * * * Transactions in currency byexempt persons with banks occurring afterApril 30, 1996, are not subject to this require-ment to the extent provided in paragraph (h) ofthis section. * * *

* * * * *(h) No filing required by banks for trans-

actions by exempt persons occurring afterApril 30, 1996.

(1) Currency transactions of exempt personswith banks occurring after April 30, 1996.Notwithstanding the provisions of paragraph(a)(1) of this section, no bank is required to filea report otherwise required by paragraph (a)(1)of this section, with respect to any transaction incurrency between an exempt person and a bankthat is conducted after April 30, 1996.

(2) Exempt person. For purposes of this sec-tion, an exempt person is:

(i) A bank, to the extent of such bank’sdomestic operations;

(ii) A department or agency of the UnitedStates, of any state, or of any political subdivi-sion of any state;

(iii) Any entity established under the laws ofthe United States, of any state, or of any politicalsubdivision of any state, or under an interstatecompact between two or more states, that exer-cises governmental authority on behalf of theUnited States or any such state or politicalsubdivision;

(iv) Any corporation whose common stock islisted on the New York Stock Exchange or theAmerican Stock Exchange (except stock listedon the Emerging Company Marketplace of theAmerican Stock Exchange) or whose common

stock has been designated as a Nasdaq NationalMarket Security listed on the Nasdaq StockMarket (except stock listed under the separate‘‘Nasdaq Small-Cap Issues’’ heading); and

(v) Any subsidiary of any corporationdescribed in paragraph (h)(2)(iv) of this sectionwhose federal income tax return is filed as partof a consolidated federal income tax return withsuch corporation, pursuant to section 1501 ofthe Internal Revenue Code and the regulationspromulgated thereunder, for the calendar year1995 or for its last fiscal year ending beforeApril 15, 1996.

(3) Designation of exempt persons.(i) A bank must designate each exempt per-

son with whom it engages in transactions incurrency, on or before the later of August 15,1996, and the date 30 days following the firsttransaction in currency between such bank andsuch exempt person that occurs after April 30,1996.

(ii) Designation of an exempt person shall bemade by a single filing of Internal RevenueService Form 4789, in which line 36 is marked‘‘Designation of Exempt Person’’ and items2–14 (Part I, Section A) and items 37–49(Part III) are completed. The designation mustbe made separately by each bank that treats theperson in question as an exempt person. (Foravailability, see 26 CFR 601.602.)

(iii) This designation requirement applieswhether or not the particular exempt person tobe designated has previously been treated asexempt from the reporting requirements of para-graph (a) of this section under the rules con-tained in paragraph (b) or (e) of this section.

(4) Operating rules for designating exemptpersons.

(i) Subject to the specific rules of this para-graph (h), a bank must take such steps to assureitself that a person is an exempt person (withinthe meaning of applicable provisions of para-graph (h)(2) of this section) that a reasonableand prudent bank would take to protect itselffrom loan or other fraud or loss based onmisidentification of a person’s status.

(ii) A bank may treat a person as a govern-mental department, agency, or entity if the nameof such person reasonably indicates that it isdescribed in paragraph (h)(2)(ii) or (h)(2)(iii) ofthis section, or if such person is known generallyin the community to be a State, the District ofColumbia, a tribal government, a Territory orInsular Possession of the United States, or apolitical subdivision or a wholly-owned agency



or instrumentality of any of the foregoing. Anentity generally exercises governmental author-ity on behalf of the United States, a State, or apolitical subdivision, for purposes of paragraph(h)(2)(iii) of this section, only if its authoritiesinclude one or more of the powers to tax, toexercise the authority of eminent domain, or toexercise police powers with respect to matterswithin its jurisdiction.

(iii) In determining whether a person isdescribed in paragraph (h)(2)(iv) of this section,a bank may rely on any New York StockExchange, American Stock Exchange, or NasdaqStock Market listing published in a newspaperof general circulation and on any commonlyaccepted or published stock symbol guide.

(iv) In determining whether a person isdescribed in paragraph (h)(2)(v) of this section,a bank may rely upon any reasonably authen-ticated corporate officer’s certificate or anyreasonably authenticated photocopy of InternalRevenue Service Form 851 (Affiliation Sched-ule) or the equivalent thereof for the appropriatetax year.

(5) Limitation on exemption. A transactioncarried out by an exempt person as an agent foranother person who is the beneficial owner ofthe funds that are the subject of a transaction incurrency is not subject to the exemption fromreporting contained in paragraph (h)(1) of thissection.

(6) Effect of exemption; limitation on liability.(i) FinCEN may in the future determine by

amendment to this part that the exemptioncontained in this paragraph (h) shall be the onlybasis for exempting persons described in para-graph (h)(2) of this section from the reportingrequirements of paragraph (a) of this section.

(ii) No bank shall be subject to penalty underthis part for failure to file a report required byparagraph (a) of this section with respect to acurrency transaction by an exempt person withrespect to which the requirements of this para-graph (h) have been satisfied, unless the bank:

(A) Knowingly files false or incompleteinformation with respect to the transaction or thecustomer engaging in the transaction; or

(B) Has reason to believe at the time theexemption is granted that the customer does notmeet the criteria established by this paragraph(h) for treatment of the transactor as an exemptperson or that the transaction is not a transactionof the exempt person.

(iii) A bank that files a report with respect toa currency transaction by an exempt person

rather than treating such person as exempt shallremain subject with respect to each such reportto the rules for filing reports, and the penaltiesfor filing false or incomplete reports, that areapplicable to reporting of transactions in cur-rency by persons other than exempt persons. Abank that continues for the period permitted byparagraph (h)(6)(i) of this section to treat aperson described in paragraph (h)(2) of thissection as exempt from the reporting require-ments of paragraph (a) of this section on a basisother than as provided in this paragraph (h) shallremain subject in full to the rules governing anexemption on such other basis and to the pen-alties for failing to comply with the rules gov-erning such other exemption.

(7) Obligation to file suspicious activityreports, etc. Nothing in this paragraph (h) relievesa bank of the obligation, or alters in any waysuch bank’s obligation, to file a report requiredby 103.21 with respect to any transaction, includ-ing, without limitation, any transaction in cur-rency, or relieves a bank of any other reportingor recordkeeping obligation imposed by this part(except the obligation to report transactions incurrency pursuant to paragraph (a) of this sec-tion to the extent provided in this paragraph (h)).

(8) Revocation. The status of any person asan exempt person under this paragraph (h) maybe revoked by FinCEN by written notice, whichmay be provided by publication in the FederalRegister in appropriate situations, on such termsas are specified in such notice. In addition, andwithout any action on the part of the TreasuryDepartment:

(i) The status of a corporation as an exemptperson pursuant to paragraph (h)(2)(iv) of thissection ceases once such corporation ceases tobe listed on the applicable stock exchange; and

(ii) The status of a subsidiary as an exemptperson under paragraph (h)(2)(v) of this sectionceases once such subsidiary ceases to be includedin a consolidated federal income tax return of aperson described in paragraph (h)(2)(iv) of thissection.

* * * * *

Dated: April 16, 1996.

Stanley E. Morris,Director, Financial Crimes Enforcement

Network.[FR Doc. 96-9798 Filed 4-23-96; 8:45 am]BILLING CODE 4820-03-P



‘‘Know Your Customer’’Section 601.0

INTRODUCTION

One of the most important, if not the mostimportant, means by which financial institutionscan hope to avoid criminal exposure to theinstitution by ‘‘customers’’ who use the resourcesof the institution for illicit purposes is to have aclear and concise understanding of the ‘‘custom-ers’ ’’ practices. The adoption of ‘‘know yourcustomer’’ guidelines or procedures by financialinstitutions has proven extremely effective indetecting suspicious activity by ‘‘customers’’ ofthe institution in a timely manner.

Even though not presently required by regu-lation or statute, it is imperative that financialinstitutions adopt ‘‘know your customer’’ guide-lines or procedures to ensure the immediatedetection and identification of suspicious activ-ity at the institution. The concept of ‘‘know yourcustomer’’ is, by design, not explicitly definedso that each institution can adopt proceduresbest suited for its own operations. An effective‘‘know your customer’’ policy must, at a mini-mum, contain a clear statement of manage-ment’s overall expectations and establishspecific line responsibilities. While the officersand staff of smaller banks, Edge corporations,and foreign branches or agencies may havemore frequent and direct contact with customersthan large urban institutions, it is incumbentupon all institutions to adopt and follow policiesappropriate to their size, location, and type ofbusiness.

OBJECTIVES OF ‘‘KNOW YOURCUSTOMER’’ POLICY

• A ‘‘know your customer’’ policy shouldincrease the likelihood that the financial insti-tution is in compliance with all statutes andregulations and adheres to sound and recog-nized banking practices.

• A ‘‘know your customer’’ policy shoulddecrease the likelihood that the financial insti-tution will become a victim of illegal activitiesperpetrated by its ‘‘customers.’’

• A ‘‘know your customer’’ policy that is effec-tive will protect the good name and reputationof the financial institution.

• A ‘‘know your customer’’ policy should notinterfere with the relationship of the financialinstitution with its good customers.

CONTENTS OF ‘‘KNOW YOURCUSTOMER’’ POLICY

In developing an effective ‘‘know your cus-tomer’’ policy it is important to note thatappearances can be deceiving. Potential custom-ers of a financial institution may appear to belegitimate, but in reality are conducting illicitactivities through the financial institution. Like-wise, legitimate customers may be turned awayfrom the institution because their activities areperceived to have a criminal tone. It is alsoimportant to realize that various influences onlegitimate customers may transform such cus-tomers into wrongdoers.

At the present time there are no statutorilymandated procedures requiring a ‘‘know yourcustomer’’ policy or specifying the contents ofsuch a policy. However, in order to develop andmaintain a practical and useful policy, financialinstitutions should incorporate the followingprinciples into their business practices:

• Financial institutions should make a reason-able effort to determine the true identity of allcustomers requesting the bank’s services;

• Financial institutions should take particularcare to identify the ownership of all accountsand of those using safe-custody facilities;

• Identification should be obtained from all newcustomers;

• Evidence of identity should be obtained fromcustomers seeking to conduct significant busi-ness transactions;

• Financial institutions should be aware of anyunusual transaction activity or activity thatis disproportionate to the customer’s knownbusiness.

An integral part of an effective ‘‘know yourcustomer’’ policy is a comprehensive knowl-edge of the transactions carried out by thecustomers of the financial institution. Therefore,it is necessary that the ‘‘know your customer’’procedures established by the institution allowfor the collection of sufficient information to


develop a ‘‘customer profile.’’ The primaryobjective of such procedures is to enable thefinancial institution to predict with relative cer-tainty the types of transactions in which acustomer is likely to be engaged. The customerprofile should allow the financial institution tounderstand all facets of the customer’s intendedrelationship with the institution, and, realisti-cally, determine when transactions are suspi-cious or potentially illegal. Internal systemsshould then be developed for monitoring trans-actions to determine if transactions occur whichare inconsistent with the ‘‘customer profile.’’ A‘‘know your customer’’ policy must consist ofprocedures that require proper identification ofevery customer at the time a relationship isestablished in order to prevent the creation offictitious accounts. In addition, the bank’semployee education program should provideexamples of customer behavior or activity whichmay warrant investigation.

IDENTIFYING THE CUSTOMER

As a general rule, a business relationship witha financial institution should never be estab-lished until the identity of a potential cus-tomer is satisfactorily established. If a potentialcustomer refuses to produce any of therequested information, the relationship shouldnot be established. Likewise, if requestedfollow-up information is not forthcoming, anyrelationship already begun should be termi-nated. The following is an overview of generalprinciples to follow in establishing customerrelationships:

Personal Accounts

1. No account should be opened without satis-factory identification, such as:• a driver’s license with a photograph issued

by the State in which the bank is located;or

• a U.S. passport or alien registration card,together with:

• a college photo identification card;• a major credit card (verify the current

status);• an employer identification card;• an out-of-State driver’s license; and/or• electricity, telephone.

2. Consider the customer’s residence or placeof business. If it is not in the area served bythe bank or branch, ask why the customer isopening an account at that location.

3. Follow up with calls to the customer’s resi-dence or place of employment thanking thecustomer for opening the account. Discon-nected phone service or no record of employ-ment warrant further investigation.

4. Consider the source of funds used to open theaccount. Large cash deposits should bequestioned.

5. For large accounts, ask the customer for aprior bank reference and write a letter to thebank asking about the customer.

6. Check with service bureaus for indicationsthe customer has been involved in question-able activities such as kiting incidents andNSF situations.

7. The identity of a customer may be estab-lished through an existing relationship withthe institution such as some type of loan orother account relationship.

8. A customer may be a referral from a bankemployee or one of the bank’s acceptedcustomers. In this instance, a referral alone isnot sufficient to identify the customer, but inmost instances it should warrant less vigi-lance than otherwise required.

Business Accounts

1. Business principals should provide evidenceof legal status (e.g. sole proprietorship, part-nership, or incorporation or association) whenopening a business account.

2. Check the name of a commercial enterprisewith a reporting agency and check prior bankreferences.

3. Follow up with calls to the customer’s busi-ness thanking the customer for opening theaccount. Disconnected phone service war-rants further investigation.

4. When circumstances allow, perform a visualcheck of the business to verify the actualexistence of the business and that the busi-ness has the capability of providing theservices described.

5. Consider the source of funds used to open theaccount. Large cash deposits should bequestioned.

6. For large commercial accounts, the followinginformation should be obtained:

601.0 ‘‘Know Your Customer’’


• a financial statement of the business;• a description of the customer’s principal

line of business;• a list of major suppliers and customers and

their geographic locations;• a description of the business’s primary

trade area, and whether international trans-actions are expected to be routine; and

• a description of the business operationsi.e., retail versus wholesale, and the antici-pated volume of cash sales.

LOAN TRANSACTIONS

It is important to realize that relationships with afinancial institution that take a form other thandeposit accounts can be used for illicit purposes.Loan transactions have become a common vehi-cle for criminal enterprises that wish to takeadvantage of the proceeds of their illegal activi-ties. Therefore, prudent financial institutionsshould apply their ‘‘know your customer’’ pol-icy to customers requesting credit facilities fromthe institution.

SUSPICIOUS CONDUCT ANDTRANSACTIONS

In making a determination as to the validity of acustomer, there are certain categories of activi-ties that are suspicious in nature and should alertfinancial institutions as to the potential for thecustomer to conduct illegal activities at theinstitution. The categories, broadly defined, are:

• Insufficient, false, or suspicious informationprovided by the customer.

• Cash deposits which are not consistent withthe business activities of the customer.

• Purchase and/or deposits of monetary instru-ments which are not consistent with the busi-ness activities of the customer.

• Wire transfer activity which is not consistentwith the business activities of the customer.

• Structuring of transactions to evade record-keeping and/or reporting requirements.

• Funds transfers to foreign countries.

The general categories, delineated above, canbe broken down into various functions of thefinancial institution. Set forth below are morespecific suspicious activities as related to thevarious functions of the financial institution:

Tellers and Lobby Personnel

• Customer is reluctant to provide any informa-tion requested for proper identification.

• Customer opens a number of accounts underone or more names and subsequently makesdeposits of less than $10,000 in cash in eachof the accounts.

• Customer is reluctant to proceed with a trans-action after being informed that a CurrencyTransaction Report (CTR) will be filed, orwithholds information necessary to completethe form.

• Customer makes frequent deposits or with-drawals of large amounts of currency for noapparent business reason, or for a businesswhich generally does not involve large amountsof cash.

• Customer exchanges large amounts of cur-rency from small to large denomination bills.

• Customer makes frequent purchases of mone-tary instruments for cash in amounts less than$10,000.

• Customers who enter the bank simultaneouslyand each conduct a large currency transactionunder $10,000 with different tellers.

• Customer who makes constant deposits offunds into an account and almost immediatelyrequests wire transfers to another city orcountry, and that activity is inconsistent withthe customer’s stated business.

• Customer who receives wire transfers andimmediately purchases monetary instrumentsfor payment to another party.

• Traffic patterns of a customer change in thesafe deposit box area possibly indicating thesafekeeping of large amounts of cash.

• Customer discusses CTR filing requirementswith the apparent intention of avoiding thoserequirements or makes threats to an employeeto deter the filing of a CTR.

• Customer requests to be included on theinstitution’s exempt list.

Bookkeeping and Wire TransferOperations

• Customer who experiences increased wireactivity when previously there has been noregular wire activity.

‘‘Know Your Customer’’ 601.0


• International transfers for accounts with nohistory of such transfers or where the statedbusiness of the customer does not warrantsuch activity.

• Customer receives many small incoming wiretransfers or deposits of checks and moneyorders then requests wire transfers to anothercity or country.

• Customer uses wire transfers to move largeamounts of money to a bank secrecy havencountry.

• Request from nonaccountholder to receive orsend wire transfers involving currency fromnonaccountholder near the $10,000 limit orthat involve numerous monetary instruments.

• Nonaccountholder receives incoming wiretransfers under instructions to the bank to‘‘Pay Upon Proper Identification’’ or to con-vert the funds to cashier’s checks and mailthem to the nonaccountholder.

Loan Officers and CreditAdministration Personnel

• Customer’s stated purpose for the loan doesnot make economic sense, or customer pro-poses that cash collateral be provided for aloan while refusing to disclose the purpose ofloan.

• Requests for loans to offshore companies, orloans secured by obligations of offshore banks.

• Borrower pays down a large problem loansuddenly, with no reasonable explanation ofthe source of funds.

• Customer purchases certificates of deposit anduses them as loan collateral.

• Customer collateralizes loan with cash deposit.• Customer uses cash collateral located offshore

to obtain loan.• Loan proceeds are unexpectedly channeled

off-shore.

601.0 ‘‘Know Your Customer’’


Wire Transfer SystemsSection 701.0

INTRODUCTION

As financial institutions, law enforcement agen-cies, and financial regulators have increasedtheir scrutiny of cash transactions, money laun-derers have become more sophisticated in usingall services and tools available to launder cashand move funds, including the wire transfersystems. This section will provide some back-ground and information on how the differentwire transfer systems work, how these systemsare used by money launderers, and how exam-iners should review a bank’s wire transfersoperations as part of the examination for com-pliance with the Bank Secrecy Act.

WIRE TRANSFER SYSTEMS

There are three wire transfer systems used in theUnited States by financial institutions—Fedwire,CHIPS, and S.W.I.F.T. All three systems sharethe same characteristics of high dollar value ofthe individual transfers, a real time system, anda widely distributed network of users. There areimportant differences, however, and these willbe discussed below. In order to examine aninstitution’s wire transfer function thoroughly, itis important to understand how the system(s)works. Each of the three wire transfer systemswill be looked at below.

Fedwire

Fedwire is the funds transfer system operated bythe Federal Reserve System. The Fedwire sys-tem may be used by any institution holding anaccount with a Federal Reserve Bank and it isprincipally domestic in orientation. It is a real-time system characterized by the instantaneous,irrevocable transfer of funds. As a ‘‘wholesale’’wire transfer system, Fedwire is primarily usedto transfer funds between financial institutionsand their major corporate customers. There areno restrictions on the minimum dollar size ofFedwire transfers, and individuals and smallbusinesses can and do use Fedwire by goingthrough their financial institution.

A financial institution can originate a Fedwiremessage in one of two ways—‘‘on-line’’ or

‘‘off-line.’’ On-line institutions have an elec-tronic connection to the Federal Reserve, andoff-line institutions have no such connectionand usually telephone the Federal Reserveto initiate a transfer. The large, high volumeinstitutions use a direct computer-to-computerconnection with Fed to originate funds transfersover Fedwire, and the other on-line institutionsuse a leased line connection or a telephonedial-up system to connect a PC to the Fedwiresystem. Because the settlement of all Fedwiretransfers is made through reserve accounts main-tained at the Federal Reserve Banks, all transfersgo through a Reserve Bank for routing andsettlement.

Off-line institutions usually telephone the Fedand give instructions over the phone using aprearranged codeword. The Fed verifies thecodeword and enters the message into the elec-tronic system for processing and sending to thereceiving institution. Fedwire transfers sent toan off-line institution are credited immediately,and the institution is either notified by phonefrom the Fed or by copy of the Fedwire messagesent to the institution the next day.

The actual transfer of funds in the Fedwiresystem takes place on the books of the FederalReserve. For a transfer to an institution in thesame Federal Reserve District, the FederalReserve Bank, upon receiving the Fedwireinstructions from the originating institution, deb-its the account of the originator and credits theaccount of the receiving institution. For interd-istrict transfers, the ‘‘local’’ FR Bank debits theaccount of the originator and credits the accountof the ‘‘receiving’’ FR Bank, which, in turn,credits the account of the receiving institution.

CHIPS

CHIPS (Clearing House Interbank PaymentsSystem) is a privately owned and operated fundstransfer system. It is owned and operated by theNew York Clearing House Association. CHIPScurrently has 128 members who are primarilymoney center banks in New York, Chicago, andSan Francisco as well as large internationalbanks.

CHIPS has its own communications networkand processes its own messages for memberinstitutions. During the day CHIPS maintains


the net credit and debit positions of memberswhile routing messages from sender to receiver.Although used primarily for international trans-fers, CHIPS is used to a small extent fordomestic transfers between U.S. banks and canbe used as an alternative to Fedwire if both thesending and receiving institutions are CHIPSmembers.

In CHIPS the transfer of funds does not occurwith the sending of the message. Rather, at theend of each day any of the 30 CHIPS settlementparticipants that are in a net debit position wirefunds by Fedwire to the CHIPS account at theNew York Fed and CHIPS sends these funds tothe banks in a net credit position by Fedwire.This end of day settlement feature is the biggestdifference between Fedwire and CHIPS, and italso puts CHIPS participants at risk if a partici-pating bank should fail or is unable to cover itsposition.

S.W.I.F.T.

SWIFT stands for the Society for WorldwideInterbank Financial Telecommunications. It is acooperatively owned, non-profit organizationwhich was founded in 1973 to serve the dataprocessing and telecommunications needs of itsmembers. SWIFT currently has members inmost countries throughout the world. The mem-bership base is very broad and includes com-mercial banks, investment banks, securitiesbroker/dealers, and other financial institutions.

As its name implies, SWIFT handles all sortsof telecommunications for its member institu-tions. Transfers of funds are only one use ofSWIFT, others being securities transfers, lettersof credit, advices of collection, foreign exchange,and free format information messages. All mes-sages are sent through the SWIFT network,SWIFT’s privately owned, worldwide telecom-munications network. Because of the availabil-ity of Fedwire and CHIPS, SWIFT is usedalmost exclusively by U.S. banks for interna-tional funds transfers and messages.

A SWIFT funds transfer message is simplynotification that funds are being transferred. Theactual movement of funds is independent of themessage, and transfers are effected in two com-mon ways. The first method is to transfer thefunds by transferring balances through mutualcorrespondent banks, and the second method isto settle through Fedwire or CHIPS.

A bank’s SWIFT operations are usuallylocated in its international department, althoughadditional terminals with SWIFT access couldbe located in the foreign exchange departmentor the securities trading department.

HOW A COMMERCIAL BANK’SWIRE ROOM WORKS

In order to examine the Fedwire operations of acommercial bank, it is important to understandhow the ‘‘wire room’’ of a commercial bankoperates. In the larger banks with a significantvolume of wire traffic, there may be a depart-ment dedicated to this function. In most banks,however, the Fedwire volume does not justify afull time staff or person, and the sending andreceiving of wires may be part-time responsi-bilities for one or several people. Every bank hasits own procedures for handling wires, but thereare enough features in common to allow forgeneric descriptions for large and small banks.

Large Banks

Large banks with a Fedwire volume of severalhundred messages per day will most likely usededicated computer resources for Fedwire—either part of the bank’s host computer or aseparate minicomputer. These banks utilize acomputer-to-computer (computer interface) elec-tronic link with the Fed, which allows for fastertransmission of high volumes. The softwareused for wire transfers, either developed in-house or purchased from a vendor, allows forautomatic posting to DDA and general ledger.

The wire room may receive payment ordersfrom several different sources, including autho-rized personnel from within the bank and cor-porate customers who may either call the bank,fax instructions, or even have an on-line con-nection with the bank to send wire instructionsand access other bank services. Phone calls tothe wire room are recorded for security andaudit reasons, and the tapes are usually main-tained for a 30 day period. The bank should haveprocedures in place to verify payment orders.These procedures usually include the use ofcode words, call backs, and corporate resolu-tions authorizing certain employees to sendwires. Verification and security procedures are

701.0 Wire Transfer Systems


extremely important in light of the potential forhigh losses.

After a payment order is received, a Fedwiremessage is entered into the bank’s system at anon-line terminal. Before the wire is sent to theFed, it is sent to a second terminal to be verifiedfor accuracy as well as proper authorization.Only after the payment order is reviewed by thesecond staff member is it sent to the Fed forprocessing. This separation of duties is extremelyimportant to ensure security.

The bank’s software will maintain data oneach day’s transfers in several different ways.These might include a listing by wires sent andreceived, wires listed by amount, wires listed bysequence number, and wires listed by accountholder. Most software systems maintain thework of several previous days, often the last 5 to7 days, to allow for on-line access to trace errorsand problems. After the 5 to 7 days, the datamay be maintained on microfiche or paperlisting.

Smaller Banks

Smaller banks with a low volume of Fedwiretransactions will typically have one or severalstaff members handling the sending and receiv-ing of wires over a connection from the bank’sPC to the Fed’s mainframe. The PC connectionis called Fedline, and the software is supplied bythe Fed. The basic procedures for sending andreceiving wires are similar to those for the largebanks, but the degree of sophistication andseparation of duties is not as great. A financialinstitution should have other back-up controls inplace if separation of duties is a problem. Thesecontrols can include rotation of duties and offi-cer review of all transactions.

Payment orders to send a wire are receivedfrom bank personnel and corporate customers.Individuals who wish to wire funds usually gothrough their loan officer or account representa-tive who notifies the wire room. Here again,verification is an important security procedure,and records should be kept of all payment orderrequests, by tapes of phone calls, written recordsof requests, or other means.

After receiving the payment order, the termi-nal operator keys the wire message into the PC.Before the message can be sent, it must beverified by a second person (this is the recom-mended procedure—some small banks allow the

same person to key in the wire and verify forsending). Most on-line PC connections to theFed have two printers attached, one which printscopies of the outgoing messages and the otherwhich prints incoming messages. The bankshould maintain the copies of these messages inthe continuous paper form for recordkeepingpurposes. The unbroken sheet ensures that allmessages are accounted for; however, thesequence numbers of the messages should alsobe checked because messages can occasionallybe skipped because of communication prob-lems. In addition, each incoming and outgoingmessage is assigned a sequence number that alsoprovides an audit trail ensuring that all messagesare accounted for.

How Money Launderers Use the WireSystem

While there are many ways for money launder-ers to use the wire system, the objective for mostmoney launderers is to aggregate funds fromdifferent accounts and move those funds throughaccounts at different banks until the origins ofthe funds cannot be traced. Most often thisinvolves moving the funds out of the country,through a bank account in a country with strictbank secrecy laws, and possibly back into theU.S. Money laundering schemes uncovered bylaw enforcement agencies, for instance throughOperation Polar Cap, show that money launder-ers use the wire system to aggregate funds frommultiple accounts at the same bank, wire thosefunds to accounts held at other U.S. banks,consolidate funds from these larger accounts,and ultimately wire the funds to offshoreaccounts in countries such as Panama.

Unlike cash transactions, which are closelymonitored, Fedwire transactions and banks’ wirerooms are designed to quickly process approvedtransactions. Wire room personnel usually haveno knowledge of the customer or the purpose ofthe transaction. Therefore, once cash has beendeposited into the banking system, money laun-derers use the wire system because of thelikelihood that transactions will be processedwith little or no scrutiny.

HOW TO READ A WIRETRANSFER MESSAGE

A wire transfer message contains, by design, a

Wire Transfer Systems 701.0


minimal amount of information. As discussed inmore detail below, Fedwire messages must con-tain primary information consisting of the send-er’s and receiver’s name and ABA routingnumber, the amount of the transfer, a referencenumber, and certain other control information.These messages may contain certain supple-mentary information, such as the name of theoriginating party, the name of the beneficiary,the beneficiary’s account number, a referencemessage for the beneficiary, and other relatedinformation.

For the purposes of these examination proce-dures, it is important to be able to identifycertain information on the message. The supple-mentary information is identified using threeletter codes. These codes are identified below,but not all information will appear in all mes-sages. In some messages, there may not be anysupplementary information at all.

Product Codes—These codes identify the typeof transfer and are followed by a backslash.

BTR/ Bank Transfer, the beneficiary is a bank.CTR/ Customer Transfer, the beneficiary is a

non bank.DEP/ Deposit to Sender’s AccountDRW/ DrawdownFFR/ Fed Funds ReturnedFFS/ Fed Funds Sold

Field Tags—These codes identify certain supple-mentary information about the transfer and con-sist of three letters followed by an equals sign.

ORG= Originator, initiator of the transfer.OGB= Originator’s Bank, bank acting for the

originator of the transfer.IBK= Intermediary Bank, the institution(s)

between the receiving institution andthe beneficiary’s institution throughwhich the transfer must pass, if speci-fied by the sending institution.

BBK= Beneficiary’s Bank, the bank acting asfinancial agent for the beneficiary ofthe transfer.

BNF= Beneficiary, the ultimate party to becredited or paid as a result of a transfer.

RFB= Reference for the Beneficiary, refer-ence information enabling the benefi-ciary to identify the transfer.

OBI= Originator to Beneficiary Information,information to be conveyed from theoriginator to the beneficiary.

BBI= Bank to Bank Information, miscella-neous information pertaining to thetransfer.

INS= Instructing Bank, the institution thatinstructs the sender to execute the trans-action.

Identifier Codes—Two letter codes preceded bya backslash and followed by a hyphen used toidentify or designate a number important to thetransfer.

/AC- Account number/BC- Bank identifier code/CH- CHIPS universal identifier/CP- CHIPS participant identifier/FW- Federal Reserve routing number/SA- SWIFT address

Advice Method Codes—Three letter codes pre-ceded by a backslash used to identify the methodof advising the beneficiary of transfer.

/PHN advise by telephone/LTR advise by letter/WRE advise by wire/TLX advise by telex

The following sample message illustrates theformat of a Fedwire message and the use of theabove codes:

mode status mdc error-intercept

PRODUCTION FT INCOMING MSG

rcvr type

121000358 1040

sndr ref # amt

021000089 4092 $1,000,000.00

CITIBANK NYC/ORG=J.DOE, LONDON OGB=BANK OF THE NORTH, LONDON

BANK AMER SF/CTR/IBK=B OF A LOS ANGELES BBK=BK OF SAN PEDRO, CA

BNF=H.L. INDUSTRIES/AC-12-34567/PHN/(415)555-1212 RFB=INV8123

OBI=EQUIP PURCH

imad omad

0504 B1Q0216K 209 05041233 FTB1 0504 L1Q11339K 1391 05041235

This Fedwire message shows a transfer fromCitibank, NYC, to Bank of America, SanFrancisco, for $1,000,000.00. Under the ‘‘rcvr’’heading is Bank of America’s routing number,

701.0 Wire Transfer Systems


and under the ‘‘sndr’’ is Citibank’s routingnumber. The transfer was originated by J. Doe inLondon through his bank (the originating bank),the Bank of the North, London. Bank of theNorth sent the funds to Citibank, which in turnsent the funds to Bank of America. The fundswill be sent to the intermediary bank, Bankof America’s Los Angeles bank for credit tothe bank of the beneficiary, Bank of San Pedro,San Pedro, CA. The beneficiary of the transferis H. L. Industries, and the message containsinstructions to credit the amount to H. L. Indus-tries’ account and advise the company by phone

of receipt of the transfer. Mr. Doe sends infor-mation that the wire is for payment of invoicenumber 8123, which was for the purchase ofequipment. The ‘‘imad’’ and ‘‘omad’’ numbersat the bottom of the message are added by theFed and identify the date, time, and receivingand sending terminal.

For the purposes of examining for moneylaundering, most of the important informationwill be contained in the supplementary portionof the message with the field tags. Bank person-nel can help decipher messages.

Wire Transfer Systems 701.0


Amendment to Regulation HProcedures for Monitoring Bank Secrecy ActCompliance—February 1987* Section 801.0

Effective January 27, 1987, section 208.14 isadded to read as follows:

SECTION 208.14—PROCEDURESFOR MONITORING BANKSECRECY ACT COMPLIANCE

(a) Purpose. This section is issued to ensurethat all state member banks establish andmaintain procedures reasonably designed toensure and monitor their compliance withthe provisions of subchapter II of chapter 53of title 31, United States Code, the BankSecrecy Act, and the implementing regula-tions promulgated thereunder by the Depart-ment of Treasury at 31 CFR part 103,requiring recordkeeping and reporting ofcurrency transactions.13

* The complete regulation as amended effectiveJanuary 27, 1987, consists of—• a regulation pamphlet dated May 1942 and• this slip sheet.

13. Recordkeeping requirements contained in thissection have been approved by the Board underdelegated authority from the Office of Managementand Budget under the provisions of chapter 35of title 44, United States Code, and have been assignedOMB No. 7100–0196.

(b) Establishment of compliance program. Onor before April 27, 1987, each bank shalldevelop and provide for the continuedadministration of a program reasonablydesigned to ensure and monitor compliancewith the recordkeeping and reportingrequirements set forth in subchapter II ofchapter 53 of title 31, United States Code,the Bank Secrecy Act, and the implement-ing regulations promulgated thereunder bythe Department of Treasury at 31 CFRpart 103. The compliance program shall bereduced to writing, approved by the board ofdirectors, and noted in the minutes.

(c) Contents of compliance program. The com-pliance program shall, at a minimum—

(1) provide for a system of internal controlsto ensure ongoing compliance;

(2) provide for independent testing for com-pliance to be conducted by bank person-nel or by an outside party;

(3) designate an individual or individualsresponsible for coordinating and moni-toring day-to-day compliance, and

(4) provide training for appropriatepersonnel.


Internal Compliance ProgramSection 802.0

Essential to the financial institution’s ability tocomply with the rules and regulations of theBank Secrecy Act and ensure that the institutiondoes not become involved in illicit activities, isan effective internal compliance program. Itshould be noted that, by statute (12 U.S.C.1818(s)), Federal banking agencies are requiredto issue orders requiring an institution to ‘‘ceaseand desist from its violation’’ when an institu-tion has failed to establish and maintain ade-quate internal compliance procedures or aninstitution has failed to correct any problem withthe internal compliance procedures that werepreviously identified as being deficient.

At a minimum, an internal compliance pro-gram must:

• Provide for a system of internal controls toensure ongoing compliance;

• Provide for independent testing of compliance;• Designate an individual responsible for day-

to-day coordination and monitoring of com-pliance; and

• Provide training for appropriate personnel.

These items are the basic elements of a goodcompliance program. In order to maintain aprogram that ensures compliance on an ongoingbasis and helps to prevent abuse of the institu-tion by those who might wish to use the insti-tution for illegal purposes, financial institutionsmust involve several areas of operation andadministration.

SENIOR MANAGEMENT

Senior management must show a commitmentto compliance by the financial institution by:

• Establishing a strong compliance plan that isfully implemented and approved by the boardof directors of the institution;

• Requiring that senior management be keptinformed of compliance efforts, audit reportsand any compliance failures with correctivemeasures instituted;

• Including regulation compliance within thejob description and job performance evalua-tion of institution personnel; and

• Conditioning employment on regulationcompliance.

INTERNAL AUDITORS

An internal auditing department within the finan-cial institution should be established withresponsibilities which include:

• Performing transaction testing to ensurethat the institution is following proscribedregulations;

• Performing testing of employees to assessknowledge of regulations and procedures;

• Reviewing written procedures and trainingprograms for completeness and accuracy; and

• Reporting all findings to senior management.

LARGE CURRENCY INTERNALCONTROL

Financial institutions should have the ability todetect and monitor large currency transactionsoccurring at the financial institution to ensurethat such transactions are not being conductedfor illegitimate purposes. With the advent of the‘‘$3,000 rule’’ imposing recordkeeping require-ments for cash purchases of certain monetaryinstruments of between $3,000 and $10,000, thesame principles of currency transaction monitor-ing should be applied to this function, as well.

EXEMPTION PROCEDURES

For those financial institutions that maintainexemptible customers from the CTR reportingrequirements under the existing rules (as opposedto the interim exemption rule), it is imperativethat regular monitoring of the exemption pro-cess be undertaken. The institution must be ableto ensure that exempted customers are comply-ing with the limitations of their exemption andthat, on a regular basis, exempted customerstransactions are reviewed. Any abnormalities inthe exemption process by the institution or thecustomer should be readily identifiable throughthe internal compliance program.

TRAINING

Financial institution personnel should be trainedin all aspects of regulatory and internal policies


and procedures. An effective training programshould include:

• All compliance officers, audit and/or indepen-dent review personnel and other customercontact personnel, including tellers, customerservice representatives, lending officers andprivate or personal banking officers, should betrained regarding policies and procedures, aswell as common money laundering schemesand patterns;

Continuous and updated training to ensure per-sonnel is provided with the most current and upto date information.

COMPLIANCE RESPONSIBILITY

An individual should be designated as a com-pliance contact, with day-to-day responsibilityfor the compliance program.

802.0 Internal Compliance Program


Internal Revenue Service Currency and Banking Retrieval SystemCurrency and Banking Reports System (CBRS) Section 901.0

The Bank Secrecy Act and Money LaunderingStatutes were passed by Congress to help facili-tate the identification and prosecution of indi-viduals involved in illegal activities for profit.In 1984, the Detroit Computing Center (DCC)was chosen to collect, perfect and input to theCBRS Data Base, millions of documentsrequired to be furnished under the laws. Thesedocuments consist of the following:CurrencyTransaction Reports (CTR’s - Form 4789)required to be filed by Financial Institutionson cash transactions over $10,000;CurrencyTransaction Reports by Casinos (CTRC -Form 8362) required to be filed by casinos oncash transactions over $10,000;Report of CashPayments Received in a Trade or Business(Form 8300) to be filed by anyone in a tradeor business receiving payments in cash totalling$10,000 or more in a single or related trans-action;Report of Foreign Bank and FinancialAccounts (FBAR - TDF 90-22.1)required to befiled annually by any U.S. citizen having finan-cial interest in or signature authority over anyforeign bank account exceeding $10,000 in totalvalue at any time during the calendar year, ormultiple accounts that in the aggregate exceed$10,000;Report of International Transporta-tion of Currency or Monetary InstrumentReports (CMIR - Form 4790) are loaded fromtapes received from U.S. Customs Service, thesedocuments are filed when amounts greater than$10,000 in cash or monetary instruments aretaken across any U.S. Borders;SuspiciousActivity Report (SAR) are filed by FinancialInstitutions on any unusual or suspicious cashtransactions of any amount; andForm CF-7501Entry Summary is received from Customselectronically for any commodity subject toExcise Tax. In early 1994, theInformationReturn for Federal Contract Document (Form8596)was added to the CBRS. This Collectiondocument allows for tracking of contracts beingissued by different Federal Agencies. As ofthe end of January 1996, the CBRS DataBase contained over 90,000,000 informationdocuments.

The CBRS Data Base can be accessed byspecial agents, revenue agents and revenue offi-cers through portable computers through a tele-phone system or CDN lines. There are approxi-mately 15,000 user-id/passwords assigned tousers of the CBRS, including staff of the Board

of Governors of the Federal Reserve System.Additionally, tapes of all documents, except8300s, are furnished to U.S. Customs and sub-sequently added to the Treasury EnforcementCommunications Service’s (TECS) data basefor use by law enforcement agencies. Tape filesare also sent to the states of California, Arizona,New York, Florida, Illinois and Texas for CTRdocuments filed in their respective states. ProjectGATEWAY has been established to allowselected officials from all states to have hands-onaccess to the query data base.

The system can be used to identify bankaccounts, secret cash, leads to assets and foreignbank accounts, and a myriad of other usefulinformation for compliance and other lawenforcement personnel. For example, FederalReserve staff utilize the data base to verifytimely filings by financial institutions.

The CBRS Data Base is maintained at theDCC, where the processing of the data is con-trolled. Three branches comprise the workinggroup for the project: Systems, Edit/Error Reso-lution, and the Compliance Branch. The Com-pliance Branch has the overall responsibility ofproviding authoritative information and assis-tance in person, by telephone, or by correspon-dence to financial institutions and their repre-sentatives as they apply to the provisions of theBank Secrecy Act.

Banks, as defined in the regulations, have theauthority to exempt from reporting transactionsof certain types of entities specifically enumer-ated in the regulations. These entities are main-tained on bank exempt lists. The ComplianceBranch corresponds with banks to obtain theseexempt lists and conducts a limited review onsuch lists once received.

If a bank believes that certain circumstanceswarrants the exemption of an entity not specifi-cally enumerated in the regulation, it mustrequest a ‘‘Special Exemption’’ from IRS. Theserequests for ‘‘Special Exemptions’’ are grantedor denied by the Compliance Branch.

Research of various data bases and files isdone so that certified transcripts/documents canbe prepared by use in grand jury investigationsand criminal/civil court cases. Periodically, theemployees may be called upon to serve aswitnesses (court testifiers) to introduce thesedocuments as evidence during a trial.


Also, as a part of the document processingfunction, many documents are perfected bytelephone contact and/or correspondence. Tele-phone contact is made with financial institutionswhen an unsatisfactory response is received as aresult of computer generated correspondence onan incomplete Currency Transaction Report.The objective is to make the Form 4789processable. If the telephone contact is unsuc-cessful, the Form 4789 is deemed unsatisfactoryand thus forwarded to Treasury for furtherreview.

BSA COMPLIANCE BRANCH,DETROIT COMPUTING CENTER

The BSA Compliance Branch of the CurrencyReporting & Compliance Division has beendelegated responsibility for providing authorita-tive information on certain provisions of theBank Secrecy Act (‘‘BSA’’). This guidance isprovided in person, by telephone or throughcorrespondence to financial institutions and theirrepresentatives.

The BSA Compliance Branch will verifyreceipt of CTRs at the request of a financialinstitution. There is a research fee charged forthis service of $20.00 for up to ten documentsand $2.00 for each additional document. Toreceive copies, add 15 cents per documentrequested.

A synopsis of the duties of the BSA Compli-ance Branch as follows:

Outreach Program:

• Speakers for Banking/Professional Seminars

Financial Institution Services

• Customer service lines for answering techni-cal and form completion questions

• Grant/deny request for special exemptions• Process requests for backfiling determinations• Review bank Exemption Lists• Provide verification of receipt and copies of

CTRs• Staff a toll-free suspicious transaction report-

ing hot line

CID Agents, IRS and Other LawEnforcement Services

• Copies of BSA/Title 26 documents includingtrue copy certifications for court

• Research and certification of ‘‘negative’’ or‘‘no document filed’’ results

• Testify at trials as Custodian of the Record

BSA Compliance Branch—ContactPoints

BSA Compliance Branch OfficeDavid Gooding,ChiefTamika Brown,SecretaryP.O. Box 32063Detroit, Michigan 48232-0063Voice (313) 234-1576Fax (313) 234-1614

BSA Compliance Review GroupCandace Walls,Chief (313) 234-1597Vergary Fortune,SecretaryOutside Customers

(financial institutions) (313) 234-1613IRS Employees/law

enforcement (313) 234-1597

Lead BSA RepresentativeMarion Formigan (313) 234-1602

BSA Representatives (BSAR)Freda Allen (313) 234-1610Phyllis Brown (313) 234-1599Yvonne Covington (313) 234-1600Lyndon Ford (313) 234-1601Wanda Hampton (313) 234-1612Elva Jackson (313) 234-1603Elizabeth Johnson (313) 234-1604Ronald Kaczynski (313) 234-1605Marian Kirkland (313) 234-1607Linda Krych (313) 234-1608Annie McCarty (313) 234-1609Marie Morris (313) 234-1610Linda Townsend (313) 234-1611

BSA Support Group IChief, Yvonne Davis (313) 234-1594

Tax Examining Assistants (TEA)Minnie Blair (313) 234-1580Cynthia Drew (313) 234-1590Sharon McMorris (313) 234-1585

901.0 Internal Revenue Service Currency and Banking Retrieval System


Mary Rogers (313) 234-1586Linda Taylor (313) 234-1588

Other Numbers/Addresses of Interest

Jim BahnkeChief, Tax Systems Division (313) 234-1066

Pat DonaldsonChief, CTR Branch (313) 234-1401

(voice)(313) 234-1402

(fax)Henry JamesChief, Currency Rep.

& Compl. Div. (313) 234-1062

Derrick MooreChief, Edit/Error Res. Br. (313) 234-1636

CTR CorrectiveCorrespondence (313) 234-1657

Ben McMakinCID Coordinator (313) 234-1077

Cathy SwicklePublic Affairs Officer (313) 234-1052

Magnetic Media Hotline (313) 234-1445

Suspicious TransactionHotline (800) 800-2877

Bank Secrecy Act (BSA)Bulletin Board (313) 234-1453

IRS Forms(including Form 4789) (800) 829-3676

IRS Taxpayer ServiceToll-Free (800) 829-1040

LOGON CODES

Each organization is required to use specifiedClient and Office codes in the Accounting Datafield when logging into the CBRS. FederalReserve System staff must first obtain an autho-rizaion code in order to access the CBRS sys-tem. Each Reserve Bank has established a BankSecrecy Act contact to access the CBRS system.Additional requests for logon i.d.’s should bemailed to:

Mr. Richard SmallSpecial CounselBoard of Governors of the Federal ReserveSystemMail Stop 173Washington, D.C. 20551

SPECIAL REQUEST PROCEDURE(REPORTS AND/OR TAPE)

In situations where on-line or download data isinsufficient for your needs, a special report ordata tape may be requested from the DCC.Non-IRS personnel should mail requests to theSpecial Assistant for Financial Enforcement atthe DCC. For Federal Reserve System staff, therequest should be routed through the SpecialCounsel at the Federal Reserve Board.

Internal Revenue Service Currency and Banking Retrieval System 901.0


Suspicious Activity Report DatabaseSection 902.0

INTRODUCTION

Pursuant to Federal Reserve regulations, allinstitutions supervised by the Federal Reserveare required to report suspicious transactionsusing the Suspicious Activity Report (‘‘SAR’’).The SARs are maintained in a computerizeddatabase that is managed by the Internal Rev-enue Service. All Reserve Banks have on-lineaccess to the SAR database.

REVIEW OF SUSPICIOUSACTIVITY REPORTS

Prior to the start of an examination, the SARdatabase should be reviewed as to all SARsrelated to the financial institution to be exam-ined. This review should be an integral part ofthe examination preparation, as it can providevaluable information to assist in developing theappropriate scope of the review.

SEARCHING THE SARDATABASE

Instructions for accessing the SAR database canbe found in the ‘‘Internal Revenue ServiceUser’s Guide.’’ Additional guidance on the useof the SAR database can be obtained from theBank Secrecy Act coordinator at each ReserveBank.

IDENTIFICATION OFSIGNIFICANT SUSPICIOUSACTIVITY

When suspicious activity involving senior cur-rent or former officials or highly unusual activityis identified, the Board’s Special Investigationsand Examinations Section should be notified at202-452-3168.

FAST TRACK CRIMINALREFERRAL ENFORCEMENTPROGRAM

Effective April 14, 1995, as detailed in theBoard’s supervisory directive SR 95-23, the

Federal Reserve implemented a Fast TrackCriminal Referral1 Enforcement Program (the‘‘Fast Track Program’’) that uses expedited,streamlined enforcement procedures to obtainconsent orders of prohibition from bankingofficials and employees whose cases have beendeclined by law enforcement agencies and havealready admitted to criminal acts involvingamounts up to $100,000. When needed, it willalso be used to seek restitution from theindividuals through consent cease and desistorders. The Fast Track Program also involvesthe expeditious issuance of appropriate noticesin those instances where individuals do notconsent to the orders presented to them. Detailedbelow are the procedures that Federal Reservestaff should follow in utilizing the Fast TrackProgram.

Procedures

1. Each Federal Reserve Bank should review allSARs on an on-going basis and, in connec-tion therewith, should implement the FastTrack Program to identify those SARs wherelaw enforcement agencies have declined toprosecute institution-affiliated parties whohave admitted guilt involving criminal activi-ties with associated losses of less than$100,000.

2. For those SARs involving losses of under$100,000, in which an institution-affiliatedparty has admitted guilt through a signedconfession, an oral admission to a bankingorganization official that is recorded, orotherwise, designated Federal Reserve Bankpersonnel should contact federal law enforce-ment agencies and, where necessary, state orlocal law enforcement agencies, or reconfirmprior contacts, to determine the status of anycriminal investigation or prosecution involv-ing the individual. The Federal Reserve Bankshould ascertain whether the individual hasalready been prosecuted and sentencedthrough a U.S. Attorney’s or state equivalent

1. Effective April 1, 1996, the Criminal Referral Form wasreplaced with the Suspicious Activity Report form.


‘‘Fast Track’’ system or otherwise,2 whetherthe matter is under active investigation, orwhether the matter has been declined forprosecution.

3. If law enforcement has declined to prosecutethe individual subject to the SAR, the FederalReserve Bank should:a. Gather from the law enforcement agency,

or the banking organization filing theSAR, or both, all appropriate documentsrelated to the SAR, including a copy of thesigned confession, records relating toany admission made to banking officials,and any other pertinent supportingmaterials, such as affidavits and investiga-tory reports;

b. contact the appropriate banking organiza-tion representative to ascertain whetherany civil action has been taken by theorganization against the individual, andwhether the financial institution hasobtained any restitution, either throughthe voluntary cooperation of the indi-vidual or by means of a court judgment;

c. determine the current home address of theindividual, if possible; and

d. determine whether the individual is cur-rently employed by a banking organiza-tion, if possible.

4. When requested information is received andthe Federal Reserve Bank determines withcertainty that the appropriate federal, state, orlocal law enforcement agency will not pros-ecute the institution-affiliated party, desig-nated Federal Reserve Bank personnel shouldmake a determination regarding whether aprohibition order, or cease and desist orderseeking restitution, or a combination of bothshould be pursued under the Fast TrackProgram.

5. In the event a Federal Reserve Bank recom-mends an institution-affiliated party for inclu-sion in the Fast Track Program, it shouldforward to the Board’s Division of BankingSupervision and Regulation’s Deputy Asso-ciate Director responsible for enforcementmatters the following:

a. The completed portion of the Fast TrackProgram checklist3 identified as ‘‘FederalReserve Bank Responsibilities,’’ alongwith a copy of the SAR; and

b. documentation supporting the recom-mendation, such as the signed confession,or a bank’s record of an individual’sadmission.

6. Upon the submission of a Federal ReserveBank’s recommendation and completedchecklist, designated staff of the Division ofBanking Supervision and Regulation, incoordination with the Board’s Legal Divi-sion, will:a. Obtain the necessary approvals of senior

Board staff required for the initiation of anenforcement action using the Fast TrackProgram checklist in the place of a stan-dard ‘‘final approval’’ memorandum;

b. notify the other federal financial institu-tions supervisory agencies regarding theproposed enforcement action under cur-rent interagency notification procedures;

c. in consultation with Federal Reserve Bankstaff, finalize a proposed order, using pre-approved formats, and send it to the indi-vidual for his or her consideration ofentering into the order on a consent basisby means of a cover letter signed by theDeputy Associate Director, which desig-nates an Enforcement Section attorney asthe contact person for discussions regard-ing the consent order;

d. upon receipt of a signed consent order,obtain the necessary senior Board staffapprovals, have the order executed by theBoard’s Secretary, prepare and send allnecessary interagency notification letters,and, in consultation with the Board’s pub-lic information office, prepare an appro-priate press release; and

e. in the event the individual does not agreeto the consensual issuance of an order ofprohibition, or cease and desist order, or acombined order, where necessary, coordi-nate with designated Federal Reserve Bankstaff in order to prepare the appropriatenotice under existing Federal Reserveenforcement procedures.

2. In those cases where an individual has already beenprosecuted and sentenced, Federal Reserve Banks shouldfollow current procedures and ensure that the individualreceives a letter from the Federal Reserve Bank explaining therestrictions and limitations contained in section 19 of theFederal Deposit Insurance Act, as amended (12 U.S.C. 1829).

3. Not included in this Manual. Refer to SR Letter 95-23for a copy of the checklist.

902.0 Suspicious Activity Report Database


These are internal procedures for the FederalReserve’s Fast Track Program. They do notcreate or confer any substantive or proceduralrights on third parties, which would be enforce-able, in any manner, in a proceeding of anynature.

QUESTIONS

For questions regarding the use of the SARdatabase you may telephone the Board’s SpecialInvestigations and Examinations Section at202-452-3168.

Suspicious Activity Report Database 902.0


Federal Reserve Enforcement ActionsSection 903.0

The Federal Reserve supervises the followingentities and has the statutory authority to takeformal enforcement actions against them:

• State member banks• Bank holding companies• Nonbank subsidiaries of bank holding

companies• Edge and agreement corporations• Branches and agencies of foreign banking

organizations operating in the U.S. and theirparent banks

• Officers, directors, employees, and certainother categories of individuals associatied withthe above banks, companies and organizations(referred to as ‘‘institution affiliated parties’’)

Generally, the Federal Reserve takes formalenforcement actions against the above entities

for violations of laws, rules, or regulations,unsafe or unsound practices, breaches of fidu-ciary duty, and violations of final orders. Formalactions include cease and desisit orders, writtenagreements, removal and prohibition orders, andorders assessing civil money penalties. Suchactions can include those for entities who fail todevelop and implement compliance programsdesigned to detect, deter and report suspiciousactivities possibly associated with money laun-dering or to meet other technical reporting andrecordkeeping requirements under the BankSecrecy Act.

For information regarding enforcement actionstaken by the Federal Reserve, the reader mayrefer to the Federal Reserve’s home page at thefollowing address:

http://www.bog.frb.fed.us/boarddocs/enforcement


FinCEN AdvisoriesSection 904.0

From time to time as deemed necessary, theFinancial Crimes Enforcement Network(‘‘FinCEN’’) will provide advisories to the banks,regulators and the general public concerningmoney laundering matters, trends and patterns,or amendments/clarifications to the BankSecrecy Act. Access to the Fincen home page toobtain the advisories and other information canbe found at the following address:

http://www.ustreas.gov/treasury/bureaus/fincen/advis.html

Other communications can be directed toFinCEN:

Phone (703) 905-3773Facsimile (703) 905-3885Address: 2070 Chain Bridge Road, Vienna,

Virginia 22182

Federal Reserve Examination Staff is advisedthat any questions regarding a FinCEN mattershould be directed first to the Board’s SpecialInvestigations and Examinations Section at(202) 452-3168.


Check List to Identify Potential Abuses1001.0

The following is a list of transactions that couldbe considered unusual or suspicious and possi-bly linked to money laundering or other finan-cial crime activities. The list is not intended tobe all inclusive.

MONEY LAUNDERING

• Increase in cash shipments that is not accom-panied by a corresponding increase in thenumber of accounts.

• Cash on hand frequently exceeds limits estab-lished in security program and/or blanketbond coverage.

• Large volume of wire transfers to and fromoffshore banks.

• Large volume of cashier’s checks, moneyorders or travelers checks sold for cash.

• Accounts have a large number of small depos-its and a small number of large checks withthe balance of the account remaining rela-tively low and constant. Account has many ofthe same characteristics as an account used forcheck kiting.

• A large volume of deposits to several differentaccounts with frequent transfers of majorportion of the balance to a single account atthe same bank or at another bank.

• Loans to offshore companies.• A large volume of cashier’s checks or money

orders deposited to an account where thenature of the account holder’s business wouldnot appear to justify such activity.

• Large volume of cash deposits from a busi-ness that is not normally cash intensive.

• Cash deposits to a correspondent bank accountby any means other than through an armoredcarrier.

• Large turnover in large bills or excess of smallbills from bank and demand for large bills bybank which would appear uncharacteristic forthe bank.

• Cash shipments which appear large in com-parison to the dollar volume of currencytransaction reports filed.

• Dollar limits on the list of the bank customersexempt from currency transaction reportingrequirements which appear unreasonably highconsidering the type and location of the busi-ness. No information is in the bank’s files tosupport the limits set.

• Currency transaction reports, when filed, areoften incorrect or lack important information.

• List of exempted customers appears unusuallylong.

• High volume of sequentially numbered trav-eler’s checks or postal money orders addressedto same payee.

OFFSHORE TRANSACTIONS

• Loans made on the strength of a borrower’sfinancial statement reflects major investmentsin and income from businesses incorporated inbank secrecy haven countries.

• Loans to offshore companies.• Loans secured by obligations of offshore

banks.• Transactions involving an offshore ‘‘shell’’

bank whose name may be very similar to thename of a major legitimate institution.

• Frequent wire transfers of funds to and frombank secrecy haven countries.

• Offers of multimillion dollar deposits at belowmarket rates from a confidential source to besent from an offshore bank or somehow guar-anteed by an offshore bank through a letter,telex, or other ‘‘official’’ communication.

• Presence of telex or facsimile equipment in abank where the usual and customary businessactivity would not appear to justify the needfor such equipment.

WIRE TRANSFERS

• Indications of frequent overrides of estab-lished approval authority and other internalcontrols.

• Intentional circumvention of approval author-ity by splitting transactions.

• Wire transfers to and from bank secrecy havencountries.

• Frequent or large wire transfers for personswho have no account relationship with bank.

• In a linked financing situation, a borrower’srequest for immediate wire transfer of loanproceeds to one or more of the banks wherethe funds for the brokered deposits originated.

• Large or frequent wire transfers againstuncollected funds.


• Wire transfers involving cash where theamount exceeds $10,000.

• Inadequate control of password access.• Customer complaints and/or frequent error

conditions.

LINKED FINANCING/BROKEREDTRANSACTIONS

• Out-of-territory lending.• Loan production used as a basis for officer

bonuses.• Evidence of unsolicited attempts to buy or

recapitalize the bank where there is evidenceof a request for large loans at or about thesame time by persons previously unknown tothe bank. Promise of large dollar deposits mayalso be involved.

• Promise of large dollar deposits in consider-ation for favorable treatment on loan requests.(Deposits are not pledged as collateral for theloans.)

• Brokered deposit transactions where the bro-ker’s fees are paid for from the proceeds ofrelated loans.

• Anytime a bank seriously considers a loanrequest where the bank would have to obtainbrokered deposits to be able to fund the loanshould be viewed with suspicion.

• Solicitation by persons who purportedly haveaccess to multi-millions of dollars, from aconfidential source, readily available for loansand/or deposits in U.S. financial institutions.Rates and terms quoted are usually morefavorable than funds available through normalsources. A substantial fee may be requested inadvance or the solicitor may suggest that thefee be paid at closing but demand compensa-tion for expenses, often exceeding $50,000.

• Prepayment of interest on deposit accountswhere such deposit accounts are used ascollateral for loans.

THIRD PARTY OBLIGATIONS

• Incomplete documentation on guaranties.• Loans secured by obligations of offshore

banks.• Lack of credit information on third party

obligor.

• Financial statements reflect concentrations ofclosely held companies or businesses that lackaudited financial statements to support theirvalue.

CREDIT CARDS ANDELECTRONIC FUNDSTRANSFERS

• Lack of separation of duties between the cardissuing function and issuance of personalidentification number (PIN).

• Poor control of unissued cards and PINs.• Poor control of returned mail.• Customer complaints.• Poor control of credit limit increases.• Poor control of name and address changes.• Frequent malfunction of payment authoriza-

tion system.• Unusual delays in receipt of card and PINs by

the customers.• Bank does not limit amount of cash that a

customer can extract from an ATM in a givenday.

• Evidence that customer credit card purchaseshave been intentionally structured by a mer-chant to keep individual amount below the‘‘floor limit’’ to avoid the need for transactionapproval.

MISCELLANEOUS

• Indications of frequent overrides of internalcontrols or intentional circumvention of bankpolicy.

• Unresolved exceptions or frequently recurringexceptions on exceptions report.

• Out-of-balance conditions.• Purpose of loan is not recorded.• Proceeds of loan are used for a purpose other

than the purpose recorded.• A review of checks paid against uncollected

funds indicates that the customer is offsettingchecks with deposits of the same or similaramount and maintains a relatively constantaccount balance, usually small in relation tothe amount of activity and size of thetransactions.

Section 1001.0 Check List to Identify Potential Abuses


Suspicious Activity ReportSection 1002.0

For immediate release February 5, 1996

The Federal Reserve Board today announced a final rule to

simplify the process for reporting suspected crimes and

suspicious activities by banking organizations supervised by the

Federal Reserve.

The final rule is effective April 1, 1996.

The rule was developed by the Federal Reserve, the other

federal banking agencies, and the Financial Crimes Enforcement

Network of the U.S. Department of the Treasury (FinCEN).

The rule significantly reduces reporting burdens, while at

the same time enhancing the ability of law enforcement

authorities to investigate and prosecute criminal offenses

involving our Nation’s financial institutions.

The new suspicious activity reporting rule:

• combines the current criminal referral rules of theFederal Reserve and the other federal banking agencieswith FinCEN’s suspicious activity reportingrequirements relating to money laundering offenses;

• creates a uniform reporting form and instructions--thenew ″Suspicious Activity Report ″ or ″SAR″--for use bybanking organizations to report all violations;

• requires the filing of only one form with FinCEN;

• enables a filer, through computer software that will beprovided by the Federal Reserve to all of the domesticand foreign banking organizations it supervises, toprepare a SAR on a computer and file it by magneticmedia, such as a computer disc or tape;

(more)


2

• raises the thresholds for mandatory reporting in twocategories and creates a threshold for the reporting ofsuspicious transactions related to money laundering andviolations of the Bank Secrecy Act in order to reducethe reporting burdens of banking organizations; and

• emphasizes recent changes in the law that provide asafe harbor from civil liability to bankingorganizations and their employees for reporting ofknown or suspected criminal offenses or suspiciousactivities.

Substantially identical suspicious activity reporting rules

are being issued by FinCEN, the Office of the Comptroller of the

Currency, the Federal Deposit Insurance Corporation, the Office

of Thrift Supervision, and the National Credit Union

Administration.

The Board’s notice is attached.

-0-

Attachment



FEDERAL RESERVE SYSTEM

12 CFR Parts 208, 211 and 225

[Regulations H, K and Y; Docket No. R-0885]

Membership of State Banking Institutions in the Federal ReserveSystem; International Banking Operations; Bank Holding Companiesand Change in Control; Reports of Suspicious Activity under the

Bank Secrecy Act

AGENCY: Board of Governors of the Federal Reserve System.AGENCY:

ACTION:ACTION: Final Rule.

SUMMARY:SUMMARY: The Board of Governors of the Federal Reserve

System (Board) is amending its regulations on the reporting of

known or suspected criminal and suspicious activities by the

domestic and foreign banking organizations supervised by the

Board. This final rule streamlines reporting requirements by

providing that such an organization file a new Suspicious

Activity Report (SAR) with the Board and the appropriate federal

law enforcement agencies by sending a SAR to the Financial Crimes

Enforcement Network of the Department of the Treasury (FinCEN) to

report a known or suspected criminal offense or a transaction

that it suspects involves money laundering or violates the Bank

Secrecy Act (BSA).

EFFECTIVE DATE: April 1, 1996.EFFECTIVE DATE:

FOR FURTHER INFORMATION CONTACT: Herbert A. Biern, DeputyFOR FURTHER INFORMATION CONTACT:

Associate Director, Division of Banking Supervision and

Regulation, (202) 452-2620, Richard A. Small, Special Counsel,

Division of Banking Supervision and Regulation, (202) 452-5235,

or Mary Frances Monroe, Senior Attorney, Division of Banking



2

Supervision and Regulation, (202) 452-5231. For the users of

Telecommunications Devices for the Deaf (TDD) only, contact

Dorothea Thompson, (202) 452-3544, Board of Governors of the

Federal Reserve System, 20th Street and Constitution Avenue,

N.W., Washington, D.C. 20551.

SUPPLEMENTARY INFORMATION:SUPPLEMENTARY INFORMATION:

BackgroundBackground

The Board, the office of the Comptroller of the

Currency (OCC), the Federal Deposit Insurance Corporation (FDIC),

and the Office of Thrift Supervision (OTS) (collectively, the

Agencies) have issued for public comment substantially similar

proposals to revise their regulations on the reporting of known

or suspected criminal conduct and suspicious activities. The

Department of the Treasury, through FinCEN, has issued for public

comment a substantially similar proposal to require the reporting

of suspicious transactions relating to money laundering

activities.

The Board’s proposed regulation (60 FR 34481,

July 3, 1995) noted that the interagency Bank Fraud Working

Group, consisting of representatives from the Agencies, the

National Credit Union Administration, law enforcement agencies,

and FinCEN, has been working on the development of a single form,

the SAR, for the reporting of known or suspected federal criminal

law violations and suspicious activities. The Board’s proposed

regulation, as well as those proposed by the OCC, FDIC, OTS and

FinCEN, attempted to simplify and clarify reporting requirements



3

and reduce banking organizations, reporting burdens by raising

mandatory reporting thresholds for criminal offenses and by

requiring the filing of only one report with FinCEN.

The Board’s final rule adopts its proposal with a few

additional changes that have been made in response to the

comments received. The changes will result in burden reductions

even greater than those that were proposed. The Board’s, the

other Agencies’, and FinCEN’s final rules relating to the

reporting of suspicious activities are now substantially

identical, and they:

(1) Combine the current criminal referral rules of the

federal financial institutions regulatory agencies with

the Department of the Treasury’s suspicious activity

reporting requirements;

(2) create a uniform reporting form, the new Suspicious

Activity Report or SAR, for use by banking

organizations in reporting known or suspected criminal

offenses, or suspicious activities related to money

laundering and violations of the BSA;

(3) provide a system whereby a banking organization need

only refer to the SAR and its instructions in order to

complete and file the form in conformance with the

Agencies’ and FinCEN’s reporting regulations;

(4) require the filing of only one form with FinCEN;

(5) eliminate the need to file supporting documentation

with a SAR;



4

(6) enable a filer, through computer software that will be

provided by the Board to all of the domestic and

foreign banking organizations it supervises, to prepare

a SAR on a computer and file it by magnetic media, such

as a computer disc or tape;

(7) establish a database that will be accessible to

federal and state financial institutions regulators and

law enforcement agencies;

(8) raise the thresholds for mandatory reporting in two

categories and create a threshold for the reporting of

suspicious transactions related to money laundering and

violations of the BSA in order to reduce the reporting

burdens on banking organizations; and

(9) emphasize recent changes in the law that provide a safe

harbor from civil liability to banking organizations

and their employees for reporting of known or suspected

criminal offenses or suspicious activities, by filing a

SAR or by reporting by other means, and provide

criminal sanctions for the unauthorized disclosure of

such report to any party involved in the reported

transaction.

Section-by-Section AnalysisSection-by-Section Analysis

Under the Board’s final rule, state member banks, bank

holding companies and their nonbank subsidiaries, most U.S.

branches and agencies and other offices of foreign banks, and

Edge and Agreement corporations need only follow SAR instructions



5

for completing and filing the SAR to be in compliance with the

Board’s and FinCEN’s reporting requirements. The following

section-by-section analysis correlates the specific SAR

instruction number with the applicable section of the Board’s

final rule:

Section 208.20(a) (Instruction No. 1 on the SAR)

provides that a state member bank must file a SAR when it detects

a known or suspected violation of federal law or a suspicious

activity pertinent to a money laundering offense.

Section 208.20(b) provides pertinent definitions.

Sections 208.20(c)(1), (2), and (3) (Instructions 1 a.,

b., and c. on the SAR) instruct a state member bank to file a SAR

with FinCEN in order to comply with the requirement to notify

federal law enforcement agencies if the bank detects any known or

suspected federal criminal violation, or pattern of violations,

committed or attempted against the bank, or involving one or more

transactions conducted through the bank, and the bank believes it

was an actual or potential victim of a crime, or was used to

facilitate a crime. If the bank has a substantial basis for

identifying one of its insiders or other institution-affiliated

parties in connection with the known or suspected crime,

reporting is required regardless of the dollar amount involved.

If the bank can identify a non-insider suspect, the applicable

transaction threshold is $5,000. In cases in which no suspect

can be identified, the applicable transaction threshold is



6

$25,000. These sections were not changed from the proposed

regulations published for public comment in July 1995.

Section 208.20(c)(4) (Instruction 1 d. on the SAR)

instructs a state member bank to file a SAR with FinCEN in order

to comply with the requirement to notify federal law enforcement

agencies and the Department of the Treasury of transactions

involving $5,000 or more in funds or other assets when the bank

knows, suspects or has reason to suspect that the transaction:

(i) involves money laundering, (ii) is designed to evade any

regulations promulgated under the Bank Secrecy Act, or (iii) has

no business or apparent lawful purpose or is not the sort in

which the particular customer normally engages and, after

examining the available facts, the bank knows of no reasonable

explanation for the transaction. Section 208.20(c)(4) has been

modified in the final rule to reflect comments received on the

proposal. Most notably, the circumstances under which a

transaction should be reported under this section were clarified,

and a reporting threshold of $5,000 was added.

Section 208.20(c)(4) recognizes the emerging

international consensus that the efforts to deter, substantially

reduce, and eventually eradicate money laundering are greatly

assisted by the reporting of suspicious transactions by banking

organizations. The requirements of this section comply with the

recommendations adopted by multi-country organizations in which

the United States is an active participant, including the

Financial Action Task Force of G-7 nations and the Organization



7

of American States, and are consistent with the European

Community’s directive on preventing money laundering through

financial institutions.

Section 208.20(d) (Instruction 2 on the SAR) provides

that SARs must be filed within 30 calendar days of the initial

detection of the criminal or suspicious activity. An additional

30 days is permitted in order to enable a bank to identify a

suspect, but in no event may a SAR be filed later than 60 days

after the initial detection of the reportable conduct. The Board

and law enforcement must be notified in the case of a violation

requiring immediate action, such as an on-going violation. These

reporting requirements were not changed from the July 1995

proposal, with the exception of the addition of the requirement

that the Board be notified about on-going offenses requiring

immediate notification to law enforcement authorities.

Section 208.20(e) encourages a state member bank to

file a SAR with state and local law enforcement agencies. This

section is unchanged from the July 1995 proposal.

Section 208.20(f) (Instruction 3 on the SAR) provides

that a state member bank need not file a SAR for an attempted or

committed burglary or robbery reported to the appropriate law

enforcement agencies. In addition, a SAR need not be filed for

missing or counterfeit securities that are the subject of a

report pursuant to Rule 17f-1 under the Securities Exchange Act

of 1934. This section of the final rule was not modified from

the version published for public comment in July 1995.



8

Section 208.20(g) requires that a state member bank

retain a copy of the SAR and the original or business record

equivalent of supporting documentation for a period of five

years. The section also requires that a state member bank

identify and maintain supporting documentation in its files and

that the bank make available such documentation to law

enforcement agencies upon their request. The Board made three

changes to this section from the version published for public

comment in July 1995. First, the record retention period was

shortened from 10 years to five years. Second, provision was

made for the retention of business record equivalents of original

documents, such as microfiche and computer imaged record systems,

in recognition of modern record retention technology. The third

change involves the clarification of a state member bank’s

obligation to provide supporting documentation upon request to

law enforcement officials. Supporting documentation is deemed

filed with a SAR in accordance with this section of the Board’s

final rule; as such, law enforcement authorities need not make

their access requests through subpoena or other legal processes.

Section 208.20(h) requires the management of a state

member bank to report the filing of all SARs to the board of

directors of the bank, or a designated committee thereof. No

change was made from the July 1995 proposal.

Section 208.20(i) reminds a state member bank and its

institution-affiliated parties that failure to file a SAR may



9

expose them to supervisory action. No change from the July 1995

proposal was made.

Section 208.20(j) provides that SARs are confidential.

Requests for SARs or the information contained therein should be

declined. The final rule also adds a requirement that a request

for a SAR or the information contained therein should be reported

to the Board. With the exception of the added requirement that

requests for SARs be reported to the Board, no changes were made

to this section from the July 1995 proposal.

Section 208.20(k) sets forth the safe harbor provisions

of 31 U.S.C. 5318(g). This new section, which was added to the

final rule as the result of many comments concerning this

important statutory protection for banking organizations, states

that the safe harbor provisions of the law are triggered by a

report of known or suspected criminal violations or suspicious

activities to law enforcement authorities, regardless whether

the report is made by the filing of a SAR in accordance with the

Board’s rules or for other reasons by different means.

Sections 211.8, 211.24(f), and 225.4(f) of the Board’s

rules relating to the activities of foreign banking organizations

and bank holding companies have not been changed in a substantive

manner. Only the references in the sections to ‘‘criminal

referral forms’’ have been changed to reflect the new name for the

reporting form, the SAR. The SAR filing requirements, as well as

the safe harbor and notification prohibition provisions of



10

31 U.S.C. 5318(g), continue to be applicable to all foreign

banking organizations and bank holding companies and their

nonbank subsidiaries supervised by the Federal Reserve through

these provisions.

Comments ReceivedComments Received

The Board received letters from 44 public commenters.

Comments were received from 15 community banks, 13 multinational

or large regional banks, eight trade and industry research

groups, seven Federal Reserve Banks and one law firm.

The large majority of commenters expressed general

support for the Board’s proposal. None of the commenters opposed

the proposed new suspicious activity reporting rules. A number

of suggestions and requests for clarification were received.

They are as follows.

Criminal Versus Suspicious Activities. Many commentersCriminal Versus Suspicious Activities.

expressed confusion over the difference between the known or

suspected criminal conduct that would be subject to the dollar

reporting thresholds (provided such conduct does not involve an

institution-affiliated party of the reporting entity) and the

suspicious activities that would be reported regardless of dollar

amount. Section 208.20(c)(4) has been revised to add a $5,000

reporting threshold and to clarify that the suspicious activity

must relate to money laundering and Bank Secrecy Act violations.

A threshold for the reporting of suspicious activities was added

to reduce further the reporting burdens on banking organizations.



11

Reporting of Crimes Under State Law. A number ofReporting of Crimes Under State Law.

commenters requested clarification of whether activities

constituting crimes under state law, but not under federal law,

should be reported on the SAR. The Board continues to encourage

banking organizations to refer criminal and suspicious activities

under both federal and state law by filing a SAR. Under the new

reporting system designed by the Board, the other Agencies, and

FinCEN, state chartered banking organizations should be able to

fulfill their state reporting obligations by filing a SAR with

FinCEN.

Safe Harbor Protections; Potential Liability UnderSafe Harbor Protections; Potential Liability Under

Federal and State Laws. Some commenters expressed the concernFederal and State Laws.

that banking organizations and their institution-affiliated

parties could be liable under federal and state laws, such as the

Right to Financial Privacy Act, for filing SARs with respect to

conduct that is later found not to have been criminal. Another

concern was that the filing of SARs with state and local law

enforcement agencies would subject filers to claims under state

law. Both of these concerns are addressed by the scope of the

safe harbor protections provided in 31 U.S.C. 5318(g).

The Board is of the opinion that the safe harbor

statute is broadly defined to include the reporting of known or

suspected criminal offenses or suspicious activities, by filing

a SAR or by reporting by other means, with state and local law

enforcement authorities, as well as with the Agencies and FinCEN.



12

A few commenters requested that the Board make explicit

the safe harbor protections of 31 U.S.C. 5318(g)(2) and (3) on

the SAR. They are included in new Section 208.20(k) of this rule

and on the form.

Record Retention. Several commenters expressed theRecord Retention.

view that the 10-year period for the retention of records in

Section 208.20(g) was excessive, especially in light of a five-

year record retention requirement for records that is contained

in the Bank Secrecy Act. The 10-year period in the Board’s

proposed regulation would have continued the Board’s existing

record retention requirement for criminal referral forms.

However, in recognition of the potential burden of document

retention on financial institutions, the Board has limited the

record retention period to five years.

Dollar Thresholds. A few commenters encouraged theDollar Thresholds.

Board to raise the dollar thresholds for known or suspected

criminal conduct by non-insiders, or to establish a dollar

threshold for insiders. The Board has considered these comments,

but at this time it believes that the thresholds meet and

properly balance the dual concerns of prosecuting criminal

activity involving banking organizations and minimizing the

burden on banking organizations. With respect to the suggestion

that the Board adopt a dollar threshold for insider violations,

it is noted that insider abuse has long been a key concern and

focus of enforcement efforts at the Board. With the development

of a new sophisticated automated database, the Board and law



13

enforcement agencies will have the benefit of a comprehensive and

easily accessible catalogue of known or suspected insider

wrongdoing. The Board does not wish to limit the information it

receives regarding insider wrongdoing. Some petty crimes, for

example, repetitive thefts of small amounts of cash by an

employee who frequently moves between banking organizations, may

warrant enforcement action or criminal prosecution.

One commenter suggested an indexed threshold, based on

the regional differences in the various dollar thresholds below

which the federal, state, and local prosecutors generally decline

prosecution. While the Board recognizes that there may be

regional variations in the dollar amount of financial crimes

generally prosecuted, the Board’s concern is to place the

relevant information in the hands of the investigating and

prosecuting authorities. The prosecuting authorities then may

consider whether to pursue a particular matter. In the Board’s

view, the dollar thresholds proposed and adopted in this final

rule best balance the interests of law enforcement and banking

organizations. The Board also believes that indexed thresholds

could create more confusion than benefit to banking

organizations.

Commenters also suggested the creation of a dollar

threshold for the reporting of suspicious activities relating to

money laundering offenses. A $5,000 threshold has been

established for reporting of such suspicious activities.



14

Questions were raised regarding the permissibility of

filing SARs in situations in which the dollar thresholds for

known or suspected criminal conduct or suspicious activity are

not met and the applicability of the safe harbor provisions of 31

U.S.C. 5318(g) to such non-mandatory filings. It is the opinion

of the Board that the safe harbor provisions of 31 U.S.C. 5318(g)

cover all reports of suspected or known criminal violations and

suspicious activities to law enforcement authorities, regardless

of whether such reports are filed pursuant to the mandatory

requirements of the Board’s regulations or are voluntary.

Notification of On-Going Violations and of State andNotification of On-Going Violations and of State and

Local Law Enforcement Authorities. Proposed Section 208.20(d)Local Law Enforcement Authorities.

required a banking organization to notify immediately the law

enforcement authorities in the event of an on-going violation.

Section 208.20(e) encourages the filing of a copy of the SAR with

state and local law enforcement agencies in appropriate cases.

This requirement and guidance were found by some commenters to be

unclear as to when immediate notification or the filing of the

SAR with state and local authorities would be required. The

Board wishes to clarify that immediate notification is limited to

situations involving on-going violations, for example, when a

check kite or money laundering has been detected and may be

continuing. It is impossible for the Board to contemplate all of

the possible circumstances in which it might be appropriate for

a banking organization to advise state and local law enforcement

authorities. Banking organizations should use their best



15

judgment regarding when to alert them regarding on-going criminal

offenses or suspicious activities.

Supporting Documentation. The proposed requirementsSupporting Documentation.

that an institution maintain ″related ″ documentation and make

″supporting ″ documentation available to the law enforcement

agencies upon request were criticized as inconsistent and vague.

One commenter questioned whether the Board intended a substantive

difference in meaning between ″related ″ and ″supporting. ″ As a

substantive difference is not intended, the Board has referred to

″supporting ″ documentation in the final rule in reference both to

the maintenance and production requirements. The Board believes

that the use of the word ″supporting ″ is more precise and limits

the scope of the information which must be retained to that which

would be useful in proving that the crime has been committed and

by whom it has been committed. As to the criticism that the

meaning of ″related ″ or ″supporting ″ documentation is vague, it

is anticipated that banking organizations will use their judgment

in determining the information to be retained. It is impossible

for the Board to catalogue the precise types of information

covered by this requirement, as it necessarily depends upon the

facts of a particular case.

Scope of Confidentiality Requirement. One commenterScope of Confidentiality Requirement.

correctly noted that the proposed regulation is unclear as to

whether the confidentiality requirement applies only to the

information contained on the SAR itself, or whether the

requirement extends to the ″supporting ″ documentation. The Board



16

takes the position that only the SAR and the fact that supporting

documentation to a SAR exists are subject to the confidentiality

requirements of 31 U.S.C. 5318(g). The supporting documentation

itself is not subject to the confidentiality provisions of

31 U.S.C. 5318(g). The safe harbor provisions of 31 U.S.C.

5318(g), however, apply to the SAR and supporting documentation,

as set forth in Section 208.20(k).

Provisions of Supporting Documentation to LawProvisions of Supporting Documentation to Law

Enforcement Authorities Upon Request. Many commenters noted thatEnforcement Authorities Upon Request.

the guidance provided in the Board’s proposed regulation

regarding giving supporting documentation to law enforcement

agencies upon their request after the filing of a SAR was unclear

or contrary to law. Some questioned whether law enforcement

agencies would still need to subpoena relevant documents from a

banking organization. The Board’s regulation requires banking

organizations filing SARs to identify, maintain and treat the

documentation supporting the report as if it were actually filed

with the SAR. This means that subsequent requests from law

enforcement authorities for the supporting documentation relating

to a particular SAR does not require the service of a subpoena or

other legal processes normally associated with providing

information to law enforcement agencies.

Civil Litigation. The Board was encouraged to adoptCivil Litigation.

regulations that would make SARs undiscoverable in civil

litigation in order to avoid situations in which a banking

organization could be ordered by a court to produce a SAR in



17

civil litigation and could be confronted with the prospect of

having to choose between being found in contempt or violating the

Board’s rules. In the opinion of the Board, 31 U.S.C. 5318(g)

precludes the disclosure of SARs. The final rule requires a

banking organization that receives a subpoena or other request

for a SAR to notify the Board so that the Board may, if

appropriate, intervene in litigation or seek the assistance of

the U.S. Department of Justice.

Maintenance of Originals. Proposed Section 208.20(g)Maintenance of Originals.

required the maintenance of supporting documentation in its

original form. A number of commenters noted that electronic

storage of documents is becoming the rule rather than the

exception, and that requiring the storage of paper originals

would impose undue burdens on financial institutions. Moreover,

some records are retained only in a computer database. The

proposed regulation reflected the concerns of the law enforcement

agencies that the best evidence be preserved. However, upon

further consideration, the Board wishes to clarify that the

electronic storage of original documentation related to the

filing of a SAR is permissible. In addition, the Board

recognizes that a banking organization will not always have

custody of the originals of documents and that some documents

will not exist at the organization in paper form. In those

cases, preservation of the best available evidentiary documents,

for example, computer disks or photocopies, should be acceptable.

This has been reflected in the final rule by changing the



18

reference to original documents to ″original documents or

business record equivalents. ″

Investigation and Proof Burdens. One commenterInvestigation and Proof Burdens.

expressed the concern that a banking organization would need to

establish probable cause before reporting crimes for which an

essential element of the proof of the crime was the intent of the

actor. The Board does not intend that banking organizations

assume the burden of proving illegal conduct; rather, banking

organizations are required to report known or suspected crimes or

suspicious activities in accordance with this final rule.

Supplementary or Corrective Information; Reporting ofSupplementary or Corrective Information; Reporting of

Multiple Crimes or Suspects. Material information thatMultiple Crimes or Suspects.

supplements or corrects a SAR should be filed with FinCEN by

means of a subsequent SAR. The first page of the SAR provides

boxes for the reporter to indicate whether the report is an

initial, a corrected or a supplemental report.

One commenter requested guidance on the reporting of

multiple crimes or related crimes committed by more than one

individual. The instructions to the SAR contemplate that

additional suspects may be reported by means of a supplemental

page. Likewise, multiple crimes committed by a suspect may be

reported by means of multiple check-offs on the SAR, or if

needed, by a written addendum to the SAR. In the event that

related crimes have been committed by more than one person, a

description of the related crimes may be made by addendum to the

SAR. The Board encourages filers to make a complete report of



19

all known or suspected criminal or suspicious activity. The SAR

may be supplemented in order to facilitate a complete disclosure.

Calculation of Time Frame for Reporting. A number ofCalculation of Time Frame for Reporting.

commenters requested that the Board clarify the application of

the deadline for filing SARs. The Board’s proposed regulation

used the broadest possible language to set the time frames for

the reporting of known or suspected criminal offenses and

suspicious activities in order to best guide reporting

institutions. Absolute deadlines for the filing of SARs are

important to the investigatory and prosecutorial efforts of law

enforcement authorities. It is expected that banking

organizations will meet the filing deadlines once conduct

triggering the reporting requirements is identified. Further

clarification of the time frames is not needed in the Board’s

view.

Board Notification Requirements. Several commentersBoard Notification Requirements.

expressed general support for the modification of the reporting

requirement that permits reporting of SARs to a committee of the

board. As a matter of clarification, notification of a committee

of the board relieves the banking organization of the obligation

to disclose the SARs filed to the entire board. It would be

expected, however, that the appointed committee, such as the

audit committee, would report to the full board at regular

intervals with respect to routine matters in the same manner and

to the same extent as other committees report at board meetings.

With respect to serious crimes or insider malfeasance, the



20

appointed committee likely should consider it appropriate to make

more immediate disclosure to the full board.

Some larger banking organizations expressed the view

that prompt disclosure of SARs to the board or a committee would

impose a serious burden because larger organizations typically

file a larger number of criminal referral forms (now, SARs).

While the Board acknowledges that larger institutions may have

more SARs to report to the board or a committee, this does not

alter the directors’ fiduciary obligation to monitor, for

example, the condition of the institution and to take action to

prevent losses. The final regulation does not dictate the

content of the board or committee notification, and, in some

cases, such as when relatively minor non-insider crimes are to be

reported, it may be completely appropriate to provide only a

summary listing of SARs filed. The Board expects the management

of banking organizations to provide a more detailed notification

to the boards or committees of SARs involving insiders or a

potential material loss to the institutions.

Information Sharing. Commenters suggested that theInformation Sharing.

final regulations should somehow facilitate the sharing of

information among banking organizations in order to better detect

new fraudulent schemes. It is anticipated that the Treasury

Department, through FinCEN, and the Agencies, will keep reporting

entities apprised of recent developments and trends in banking-

related crimes through periodic pronouncements, meetings, and

seminars.



21

Single Filing Requirement; Acknowledgement of Filings.Single Filing Requirement; Acknowledgement of Filings.

Some commenters requested clarification of the single form filing

requirement. The Board reiterates that the filing of a SAR with

FinCEN is the only filing that is required. Federal and state

law enforcement and bank supervisory agencies will have access to

the database created and maintained by FinCEN on behalf of the

Agencies and the Department of Treasury; thus, a single filing

with FinCEN is all that is required under the new reporting

system.

Commenters also requested that the final rule permit

the filing of SARs via telecopier. Such filings are not

compatible with the system developed by the Agencies and FinCEN.

Banking organizations can file the SAR via magnetic media using

the computer software to be provided to all banking organizations

by the Board and each of the other Agencies with respect the

institutions they supervise. Larger banking organizations that

currently file currency transaction reports via magnetic tape

with FinCEN may also file SARs by magnetic tape.

Regulatory Flexibility ActRegulatory Flexibility Act

The Board certifies that this final regulation will not

have a significant financial impact on a substantial number of

small banks or other small entities.

Paperwork Reduction ActPaperwork Reduction Act

In accordance with Section 3506 of the Paperwork

Reduction Act of 1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix



22

A.1), the Board reviewed the rule under the authority delegated

to the Board by the Office of Management and Budget.

The collection of information requirements in this

regulation are found in 12 CFR 208.20, 211.8, 211.24, and 225.4.

This information is mandatory and is necessary to inform

appropriate law enforcement agencies of known or suspected

criminal or suspicious activities that take place at or were

perpetrated against financial institutions. Information

collected on this form is confidential (5 U.S.C. 552(b)(7) and

552a(k)(2), and 31 U.S.C. 5318(g)). The federal financial

institution regulatory agencies and the U.S. Department of

Justice may use and share the information. The

respondents/recordkeepers are for-profit financial institutions,

including small businesses.

The Federal Reserve may not conduct or sponsor, and an

organization is not required to respond to, this information

collection unless it displays a currently valid OMB control

number. The OMB control number is 7100-0212.

No comments specifically addressing the hour burden

estimate were received.

It is estimated that there will be 12,000 responses

from state member banks, bank holding companies, Edge and

agreement corporations, and U.S. branches and agencies of foreign

banks.

Both the new regulation and revisions made to the

proposed regulation and reflected in this final rule simplify the



23

submission of the reporting form and shorten the records

retention requirement. However, the same amount of information

will be collected under the new rule. The burden per respondent

varies depending on the nature of the criminal or suspicious

activity being reported. The Federal Reserve estimates that the

average annual burden for reporting and recordkeeping per

response will remain .6 hours. Thus the Federal Reserve

estimates the total annual hour burden to be 7,200 hours. Based

on an hourly cost of $20, the annual cost to the public is

estimated to be $144,000.

Send comments regarding the burden estimate, or any

other aspect of this collection of information, including

suggestions for reducing the burden, to: Secretary, Board of

Governors of the Federal Reserve System, 20th and C Streets,

N.W., Washington, D.C. 20551 and to the Office of Management and

Budget, Paperwork Reduction Project (7100-0212), Washington,

D.C. 20503.

List of SubjectsList of Subjects

12 CFR Part 208

Accounting, Agriculture, Banks, Banking, Confidential

Business information, Crime, Currency, Federal Reserve System,

Flood insurance, Mortgages, Reporting and recordkeeping

requirements, Securities.

12 CFR Part 211



24

Exports, Federal Reserve System, Foreign Banking,

Holding companies, Investments, Reporting and recordkeeping

requirements.



25

12 CFR Part 225

Administrative practice and procedures, Banks, Banking,

Federal Reserve System, Holding companies, Reporting and

recordkeeping requirements, Securities.

For the reasons set forth in the preamble, Parts 208,

211 and 225 of chapter II of title 12 of the Code of Federal

Regulations are amended as set forth below:

PART 208 -- MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THEPART 208 -- MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE

FEDERAL RESERVE SYSTEM (REGULATION H)FEDERAL RESERVE SYSTEM (REGULATION H)

1. The Authority citation for 12 CFR Part 208

continues to read as follows:

Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a,Authority:

371d, 461, 481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o,

1831p-1, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b,

781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-1 and 78w; 31

U.S.C. 5318; 42 U.S.C. 4102a, 4104a, 4104b, 4106, and 4128.

2. Section 208.20 and its heading are revised to read

as follows:

§ 208.20 Suspicious Activity Reports.§ 208.20 Suspicious Activity Reports.

(a) Purpose. This section ensures that a state member

bank files a Suspicious Activity Report when it detects a known

or suspected violation of Federal law, or a suspicious

transaction related to a money laundering activity or a violation

of the Bank Secrecy Act. This section applies to all state

member banks.

(b) Definitions. For the purposes of this section:



26

(1) FinCEN means the Financial Crimes Enforcement

Network of the Department of the Treasury.

(2) Institution-affiliated party means any

institution-affiliated party as that term is defined in 12 U.S.C.

1786(r), or 1813(u) and 1818(b)(3),(4) or (5).

(3) SAR means a Suspicious Activity Report on the form

prescribed by the Board.

(c) SARs required. A state member bank shall file a

SAR with the appropriate Federal law enforcement agencies and the

Department of the Treasury in accordance with the form’s

instructions by sending a completed SAR to FinCEN in the

following circumstances:

(1) Insider abuse involving any amount. Whenever the

state member bank detects any known or suspected Federal criminal

violation, or pattern of criminal violations, committed or

attempted against the bank or involving a transaction or

transactions conducted through the bank, where the bank believes

that it was either an actual or potential victim of a criminal

violation, or series of criminal violations, or that the bank was

used to facilitate a criminal transaction, and the bank has a

substantial basis for identifying one of its directors, officers,

employees, agents or other institution-affiliated parties as

having committed or aided in the commission of a criminal act

regardless of the amount involved in the violation.

(2) Violations aggregating $5,000 or more where a

suspect can be identified. Whenever the state member bank



27

detects any known or suspected Federal criminal violation, or

pattern of criminal violations, committed or attempted against

the bank or involving a transaction or transactions conducted

through the bank and involving or aggregating $5,000 or more in

funds or other assets, where the bank believes that it was either

an actual or potential victim of a criminal violation, or series

of criminal violations, or that the bank was used to facilitate a

criminal transaction, and the bank has a substantial basis for

identifying a possible suspect or group of suspects. If it is

determined prior to filing this report that the identified

suspect or group of suspects has used an ″alias, ″ then

information regarding the true identity of the suspect or group

of suspects, as well as alias identifiers, such as drivers’

license or social security numbers, addresses and telephone

numbers, must be reported.

(3) Violations aggregating $25,000 or more regardless

of a potential suspect. Whenever the state member bank detects

any known or suspected Federal criminal violation, or pattern of

criminal violations, committed or attempted against the bank or

involving a transaction or transactions conducted through the

bank and involving or aggregating $25,000 or more in funds or

other assets, where the bank believes that it was either an

actual or potential victim of a criminal violation, or series of

criminal violations, or that the bank was used to facilitate a

criminal transaction, even though there is no substantial basis

for identifying a possible suspect or group of suspects.



28

(4) Transactions aggregating $5,000 or more that

involve potential money laundering or violations of the Bank

Secrecy Act. Any transaction (which for purposes of this

paragraph (c)(4) means a deposit, withdrawal, transfer between

accounts, exchange of currency, loan, extension of credit,

purchase or sale of any stock, bond, certificate of deposit, or

other monetary instrument or investment security, or any other

payment, transfer, or delivery by, through, or to a financial

institution, by whatever means effected) conducted or attempted

by, at or through the state member bank and involving or

aggregating $5,000 or more in funds or other assets, if the bank

knows, suspects, or has reason to suspect that:

(i) The transaction involves funds derived from

illegal activities or is intended or conducted in

order to hide or disguise funds or assets derived

from illegal activities (including, without

limitation, the ownership, nature, source,

location, or control of such funds or assets) as

part of a plan to violate or evade any law or

regulation or to avoid any transaction reporting

requirement under federal law;

(ii) The transaction is designed to evade any

regulations promulgated under the Bank Secrecy

Act; or

(iii) The transaction has no business or apparent

lawful purpose or is not the sort in which the



29

particular customer would normally be expected to

engage, and the bank knows of no reasonable

explanation for the transaction after examining

the available facts, including the background and

possible purpose of the transaction.

(d) Time for reporting. A state member bank is

required to file a SAR no later than 30 calendar days after the

date of initial detection of facts that may constitute a basis

for filing a SAR. If no suspect was identified on the date of

detection of the incident requiring the filing, a state member

bank may delay filing a SAR for an additional 30 calendar days to

identify a suspect. In no case shall reporting be delayed more

than 60 calendar days after the date of initial detection of a

reportable transaction. In situations involving violations

requiring immediate attention, such as when a reportable

violation is on-going, the financial institution shall

immediately notify, by telephone, an appropriate law enforcement

authority and the Board in addition to filing a timely SAR.

(e) Reports to state and local authorities. State

member banks are encouraged to file a copy of the SAR with state

and local law enforcement agencies where appropriate.

(f) Exceptions. (1) A state member bank need not

file a SAR for a robbery or burglary committed or attempted that

is reported to appropriate law enforcement authorities.



30

(2) A state member bank need not file a SAR for lost,

missing, counterfeit, or stolen securities if it files a report

pursuant to the reporting requirements of 17 CFR 240.17f-1.

(g) Retention of records. A state member bank shall

maintain a copy of any SAR filed and the original or business

record equivalent of any supporting documentation for a period of

five years from the date of the filing of the SAR. Supporting

documentation shall be identified and maintained by the bank as

such, and shall be deemed to have been filed with the SAR. A

state member bank must make all supporting documentation

available to appropriate law enforcement agencies upon request.

(h) Notification to board of directors. The

management of a state member bank shall promptly notify its board

of directors, or a committee thereof, of any report filed

pursuant to this section.

(i) Compliance. Failure to file a SAR in accordance

with this section and the instructions may subject the state

member bank, its directors, officers, employees, agents, or other

institution-affiliated parties to supervisory action.

(j) Confidentiality of SARs. SARs are confidential.

Any state member bank subpoenaed or otherwise requested to

disclose a SAR or the information contained in a SAR shall

decline to produce the SAR or to provide any information that

would disclose that a SAR has been prepared or filed citing this

section, applicable law ( e.g. , 31 U.S.C. 5318(g)), or both, and

notify the Board.



31

(k) Safe Harbor. The safe harbor provisions of

31 U.S.C. 5318(g), which exempts any state member bank that makes

a disclosure of any possible violation of law or regulation from

liability under any law or regulation of the United States, or

any constitution, law or regulation of any state or political

subdivision, covers all reports of suspected or known criminal

violations and suspicious activities to law enforcement and

financial institution supervisory authorities, including

supporting documentation, regardless of whether such reports are

filed pursuant to this section or are filed on a voluntary basis.

PART 211 -- INTERNATIONAL BANKING OPERATIONS (REGULATION K)PART 211 -- INTERNATIONAL BANKING OPERATIONS (REGULATION K)



Authority: 12 U.S.C. 221 et seq., 1818, 1841 et seq.,Authority:

3101 et seq., 3901 et seq..

§§ 211.8 and 211.24 [Amended]§§ 211.8 and 211.24 [Amended]

2. In §§ 211.8 and 211.24(f), remove the words

″criminal referral form ″ and add, in their place, the words

″suspicious activity report ″.

PART 225 -- BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROLPART 225 -- BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL

(REGULATION Y)(REGULATION Y)



Authority: 12 U.S.C. 1817(j)(13), 1818, 1831i,Authority:

1831p-1, 1843(c)(8), 1844(b), 1972(l), 3106, 3108, 3310, 3331-

3351, 3907, and 3909.



32

§ 225.4 [Amended]§ 225.4 [Amended]

2. In § 225.4, the heading of paragraph (f) is revised

to read ″Suspicious Activity Report. ″.

3. In § 225.4(f), remove the words ″criminal referral

form ″ and add, in their place, the words ″suspicious activity

report ″.

By order of the Board of Governors of the FederalReserve System, January 30, 1996.

(signed) William W. Wiles

William W. Wiles,Secretary of the Board.



Payable Through AccountsIntroduction Section 1101.0

WHAT IS A PAYABLE THROUGHACCOUNT?

A Payable Through Account (PTA) is a demanddeposit account through which banking entitieslocated in the United States extend check-writing privileges to the customers of a foreignbank. Under this PTA arrangement, a U.S. bank,Edge corporation or the U.S. branch or agencyof a foreign bank (‘‘U.S. banking entities’’),opens a master checking account in the name ofa foreign bank operating outside the UnitedStates.

The master account subsequently is dividedby the foreign bank into ‘‘sub-accounts,’’ eachin the name of one of the foreign bank’scustomers. The foreign bank extends signatureauthority on its master account to its owncustomers. The number of sub-accounts permit-ted under this arrangement is virtually unlim-ited. See Diagram 1.

Deposits into the master account may flowthrough the foreign bank, which pools them fordaily transfer to the U.S. banking entity, or thefunds may flow directly to the U.S. bankingentity for credit to the master account, withfurther credit to the sub-account. Checks encodedwith the foreign bank’s account number, alongwith a numeric code to identify the sub-account,provide sub-account holders with access tothe U.S. payments system. Thus, the PTAmechanism permits the foreign bank operatingoutside the U.S. to offer its customers, thesub-accountholders, U.S. dollar denominatedchecks and ancillary services, which may includethe ability to receive wire transfers and depositsinto the sub-accounts, and to cash checks.

U.S. banking entities may require foreignbanks to execute a contract stipulating that allmatters pertaining to sub-accounts are the soleresponsibility of the foreign bank. Sub-accountrecords are typically maintained by the foreign

Diagram 1


bank in the foreign jurisdiction in which it ischartered and, for the most part, statements andaccount activity notices are also issued by theforeign bank outside of the United States.

Certain aspects of the PTA arrangement mayprovide opportunities for illicit activities. First,weak licensing laws, promulgated by a prolifer-ating offshore financial services sector and com-pounded by weak or absent bank supervision insome offshore financial centers, have created anenvironment in which access to banking licensesis unencumbered and unregulated.

Second, in the PTA arrangement, the U.S.banking entity may regard the foreign bank asits sole customer. This means that even if theU.S. banking entity has adequate ‘‘know yourcustomer’’ guidelines in place with respect toits own customers, such guidelines may notbe extended to the customers of the foreignbank.

In addition, some U.S. banking entities rou-tinely permit sub-account holders to have cashdeposit and cash withdrawal privileges from theforeign bank’s master account. These activities,especially if they are frequent and involve largeamounts, indicate a potential for abuse, in lightof uncertainty as to the true identity of thesub-account holders. Finally, PTAs used in con-junction with a U.S. office of the foreign bank,such as a representative office or a subsidiary,may enable the foreign bank to, in effect, offerthe same services as a branch without beingsubject to Federal Reserve supervision.

PTAs have been used for many years by creditunions, insurance companies and investmentcompanies. More recently, PTAs have beenmarketed to foreign banks that do not have aU.S. presence as a way to clear U.S. dollardenominated checks through the U.S. paymentssystem. This product has also been offeredunder different names by a variety of bankingentities. Although the most common alternativenames used by banking entities are ‘‘pass-through account’’ or ‘‘pass-by account,’’ thebanking entity may have another name for thisproduct which does not identify it as a PTA. Inthis event, a further check into the foreign bankcorrespondent relationships existing at theexamined institution may be necessary.

BENEFITS AND RISKSASSOCIATED WITH PAYABLETHROUGH ACCOUNTS

The objectives of U.S. banking entities market-ing PTAs, and foreign banks which subscribe tothe PTA service, may vary from situation tosituation. However, there are essentially threebenefits that currently drive provider and userinterest: a) permits U.S. banking entities toattract dollar deposits from the home market offoreign banks without jeopardizing the foreignbank’s relationship with its clients; b) providesfee income potential for both the U.S. PTAprovider and the foreign bank; and, c) theforeign bank can offer its customers efficient andlow cost access to the U.S. payment system.

The safety and soundness risks most likely tobe encountered by U.S. banking entities provid-ing PTA services to foreign banks, in addition tothe possible use of the banking entities in moneylaundering schemes, are ‘‘reputational,’’ withthe potential related loss of business, and thepayment of legal expenses. Violations of theBank Secrecy Act and related statutes, theInternational Emergency Economic Powers Act,and the Trading with the Enemy Act can alsoresult from the PTA arrangement.

CONTRACTUAL AGREEMENTS

There may be a comprehensive written contractagreement between the U.S. banking entityoffering the PTA and the foreign bank thatgoverns their relationship and, among otherthings, the requirements of the account andservices offered, eligible sub-account holders,the accounting and recordkeeping to be doneby both parties, fees, and required minimumbalance, the provision of overdraft lines ofcredit, indemnification for bad checks and losses,and the legal jurisdiction under which disputeswill be resolved. It is important to note that thecontract is between the U.S. banking entity andthe foreign bank. The written agreement shouldbe reviewed as it may provide evidence anddocumentation for the policies and proceduresthat the U.S. banking entity has developed.

1101.0 Payable Through Accounts


Payable Through AccountsExamination Procedures Section 1102.0

Y N Comments

1. Review the U.S.-based bank’s deposit ledger anddetermine if the bank offers payable throughaccounts to foreign banks. If so, identify whichbanks and country(s) of origin. If no, do notcomplete this section.

Advisory #1

The Federal Reserve has established guidelinesfor the maintenance of payable through accounts.(See SR 95-10 (SUP), March 3, 1995, Sec-tion 1402.0 of the BSA Examination Manual).The guidelines state that it is inconsistent withthe principles of safe and sound banking forU.S.-based banking entities to offer payablethrough account services without developingand maintaining policies and procedures designedto guard against the possible improper or illegal

use of their payable through account facilities byforeign banks and their customers.

For each payable through account maintainedfor a foreign financial institution, the U.S. bank-ing entity should either: (1) obtain adequateinformation about the ultimate users of thepayable through accounts; (2) be able to rely onthe home country supervisor to require theforeign bank to identify and monitor the trans-actions of its own customers; or (3) ensure thatits payable through account is not being used formoney laundering or other illicit purposes.

Y N Comments

2. Review the contract with the foreign bank. Does thecontract:

a. address procedures for opening sub-accounts?

b. require the master account holder to provide theU.S.-based bank with the true identity of sub-account holders?

c. allow cash transactions by sub-account holderswithin the U.S. borders?

d. require the foreign bank to investigate suspi-cious transactions and report findings to theU.S.-based bank?

e. clearly state the liability of both the U.S.-basedbank and the foreign bank to which the payablethrough service is being offered?


Y N Comments

f. have approval of personnel with appropriateauthority?

g. have approval of the legal department?

3. Does the U.S.-based bank have an effective systemof internal controls for opening and monitoringpayable through accounts that include written poli-cies and procedures providing for:

a. procedures for opening accounts?

b. operational procedures?

c. staff responsibilities?

d. training?

e. audit?

f. identifying and reporting of unusual or suspi-cious transactions (e.g., money laundering)?

4. Does the U.S.-based bank apply its ‘‘know yourcustomer’’ policy to:

a. payable through accounts

b. sub-account holders?

c. Review documentation to determineeffectiveness.

5. Does the U.S.-based bank prohibit foreign banksfrom openingsub-accounts(second tier) for otherforeign banks, casas de cambios, finance companiesor other financial intermediaries? If not, what pro-cedures are in place for the U.S. bank to understandthe identity of these second-tier sub-accounts hold-ers and the nature of the business transactions (seeDiagram #1 in Section 1101.0)?

6. Does the U.S.-based bank review the listing ofaccount and sub-account holders to ensure that noaccounts have been opened to individuals or busi-nesses located in countries that are prohibited withdoing business with the U.S. and Specially Desig-nated Nationals or Specially Designated NarcoticsTraffickers as determined by the Treasury’s Officeof Foreign Assets Control?



Y N Comments

7. Does the U.S.-based bank have written internalcontrols policies to monitor account activity forsuspicious transactions? Determine how monitoringoccurs.

8. Do the foreign banks that maintain the payablethrough relationship properly review and explainsuspicious transactions to the U.S.-based bank?Review and determine if written procedures providefor the explanation of suspicious accounts.

9. Does the U.S.-based bank allow cash transactionsby sub-account holders? If so, does the U.S. bankproperly report CTRs for large cash transactions?

10. Does the U.S.-based bank conduct audits of payablethrough accounts to ensure compliance with thecontract and appropriate laws and regulations? Ifso, note the scope and frequency of the audit.

11. Does the U.S.-based bank conduct audits of theforeign bank, or review in some other way:

a. the procedures of the foreign bank for openingaccounts, to determine if they are consistentwith U.S. requirements?

b. the foreign bank’s monitoring of sub-accountholder activities to detect and report suspiciousor unusual transactions?

12. Does the U.S.-based bank maintain adequate docu-mentary information (i.e. financial statements,licensing confirmation, etc.) regarding the foreignbank?

13. Has the examiner determined, if possible, whetherthe home country supervisor of the foreign bankrequires banks in that jurisdiction to identify andmonitor the transactions of its own customersconsistent with U.S. requirements?

14. Has the U.S.-based bank determined whether thehome country supervisor of the foreign bank requiresbanks in that jurisdiction to identify and monitor thetransactions of its own customers consistent withU.S. requirements?

Payable Through Accounts 1102.0


Y N Comments

15. After reviewing the responses to procedures1 through 14, above, answer the questions listedbelow:

a. Does the U.S.-based bank obtain adequateinformation about the ultimate users of thepayable through accounts?

b. Is the U.S.-based bank able to rely on the homecountry supervisor to require the foreign bankto identify and monitor the transactions of itsown customers?

c. Can the U.S.-based bank ensure that its payablethrough account is not being used for moneylaundering or other illicit purposes?

Advisory #2

If procedure 15, a, b and c is answered in theaffirmative, you may stop. In the event that theanswer to procedure 15 a, b, or c is in the

negative, Federal Reserve guidelines recom-mend that the U.S.-based banking entity termi-nate the payable through arrangement with theforeign bank as expeditiously as possible.

Y N Comments

16. Has the U.S.-based bank taken steps to terminatethe account relationship as expeditiously as possible?

Advisory #3

In those cases where the U.S.-based institutionfails to take appropriate steps to terminate theaccount relationship, the examiner should so

note this in the ‘‘Examiners Comments andConclusions’’ page of the examination report,and bring the inappropriate practice to the atten-tion of bank management.



Report of Foreign Bank and Financial AccountsTD F 90-22.1 Section 1201.0

REPORT OF FOREIGN BANK ANDFINANCIAL ACCOUNTS, TD F90-22.1, BY ‘‘BANKS’’ LOCATEDIN THE UNITED STATES(INCLUDING AGENCIES ANDBRANCHES OF FOREIGN BANKS)

The regulation that calls for the reporting offoreign financial accounts implements the Cur-rency and Foreign Transactions Reporting Actof 1970, commonly referred to as the BankSecrecy Act (BSA). In the late 1960’s, lawenforcement and tax collection officials noted anincreased use of foreign bank accounts by U.S.citizens and residents to evade taxes. Suchcitizens established and maintained financialaccounts in ‘‘tax haven’’ countries with strictbank secrecy laws in order to hinder U.S. inves-tigations into their unlawful activities. For exam-ple, funds obtained from illicit narcotics sales inthe U.S. would be deposited into foreign bankaccounts and then repatriated back to the U.S.owner in the form of innocent-appearing shamloans or investments.

The Form 90-22.1 requirements serve twouseful purposes in combating the use of foreignfinancial accounts to circumvent U.S. law. First,the information provides leads to investigatorsin identifying or tracing illicit funds or unre-ported income maintained or generated abroad.Also, and often more importantly, the Form90-22.1 filing requirements provide an addi-tional prosecutorial tool in combating moneylaundering, tax evasion, drug trafficking, andnumerous white collar crimes. Often it is diffi-cult or impossible to obtain detailed evidence offinancial activity and assets from outside of thejurisdiction of the U.S. Frequently, this evidenceis critical in convicting violators of U.S. lawwho use foreign financial accounts to ‘‘cover thetracks’’ of their illegal activities. Generally, suchpersons do no comply with the Form 90-22.1filing requirement as they do not want to notifythe government of their interest in foreign finan-cial accounts. Accordingly, persons may beprosecuted for criminal violation of the report-ing requirements instead of for commission ofthe underlying crimes.

Treasury Form 90-22.1 is used to reportforeign account relationships and is required bysection 103.24 of the BSA regulations, 31 C.F.R.

Part 103. The BSA is not an income tax statute,and Form 90-22.1, though filed with the InternalRevenue Service, is not a tax form. Accordingly,a person may have a Form 90-22.1 reportingobligation even though that person’s assets heldthrough foreign accounts produce no taxableincome.

In general, each United States person havinga financial interest in, or signatory authorityover, foreign financial accounts with an aggre-gate value exceeding $10,000, must report theaccount relationships to the Internal RevenueService. See form 90-22.1, Instruction A, andSections 103.24 and 103.27 of the Bank SecrecyAct regulations, 31 C.F.R. Part 103. A reportmust be filed for each calendar year in which theaggregate value of the foreign accounts exceededU.S. $10,000. No report is required for calendaryears where the aggregate value of the foreignfinancial accounts at no time exceeded U.S.$10,000.

The term ‘‘United States person’’ means (1) aU.S. citizen, (2) a resident of the United Statese.g., any individual who was in the United Statesfor any 60 consecutive day period during thereporting year, (3) a domestic partnership, (4) adomestic corporation, or (5) a domestic estate ortrust. A branch, agency, or representative officeof a foreign corporation, including a foreignbank, which is not recognizable as a separatelegal personality is not a United States personfor the purposes of this form.

An officer or employee of a federally-insureddepository institution branch, or agency officewithin the United States of a foreign bank that issubject to the supervision of a federal bankregulatory agency need not report that he or shehas signature or other authority over a foreignbank, securities or other financial account main-tained by such entities unless he or she has apersonal financial interest in the account. Seeform 90-22.1, Instruction A.

Form 90-22.1 shall be filed on or beforeJune 30 of each calendar year with the Internalrevenue Service, Post Office Box 32621, Detroit,Michigan 48232. The year for which the reportis made must be identified on the form. Pleasenote that if an extension of time to file is needed,request such extension by writing to the Finan-cial Crimes Enforcement Network, Departmentof the Treasury, 1500 Pennsylvania Avenue,N.W., Washington, D.C. 20220.


Accounts subject to reporting are all main-tained with a bank (except a military bankingfacility as defined in Instruction E) or broker ordealer in securities that is located in a foreigncountry, even is it is part of a Unites States bankor other institution. Accounts maintained with abranch, agency, or other office of a foreign bankor other institution that is located in the UnitedStates, Guam, Puerto Rico, the Northern MarianaIslands, American Samoa, the Trust Territory ofthe Pacific Islands, and the Virgin Islands arenot foreign accounts and are not subject toreporting. Foreign assets (such as securitiesissued by foreign corporations) that are helddirectly by a U.S. person, or through an accountmaintained with a U.S. office of a bank or otherinstitution are not subject to the BSA foreignaccount reporting requirements. Form 90-22.1is for the reporting of foreign accounts, andnot all ‘‘foreign’’ assets owned or controlled

by U.S. persons. Also, international, interbanktransfer accounts (‘‘nostro accounts’’) heldby domestic banks are not subject to reportingon Form 90-22.1 52FR 11436, 11438 (April 8,1987).

Reportable bank accounts include both depositaccounts and loan/credit line accounts. The term‘‘bank deposit account’’ means a savings,demand, checking, or any other funds depositaccount maintained with a financial institutionor other person engaged in the business ofbanking. It includes certificates of deposit. Theterm ‘‘loan/credit line account’’ means dis-bursed loan, funds drawn under credit lines, andsecured, undrawn credit lines and other secured,undisbursed extensions of credit by a financialinstitution to a U.S. person. A federally insureddepository institution, however, should not reportany loans and credit extensions from foreignbanks.

1201.0 Report of Foreign Bank and Financial Accounts


Anti-Money Laundering Program Reviewfor U.S. Overseas OfficesExamination Procedures Section 1202.0

Advisory #1

The Federal Reserve has developed examinationprocedures for reviewing compliance by U.S.-based institutions, whether domestic or foreignoperated, with the Bank Secrecy Act (‘‘BSA’’)and other related anti-money laundering stat-utes. These procedures, entitled the ‘‘Workpro-gram for Financial Recordkeeping and Report-ing of Currency and Foreign TransactionsExamination,’’ is designed for conducting BSAreviews of the U.S-based operations only andcan be located at Section 100 of theBSAExamination Manual.

In contrast, the following examination proce-dures should be utilized by the examiner whenconducting BSA on-site reviews of the overseasoperations of U.S.-based institutions. It isimperative that the examiner understand thateach foreign country may have its own anti-money laundering statutes, if any at all, andthat the statutes may differ significantly fromthose utilized in the U.S. The availability ofrecords may also differ significantly from theU.S.

Advisory #2

The following examination procedures have beendesigned to be completed in two parts. The firstis to be completed at the head office in the U.S.prior to conducting the on-site examination ofthe overseas branch or subsidiary of the U.S.-based institution. The second relates to theon-sight foreign country review.

PART 1: HEAD OFFICE REVIEW

Operational Considerations On-Sitein the U.S.

Contact the appropriate U.S. representative withoverseas branch/subsidiary responsibility toadvise that information regarding BSA andrelated anti-money laundering laws is needed toconduct the initial portion of the examination.Follow-up the conversation in writing to requestthe needed information.

The following information, at a minimum,should be obtained from the head office:

Y N Comments

1. Policies and Procedures

Does the head office maintain and periodicallyreview policies and procedures for overseasoperations?

The following should be reviewed:

a. Policies and procedures applicable to the for-eign offices such as the corporate policy state-ment or program designed to monitor compli-ance with U.S. and local anti-money launderingstatutes.

b. Applicable laws and regulations affecting theforeign operations. Does the foreign country inwhich the institution operates maintain similarreporting requirements as that of the U.S.?.


Y N Comments

c. The mission statement and a detailed descrip-tion of the foreign branch/subsidiary’s primarybusiness and a listing of the services offered(i.e. retail, wholesale, private banking, trust,money exchange, letters of credit secured withcash or time deposits).

d. Organization Chart, including a listing of man-agement and other key personnel at the foreignoffices.

e. Listing of financial reports available from theforeign branch/subsidiary and copies of themost recent reports forwarded by the foreignoperation to the head office to determine:• addresses/recipients• method of reporting to the U.S.• content of required reports• frequency of reports• required responses to provided reports (review

responses)• record retention requirements at the foreign

operation• type of accounting systems in place (manual

or automated)

Advisory #3

The examiner should determine whether or notthe records on-site at the foreign operation are

available in a foreign language only and if so,what arrangements can be made to translate theinformation.

Y N Comments

2. Audit

Are internal or external audit reports available?

Contact should be made with the auditor respon-sible for the on-site overseas audit to determine the:

a. scope of internal/external audits

b. frequency of audits

c. location of audit workpapers

d. audit procedures implemented

e. reporting lines

1202.0 Anti-Money Laundering Program Review for U.S. Overseas Offices


Y N Comments

2. Audit (Continued)

Is a copy of the latest internal and/or external auditof the overseas operation available at the headoffice? If so, review the audit for pertinent informa-tion that may assist the conducting of the on-sitereview.

Has senior management reviewed the internal and/orexternal audits and implemented corrective actionsregarding criticisms noted within the audits?

Anti-Money Laundering Program Review for U.S. Overseas Offices 1202.0


Advisory #4

Section 1502 of theBSA Examination Manualcontains information regarding the FinancialAction Task Force (FATF) and its recommenda-tions to member countries in adopting anti-money laundering statutes. For each foreigncountry in which the U.S. institution operates,management should be able to provide informa-tion regarding the foreign country’s adoption ofthe FATF recommendations. Keep in mind that aforeign country’s formal adoption of the FATFrecommendations does not necessarily meanthat the anti-money laundering statutes and regu-lations are now in place, or that the statutes andregulations are being adequately followed bythe financial community or monitored by thecountry’s federal government. The foreigncountry on-site examination should be able toassist you in making the determination as to theadequacy of the country’s adoption of the FATFrecommendations.

Advisory #5

The U.S. Department of Treasury’s Office ofForeign Assets Control (‘‘OFAC’’) administerslaws that impose economic sanctions againstforeign countries to further U.S. foreign policyand national security objectives. OFAC is alsoresponsible for making regulations that restricttransactions by U.S. persons or entities (includ-ing banks), located in the U.S. or abroad, withcertain foreign countries, their nationals or ‘‘spe-cially designated nationals.1’’ OFAC regularlyprovides to banks, or banks may subscribe tocertain databases or other informational provid-ers (including theFederal Register), currentlistings of foreign countries and designatednationals that are prohibited from conductingbusiness with any U.S. entity or individual.Some of the OFAC examination procedureslisted below can be conducted at the head officewhile others may have to be checked during theon-site foreign country review. Refer to Section1505 for additional information.

Y N Comments

3. Office of Foreign Assets Control (OFAC)

Does the institution have policies and procedures inplace for complying with OFAC laws andregulations?

Does the U.S. bank maintain a current listing ofOFAC information?

Is the OFAC information disseminated to foreigncountry offices?

Are new accounts compared to the OFAC listingprior to opening?

Are established accounts regularly compared tocurrent OFAC listings?

1. Includes ‘‘specially designated narcotics traffickers,’’‘‘specially designated terrorists,’’ ‘‘blocked persons,’’ and‘‘blocked vessels.’’



Advisory #6

Deliver a first day letter to the U.S. office foreach foreign branch or subsidiary to be exam-ined. The head office should be able to providethe name(s) of responsible personnel to becontacted and to ensure their presence during

the on-site portion of the examination. Tailor thefirst day letter to reflect information obtainedfrom the U.S. head office examination. Thefollowing is a list of some of the informationthat should be available prior to the on-sitecountry review:

Y N Comments

4. First Day Letter

List of the different currencies used in cashoperations.

Average amount of cash held on premises in anormal working day.

Information concerning customers, including typeof business and location, who frequently conductlarge cash transactions.

List of banks that ship/receive currency with theforeign country offices.

Copy of procedures and sample reports used tomonitor large currency deposits.

Description of teller systems (automated or manual).

Description of and sample reports utilized in con-ducting electronic funds transfers.

Average volume of daily funds transfers.

List of private banking/trust accounts, includingname and country of origin.

List of banks that clear dollar denominated instru-ments (e.g., checks, money orders, and traveller’schecks).

Advisory #7

Upon completion of the examination of the headoffice records, you may be able to make anadequate assessment of the entire operationsefforts, both domestically and internationally, incomplying with the BSA and other relatedstatutes. Nonetheless, you should complete asmany of the overseas on-site procedures locatedin Part 2 as possible.

Advisory #8

Prior to the commencement of the on-site for-eign country review, you should check withyour Reserve Bank BSA representative to deter-mine the nature and scope of any examinationconducted on the institution or foreign countryanti-money laundering initiatives by either thehome country supervisor or team of FATFauditors.



PART 2: ON-SITE FOREIGN COUNTRY EXAMINATION

Y N Comments

5. Internal Compliance Program and Procedures

Does the institution follow a written program?

Does the written program provide for the following:

a. a system of internal controls to ensure compli-ance with applicable rules, regulations andinternal policies?

b. independent testing for compliance? If con-ducted by an outside party, list the name of theparty.

c. a designated position(s) responsible for dailycompliance with BSA and related statutes? Listname(s) of individuals.

d. training for personnel?

e. adequate control of currency flows and cashtransactions?

6. Know Your Customer Policy

Does the institution have policies and procedures thatrequire reasonable efforts to be made to ascertain theidentity of individuals and/or stated business purposeof each commercial enterprise with whom the insti-tution conducts business? (Refer to Section 600of the BSA Examination Manual—‘‘Know YourCustomer’’)

Does the institution allow accounts to be openedunder fictitious names? If so, does the institutionmaintain records containing the actual names andother identifying information regarding the individu-als and their stated ‘‘activities?’’

Do the bank employees receive adequate trainingregarding the identifying and reporting of unusual orsuspicious transactions?

Does the bank have an adequate monitoring systemto identify unusual or suspicious transactions (struc-turing of cash transactions, concentration of accounts,unusual wire transfer activity, cash collateralizedloans, or other transactions inconsistent with thenature of a customer’s stated business activity)?



Y N Comments

7. Private Banking and Trust Departments

Does the institution provide for private banking ortrust services in the host country? If so, determinewhat requirements are necessary for opening anaccount:

a. identification

b. recommendation from third party

c. business or profession

Are numbered accounts or accounts with codednames permitted? If so, review documentation of:

a. actual names and country of origination

b. concentration of accounts by country

Determine the source and destination of funds(checks, wires).

8. Wire Transfers

What systems are in place for recording the initiationand reception of wire transfers (automated, manual)?

Is documentation available to identify the remitter,destination and description of the transaction?

Does the institution maintain daily transaction logsfor both incoming and outgoing transfers?

Does the institution accept cash from non-customersto initiate funds transfers?

Do wire room personnel receive regular training inanti-money laundering procedures and the identifi-cation of unusual or suspicious activities?



Advisory #9

Credit extensions can serve as one of the chan-nels to conceal money laundering activities,whether extended to individuals or business

entities. In view of the numerous methods andcomplex nature of such transactions, you shouldcomplete the following procedures. The list isnot meant to be exhaustive, rather, it shouldprovide a conceptual framework for analysis.

Y N Comments

9. Credit Extensions

Does the bank have a clear understanding of itscustomers business and credit needs?

Does the bank clearly understand the ownershipstructure of corporate borrowers?

Is the purpose of the credit extension well definedand commensurate with the business activity?

Are the sources of payment well defined? What isthe repayment history (are extensions paid downahead of schedule?)?

Are credits secured with cash? If so, what is thereasoning and is this structure in line with theclient’s business objectives and needs?

Are cross-border credit extensions being booked onthe basis of cash deposits at an affiliate or corre-spondent bank?

Is the pricing of credit services in line with generalpractices, including the payment of ‘‘up-front’’fees?



Advisory #10

Section 1100 of the BSA Examination Manualprovides information on ‘‘Payable ThroughAccounts.’’ You should determine whether theforeign country operation deals in such accountsand what policies and procedures are in placefor the proper opening and monitoring of suchrelationships. A review of the correspondentbank relationships should also be conducted.

Findings, particularly criticisms, should benoted in the consolidated examination reportand brought to management’s attention.

Advisory #11

If there are adequate policies, procedures andinternal controls regarding currency flows, stophere. If not, proceed to #10.

Y N Comments

10. Bank Secrecy Act (Anti-Money Laundering Statutes)

Does the foreign branch/subsidiary accept cash fordeposits, loan payments or other financial transac-tions? If so, review the following:

a. teller operations, including daily cash proofsheets, tapes, computer-generated reports andany other documents to support the cash activity.

b. sources of cash (clients, non-clients)

c. uses of cash (deposits, wire transfers, purchaseof monetary instruments)

Are deposits accepted for U.S. accounts? If so,ascertain how credit is accomplished (pouch deliv-ery, nostro account debit/credit). Determine themake-up of the deposits.

Is the U.S. foreign office in compliance with localanti-money laundering statutes regarding reportingand record retention.



Sound Practices Paper—Private BankingPrepared by the Federal Reserve Bankof New York, July 1997 Section 1301.0

This paper presents the observations of examin-ers of the Federal Reserve Bank of New Yorkregarding sound risk management and internalcontrol practices with respect to private bankingactivities. Findings are based on a year-longcycle of on-site examinations of the risk man-agement practices of approximately forty insti-tutions in the Second Federal Reserve Districtthat are engaged in the provision of financialservices to high net worth individuals, which iscommonly referred to as private banking. Theseexaminations represented a cross section ofcommercial banks, Edge Act corporations, trustcompanies, and U.S. branches of foreign banks.Our examiners found varying degrees of sophis-tication and depth in private banking activities.And, we recognize that what constitutes soundpractice may vary according to the particulars ofeach organization’s business.

The guidance presented in this paper is not aregulation and should not be interpreted as such.The sound practices reflect the type of informa-tion banks need to have to satisfy existing legalrequirements as well as transactions testingperformed by examiners, and the types of con-trols essential to minimize reputational and legalrisk and deter money laundering. The goal of thepaper is to ensure that banks are aware of themajor issues currently under review by regula-tory and legal authorities and to further thedialogue with institutions engaged in privatebanking.

Heightened supervisory interest in privatebanking activities primarily reflects marketdevelopments. Recently, domestic and foreignbanking organizations have been increasing theirprivate banking activities and their reliance onincome from this business line. Several largeinstitutions reported plans to increase sharplythe net contribution of private banking to theirorganizations’ earnings. Additionally, the targetmarket for private banking—high net worthindividuals—is growing and becoming moresophisticated and diverse with regard to productand service preferences and risk appetites. Asthe target market for private banking is growing,so is the level of competition among institutionsthat provide private banking services. Bankingorganizations are experiencing competition forprivate banking clients from non-bank financial

institutions, including securities dealers, andasset management and brokerage firms. Accord-ingly, there are increased pressures on the rela-tionship managers and marketing officers ofbanking organizations to obtain new clients,increase their assets under management, andcontribute a greater percentage to the net incomeof their organizations.

The reviews underlying this paper focusedprimarily on assessing each banking institu-tion’s ability to recognize and manage thepotential reputational and legal risks that maybe associated with inadequate knowledge andunderstanding of the clients’ personal and busi-ness background, source of wealth and use oftheir private banking accounts. Also consideredwere the essential characteristics of an appropri-ate control infrastructure that is suited to supportthe effective management of these risks.

To varying degrees, the sound practices iden-tified here either are currently in place or are inthe process of being implemented in most insti-tutions, although it is recognized that practicesobserved in the United States may differ fromglobal practices. The discussion is structured asfollows: (I) management oversight, (II) policiesand procedures, (III) risk management practicesand monitoring systems, and (IV) segregation ofduties, compliance and audit.

I. MANAGEMENT OVERSIGHT OFPRIVATE BANKING

Senior management’s active oversight of privatebanking activities and the creation of an appro-priate corporate culture are crucial elements of asound risk management and control environ-ment. Senior management is responsible foridentifying clearly the purpose and objectives ofthe organization’s private banking activities. Astatement that describes the target client base,the range of services offered to clients, and thefinancial objectives and risk tolerances shouldbe approved by senior management and estab-lish accountability for risk management andcontrol functions. Well-developed goals andobjectives not only describe the target clientbase in terms of factors such as minimum networth, investable assets and the types of prod-


ucts and services sought, but specifically indi-cate the types of clients the institution will andwill not accept, and establish multiple andsegregated levels of authorization for new clientacceptance. Institutions that follow such soundpractices will be better positioned to design anddeliver products and services that match theirclients’ needs, while reducing the likelihood thatunsuitable clients will be accepted.

Senior management should be activelyinvolved in strategic planning for the privatebanking operation. Sound strategic planningshould involve not only setting targets such asrevenue, assets under management, and thenumber of new accounts, but also include theestablishment of control and risk managementgoals, such as satisfactory audit and compliancereviews. The most control-conscious institutionshave passed these and other specific qualitativegoals through to relationship managers. In somecases, they have included these factors inemployee compensation schemes, thus promot-ing accountability and responsibility for riskmanagement and control processes.

The culture that exists within the privatebanking operation invariably reflects seniormanagement’s level of commitment to controlsand risk management. A focused, integrated,‘‘top-down’’ approach to embracing risk man-agement and control concepts will most effec-tively foster an environment in which managersand staff are knowledgeable and aware of therisks in their portfolio. This approach to privatebanking activities will help ensure that staffmembers apply consistent practices, communi-cate effectively, and assume responsibility andaccountability for controls.

Each organization should ensure that its poli-cies and procedures for conducting private bank-ing activities are evaluated and updated regu-larly, and that there is a clear delineation ofroles, responsibilities and accountability forimplementing such policies and procedures.

II. POLICIES AND PROCEDURES

As a private banking operation frequently func-tions as a ‘‘bank within a bank,’’ there aredifferent policies and procedures needed togovern its activities and operations. This paperfocuses primarily on the significance of soundKnow Your Customer (‘‘KYC’’) policies andprocedures in managing the reputational andlegal risks inherent in private banking activities.

Know Your Customer Policies andProcedures

Nearly all of the institutions examined hadwritten KYC policies and procedures—most ofwhich captured the spirit of sound KYC guide-lines. These institutions have taken a reasonableapproach to including essential components ofa sound KYC policy in their written policies,such as: obtaining identification and basic back-ground information on the clients, describingthe clients’ source of wealth and line of busi-ness, requesting references, handling referralsand identifying red-flags or suspicious trans-actions. Policies also should require that theclients’ source of wealth and funds be corrobo-rated and include specific guidelines on how tocorroborate information provided by the client.Sound policies also define acceptable KYCinformation for different types of account hold-ers, such as individuals, operating companies,personal investment companies (‘‘PICs’’), trusts,clients of financial advisers or other intermedi-aries, and financial advisers. These policies alsoshould recognize that contact/visitation reportswritten by private bankers, which documenttheir meetings with clients in their home coun-tries and places of business, are an importantcomponent to the KYC process.

Additionally, sound policies require that thetype and volume of transactions expected to bepassing through the clients’ accounts be docu-mented, with actual flows monitored to assist indetecting suspicious or unusual transactions.Accountability for following up on suspiciousactivities and making such reports as may berequired should also be clearly assigned.

Compliance with policies should be expectedby senior management as a matter of course;waivers should be the exception, not the rule,and reasons for any exception should be docu-mented. Moreover, all waivers should be handledby authorized personnel—thus reinforcing seniormanagement’s oversight of the risk managementprocess. Clearly, the best written policies andprocedures will not work unless they are imple-mented effectively and modified appropriatelyto reflect changing industry practices.

Credit Policies and Procedures

Lending to high net worth individuals and theirbusiness concerns often takes on unique banking

1301.0 Sound Practices Paper—Private Banking


characteristics. The majority of private bankinglending is fully secured—often by cash, securi-ties and other assets held by the private bankingfunction. Thus, the extensions of credit to highnet worth individuals on a secured basis shouldnot result in compromising sound underwritingstandards. If credit is extended based on collat-eral, even if the collateral is cash, repayment isnot assured. For example, collateral derivedfrom illicit activities may be subject to govern-ment forfeiture. Accordingly, when extendingsecured private banking loans, institutions shouldbe satisfied as to the source and legitimacy ofthe client’s collateral, the borrower’s intendeduse of the proceeds and the source of repayment.Some institutions have appropriately recognizedthat, when lending to high net worth individuals,whether on a secured or unsecured basis, thecreditworthiness determination is bolstered by athorough and well-structured KYC process.

III. RISK MANAGEMENTPRACTICES ANDMONITORING SYSTEMS

Effective risk management practices and sys-tems that carry out the KYC policies are thefoundation of a sound risk management process.These practices should be well-integrated withinthe organization and reassessed on an ongoingbasis. Additionally, relevant personnel shouldrecognize their roles in the process, as well astheir accountability.

Documentation and Due Diligence

Virtually all institutions perform more due dili-gence on relationships established currently thanon accounts that were opened in the past. Theyare supplementing basic account-opening infor-mation, such as identification through passportsand national identity cards and other basicpersonal and business data, including the cli-ent’s mailing address, profession, and estimatednet worth, with more detailed and substantiveinformation. Sound practice requires institutionsto obtain references on their clients from reli-able, independent sources, such as other finan-cial institutions, the client’s business associates,attorneys or accountants. Independent refer-ences that describe the capacity in which thereferring party knew the client and the nature of

their relationship are important components ofthe KYC process, and institutions routinelyshould seek to obtain these references. Further-more, if internal references from personnel thatserve the client from an affiliated office are used,such references should be accompanied bydetailed, well-supported documentation.

Institutions employ a wide array of soundpractices to corroborate a client’s source ofwealth and business activities, in addition toobtaining references. For example, some insti-tutions have obtained private credit agencyreports on their clients’ businesses, includingthose in foreign countries. Private bankers havealso sought out public information on highprofile clients in the press, periodicals andthrough standard database searches. Sound prac-tice also suggests that private bankers obtainfinancial statements, marketing brochures, andannual reports of clients’ businesses as addi-tional corroboration sources.1 Examinations haveconfirmed that there are relatively easy andunobtrusive ways to corroborate a private bank-ing client’s source of wealth, whether that clientis from the United States or abroad.

A concerted effort should be made to embracethese due diligence practices with prospectiveand existing private banking clients to assurethat a client’s source of funds is legitimate.While most institutions emphasized the signifi-cance of documentation and due diligence dur-ing the client acceptance process, it is equallyimportant to ensure that client profiles areappropriately updated throughout the relation-ship with the client.

Most banking institutions maintain and man-age accounts for PICs in their U.S. offices; infact, frequently PICs are established for theclient—the beneficial owner of the PIC—by oneof the institution’s affiliated trust companies inan offshore secrecy jurisdiction. The majority ofthese institutions employ the sound practice ofapplying the same general KYC standards toPICs as they do to personal private bankingaccounts—they identify and profile the benefi-cial owners. Most institutions had KYC docu-mentation on the beneficial owners of the PICsin their U.S. files.

1. Note that dealings with certain types of entities—pension funds or public entities such as municipalities—require additional procedures. When dealing with a pensionfund certain disclosure requirements of ERISA may apply,and a knowledge of relevant statutes or regulations may berequired when dealing with public entities.

Sound Practices Paper—Private Banking 1301.0


The beneficial owners of PICs have a legiti-mate right to protect their financial privacy, andsome high net worth private clients may have aspecial and legitimate need for confidentiality—because of their public prominence, for exam-ple. The needed confidentiality in these casesmay be afforded by promulgating special pro-tections as to access to the records revealing theidentity of a beneficial owner of a PIC. How-ever, the ability to make proper identification ofthe beneficial owner remains an important con-trol within the banking organization. First, with-out this control, the banking organization cannotsatisfy its compliance obligations with respect tolegal process served on the banking organiza-tion, which might reach property owned orcontrolled by a particular beneficial owner,including the PIC itself. If the banking organi-zation has structured its records in a way thatmakes it impossible to comply with such pro-cess, this could cause the organization seriouscompliance problems. Second, the lack of trans-parency may be an impediment to the bankingorganization’s understanding of its overall rela-tionship with a particular beneficial owner; andthe existence of accounts for one or more PICscould confuse the organization about the natureand depth of the overall relationship if theidentity of the beneficial owner is masked withinmanagement information systems. Finally, thereis no legal impediment to maintaining appropri-ate records. The law in the foreign jurisdictionwhere the PIC is organized ordinarily shouldpresent no obstacle to recording the beneficialowner in a record that the banking organizationmaintains with respect to a PIC account in theUnited States.

KYC standards for the beneficial owners ofPICs (and similarly for those of offshore trustsand foundations) should be no different fromthose of other personal private banking accounts.Further, institutions maintaining such accountsin the United States should be able to makeavailable, within a reasonable period of time, theidentities and full KYC profiles of the beneficialowners when requested by supervisors perform-ing test-checks of their KYC programs.2

Use of ‘‘Omnibus’’ and‘‘Concentration’’ Accounts

Sound practice calls for each private bankingclient to have its own account(s) at the bank,through which all of the client’s transactions aredirected. Private banking operations should havethe policies and controls in place to confirm thata client’s funds flow into and out of the client’saccount(s), and not through any other account,such as the organization’s suspense, omnibus orconcentration accounts. Generally, it is inadvis-able from a risk management and control per-spective for institutions to allow their clients todirect transactions through the organization’ssuspense account(s). Such practices effectivelyprevent association of the clients’ names andaccount numbers with specific account activity,could easily mask unusual transactions andflows, the monitoring of which is essential tosound risk management in private banking, andcould easily be abused.

Management Information Systems

The management information systems (‘‘MIS’’)associated with private banking activities werereviewed with a focus on the utility, thorough-ness, timeliness and accuracy of data reported tomanagement and responsible individuals. Whilethe size and complexity of the private bankingoperation at each organization will affect theresources devoted to MIS, private bankingoperations should make effective use of currenttechnology to support their risk managementframework. The level of MIS support given toprivate banking frequently was weaker than thesupport given to other areas of the same bankingorganization. In such cases, institutions shoulddevelop specific plans to change or upgradetheir MIS.

MIS should be migrating towards providingmanagement with timely information necessaryto analyze and manage effectively the privatebanking business. The types of reports that maymeet this objective are those that reflect eachclient’s holdings, including those held throughPICs and any affiliated accounts; any missingaccount opening documentation; transactionsmade through a client’s accounts that are

2. Similarly, KYC standards should be no different thanthose applicable to private banking accounts when the insti-tution deals with a financial adviser or other type of interme-diary acting on behalf of a client. In order to perform its KYCresponsibilities, the institution should identify the beneficialowner of the account (usually the intermediary’s client, but, inrare cases, the intermediary itself) and perform its KYCanalysis with respect to the beneficial owner. The imposition

of an intermediary between the institution and the counterparty should not lessen the private bank’s KYC responsibilities.



unusual; and the private banking function’sprofitability. Institutions that manage privatebanking activities on a decentralized, functionalbasis may face challenges in uneven implemen-tation of policies and procedures and in aggre-gating a client’s total relationship with theinstitution, as the client’s account balances mightbe recorded on disparate systems. Institutionswith integrated management of private bankingactivities have more success in capturing andreporting a client’s complete relationship. Man-agement’s ability to measure and analyze eachclient’s complete relationship with the organiza-tion is a key element for sound risk manage-ment, and MIS should support that objective.

MIS should be capable of monitoring accountsfor unusual and potentially suspicious activities.Many institutions are developing or enhancingsystems which will identify transactions thatwarrant explanation and evaluation because oftheir size, volume, pattern, source or destination.Systems that identify individual transactions onan exception basis, for example those that areabove established thresholds in dollar amountand volume, are more appropriate in the detec-tion of aberrations in transactional behavior thansystems that only recognize net balance changes.There is a wide array of thresholds used toinitiate exception reports—some institutions usea dollar minimum for each transaction, regard-less of the type of client or activity, while otherssegregate their client base and establish differentdollar/volume thresholds for transactions per-taining to each client grouping or to each indi-vidual client account. Each institution shouldimplement exception reporting that makes senseand provides appropriate information within thecontext of its particular business. It shouldrecognize that the systems and reports are valu-able only if there are individuals who areresponsible for receiving, analyzing and actingon the information generated.

Reporting Suspicious Activity

Procedures established to investigate and, ifnecessary, report suspicious private bankingactivity also were reviewed. If legal, reputa-tional, and other risks are to be controlled, theremust be a heightened focus on preventing anddetecting money laundering and other unlawfulactivity. Financial institutions clearly have a keyresponsibility in that process. The FederalReserve’s Suspicious Activity Reporting regu-

lations, which became effective April 1, 1996,and are similar to regulations issued by theOCC, FDIC, OTS, NCUA and the Treasury,impose a duty to file a Suspicious ActivityReport (‘‘SAR’’) for any transaction that:

‘‘has no business or apparent lawful purpose or isnot the sort in which the particular customer wouldnormally be expected to engage, and the institutionknows of no reasonable explanation for the trans-action after examining the available facts includingthe background and possible purpose of thetransaction.’’

Some institutions with global private bankingactivities have recognized the advantages inapplying their suspicious activity monitoringprocedures globally, as they will be betterequipped to detect and analyze patterns andtrends of suspicious transactions within theirorganizations. Private banking senior manage-ment should ensure that sound practices arebeing followed throughout their organization.Management should ensure there is a proactiveapproach and well-established procedures cov-ering the SAR process and that accountabilityexists within their organization for the analysisand follow-up of internally identified suspiciousactivity, for the decision-making process as towhether or not to file a SAR, and for maintain-ing or closing an account. Because there is alegal requirement to report suspicious trans-actions, it is essential for banking organizationsto maintain internal programs that ensurecompliance.

IV. SEGREGATION OF DUTIES,COMPLIANCE AND AUDIT

Ensuring effective implementation of estab-lished policies and procedures is a significantchallenge to many private banking operations.Institutions that evidence ongoing progresstowards conformity with stated policies andprocedures are those that recognize the impor-tance of segregation of duties and provideadequate attention, direction and support to theindividuals responsible for compliance andinternal audit.

Segregation of Duties

Adequate segregation of duties in the KYC



process is of critical importance. Institutionsshould not rely exclusively on any individualrelationship manager or immediate supervisorto, for example, waive documentation requiredto open an account, approve the client profile,authorize a new client relationship, fully iden-tify (or ‘‘know’’) the client, and monitor clientaccounts for unusual transactions. The morecontrol-conscious institutions ensure that anindependent unit—such as compliance, riskmanagement or senior management—also hasresponsibility for these functions. Some institu-tions have segregated KYC duties in a KYCcommittee comprised of relationship managers,compliance, and senior management to deter-mine, prior to the acceptance of any new client,if the potential client’s profile meets the institu-tion’s KYC standards. Many institutions havealso introduced the concept of ‘‘back-up rela-tionship managers’’ or ‘‘client teams’’ to mini-mize the risk of a single relationship managerhaving exclusive knowledge and control overindividual relationships.

Segregation of duties clearly facilitates theprivate banking operation’s compliance withpolicies and procedures and, consequently, mini-mizes reputational and legal risk. Institutionsthat have not already established independentcontrol over the above-mentioned activities areurged to introduce such measures as soon aspossible.

Compliance

Compliance functions are most effective if theyare proactive in ensuring the integrity of thecontrol infrastructure of the private bankingoperation, as opposed to being reactive to spe-cific, isolated events. They should ensure thatpolicies and procedures are being followed byconducting frequentad hoc reviews and teststhat measure how different groups within theprivate banking function are complying with thepolicies and procedures. Some institutions assignto compliance the responsibility for reviewingall prospective client profiles to determine if therelationship managers have satisfied the institu-tions’ profiling requirements, obtained neces-sary documentation and taken appropriate actionwhere problems arise. Compliance functionsshould also be in a position to recognizepromptly any client activity that may be unusual,to question relationship managers about the

nature of potentially suspicious activities, and tofollow through on their inquiries and suspicions.Compliance functions work effectively onlywhen they have senior management commit-ment and sufficient resources to accomplishtheir mission.

In creating a culture that follows best prac-tices of risk management and internal control,institutions should conduct frequent training ofpersonnel that is reinforced at regular intervals,particularly in providing the ‘‘how to’’ of clientprofiling, conducting due diligence, preparingcustomer call reports and detecting and respond-ing to unusual activities. In some cases, KYCtraining has been incorporated into the overallmarketing and sales training programs. Thisserves to integrate the concepts of knowing theclient’s personal and business background, andsource and legitimacy of wealth with thoserelating to the selling of appropriate productsand services that meet the client’s needs andinterests. The majority of institutions providetraining on money laundering and documen-tation requirements for their compliance staff.Institutions also should incorporate this traininginto programs conducted for their relationshipmanagers.

Internal Audit

Comprehensive private banking audit programsare based on risk ratings that apply an appropri-ate weighting to the major risks of the business,such as reputational and legal risk, and auditsthat are conducted with sufficient frequency andinvolve adequate transaction testing to deter-mine the effectiveness of the internal controlenvironment. KYC testing, for example shouldbe a critical element.

As internal audit plays a crucial role inindependently evaluating the risk managementand controls, management should ensure thataudit functions are staffed adequately with indi-viduals who are well-versed in private banking.In addition, auditors should be proactive infollowing-up on their findings and criticisms.

Conclusion

The purpose of this paper is to provide soundpractice guidance to institutions that are engagedin private banking, while at the same time



contribute to the ongoing national and interna-tional discussion of the difficult challenges ofimplementing effective Know Your Customerpolicies and procedures. Banks face a majorresponsibility with their affirmative legal obli-gation to prevent money laundering. This isparticularly true in light of the general expecta-tion that private banking will grow significantly

in size, complexity and diversity over the nextseveral years, with the result that business prac-tices, policies and procedures will need to bereviewed and revised to ensure effective riskmanagement. We look forward to continuingour dialogue with banks engaged in privatebanking.



AD 93-56 (FIS)Section 1401.0

BOARD OF GOVERNORS

of the

FEDERAL RESERVE SYSTEMWashington, D.C. 20551

AD 93-56 (FIS)

September 22, 1993

TO THE OFFICER IN CHARGE OF SUPERVISIONAT EACH FEDERAL RESERVE BANK

SUBJECT: Bank Secrecy Act—Department of the Treasury Rulings and Directives

The Department of the Treasury, Office ofFinancial Enforcement, recently issued twoAdministrative Rulings, a policy statement anda directive with regard to Bank Secrecy Act(BSA) compliance. Summaries of these are setforth below. Additionally, copies of the Admin-istrative Rulings and the policy statement areattached.1 Reserve Banks are requested to dis-seminate this information to the examinationstaff and, in accordance with a request from theDepartment of the Treasury, to all domestic andforeign banking organizations supervised by theFederal Reserve.

ADMINISTRATIVE RULINGS

The following Administrative Rulings issued bythe Department of the Treasury are with regardto: 1) the identification of elderly or disabledpatrons that conduct large cash transactions orpurchase monetary instruments with currencyin amounts between $3,000 and $10,000; and2) proper completion of the Currency Trans-action Report (IRS Form 4789) for multipletransactions:

Administrative Ruling 92-1—Identification Of Elderly Or DisabledPatrons Conducting Large CurrencyTransactions

The BSA requires financial institutions to verify

and record the identity of individuals conductingreportable currency transactions. However, cer-tain elderly or disabled patrons do not possessidentification documents that would normallybe accepted within the banking community(e.g. driver’s license, passport, state-issuedidentification card). Administrative Ruling 92-1(AD 92-1) allows for other methods of verifica-tion of identification to be utilized. Financialinstitutions must establish formal written proce-dures consistent with AD 92-1 and, once imple-mented, there can be no exceptions to theprocedures.

Administrative Ruling 92-2—ProperCompletion Of The CurrencyTransaction Report (CTR),IRS Form 4789, When ReportingMultiple Transactions

The BSA requires financial institutions to reportcurrency transactions that exceed either $10,000or an exempted account’s established limit.Multiple currency transactions are treated as asingle transaction when the institution has knowl-edge that the transactions by or on behalf of anyperson, conducted during any business day,exceed either $10,000 or the exemption limit.When reporting multiple transactions, item 3dof the CTR must be checked and the informationin item 48 of the CTR must be provided.Administrative Ruling 92-2 explains the proce-dures to be followed in completing a CTR forthese cases.

1. Administrative rulings located in prior sections of BSAmanual.


Exemption Policy For RetailAccounts In Which Retail and MoneyOrder Sale Proceeds Are Commingled

The Department of the Treasury has issued apolicy statement with regard to exemption pro-cedures for retail accounts in which retail andmoney order sale proceeds are commingled. Thepolicy statement amends the current policy thatsuch accounts cannot be exempted from thefiling of CTRs.

CURRENCY TRANSACTIONREPORTS FILING DEADLINESDIRECTIVE

In 1988, the Department of the Treasuryexempted all banks from the 15-day filingrequirements of the BSA (31 C.F.R. 103.26(a)(1)(1987)) with respect to the filing of CTR’son magnetic tape. For CTR’s that are filed

magnetically, banks must file the CTR’s withthe IRS Detroit Computing Center within25 days following the date on which a reportabletransaction occurs.

It is important to emphasize that this exemp-tion applies only to CTR’s filed magneticallypursuant to an agreement between a bank andthe IRS. If for any reason a bank should with-draw from the magnetic tape program or for anyother reason file paper CTR’s, these CTR’s mustbe filed within the 15-day period following thereportable transaction (31 C.F.R. 103.27(a)(1)(1989)).

If you have any questions regarding theseprocedures, you may call Richard Small, SpecialCounsel, at (202) 452-5235, or Dan Soto, SeniorSpecial Examiner, at (202) 728-5829.

Stephen C. SchemeringDeputy Director

Attachment

1401.0 AD 93-56 (FIS)


DEPARTMENT OF THE TREASURY

WASHINGTON

OFFICE OF FINANCIAL ENFORCEMENT EXEMPTION POLICYFOR RETAIL ACCOUNTS IN WHICH RETAIL AND MONEY ORDER SALEPROCEEDS ARE COMMINGLED

(August 27, 1993).

Section 103.22(b)(2)(i) of the Bank Secrecy Act(BSA) regulations authorizes a bank to unilat-erally exempt from the Currency TransactionReport (CTR) reporting requirement deposits toor withdrawals of currency from an existingaccount by an established depositor who is aUnited States resident and operates a retail typeof business in the United States. However, theBSA regulations do ‘‘. . . not permit a bank toexempt its transactions with nonbank financialinstitutions (except for check cashing serviceslicensed by state or local government and theUnited States Postal Service). . . .’’ 31 C.F.R.103.22(c). Any business which sells more than$150,000 worth of money orders or traveler’schecks within any given 30-day period is definedto be a ‘‘financial institution.’’ 31 CFR 103.11(i)(4).

In view of this, and the fact that illegallyobtained funds are frequently laundered throughpurchases of money orders and other monetaryinstruments, Treasury’s policy has been thatbanks could not exempt accounts of retail busi-nesses into which retail receipts and moneyorder sale proceeds are commingled. However,Treasury recognizes that many operators ofretail businesses, especially grocery, discountand convenience stores sell money orders asan incidental service to their customers and thatthe majority of these sales are for legitimatepurposes.

Provided that the Bank monitors the accountsto detect unusual activity and reports suspicioustransactions law enforcement’s concerns aresatisfied. Provided also that money order salesdo not exceed $150,000 in any 30-day perioddefined as any calendar month (e.g. January1–31; February 1–28/29; June 1–30). and thatretail proceeds account for more than 50% of abusiness’ gross revenues, such a business is nota financial institution as defined in the BSAregulations. To withhold exemption authorityand to require routine CTR reporting in such asituation is burdensome to banks and could well

produce information of little value to lawenforcement.

Therefore, Treasury will consider on a case-by-base basis, requests from banks for specialexemption authorization to exempt accounts ofretail stores in which money order receipts arecommingled with retail proceeds under the fol-lowing conditions. First, the Bank must verifythat the business is not a nonbank financialinstitution by taking the following steps. TheBank should review any records it has availableto confirm that: (1) money order sale proceedsdo not exceed $150,000 in any 30-day period(calendar month); (2) money order sale proceedshave never exceeded $150,000 in any 30-dayperiod (calendar month); and retail proceedsaccount for more than 50% of the business’gross revenues. In the event that multiple loca-tions deposit to a .single account, the exemptioncriteria should be applied to each location. Inaddition, the Bank must require the business toattest to both facts in its Exemption Statement.

The following examples illustrate applicationof the above verification provision:

Retail business with one location which com-mingles the location’s retail and money orderproceeds in one account:

The account may be considered for exemp-tion only if a bank confirms that both the moneyorder sale proceeds do not exceed and havenever exceeded $150,000 in any 30-day period(calendar month) and the retail proceeds accountfor more than 50% of the business’ gross rev-enues. If either of the thresholds is not met, theaccount may not be exempted.

Retail business with multiple locations whichcommingles the locations’ retail and moneyorder proceeds in one account:

The account may be considered for exemp-tion only if a bank confirms that the moneyorder sale proceeds do not exceed and havenever exceeded $150,000 in any 30-day period(calendar month) and the retail proceeds accountfor more than 50% of the business’ gross rev-

AD 93-56 (FIS) 1401.0


enues for each location. If either of the thresh-olds is exceeded by any location, the accountmay not be exempted.

Retail business which deposits retail andmoney order proceeds in separate accounts.

The separate money order account is neverexemptible, irrespective of whether or not thebusiness’ money order sale proceeds are lessthan or exceed $150,000 in any 30 day period(calendar month). The retail proceeds accountmay be considered for exemption only if retailproceeds account for more than 50% of thebusiness’ gross revenues.

After an account has been exempted, theBank must monitor the account and request thatthe business notify.it immediately should any ofthe above conditions change. If any of thethresholds are exceeded, the exemption must besuspended immediately. As set forth in theExemption Handbook,Treasury recommendsthat the Bank review this exemption at leastonce a year, preferably every six months. At thetime of the review, the Bank shall again ensurethat money order sale proceeds have not andhave never exceeded $150,000 in any 30-dayperiod (calendar month) and retail proceeds stillaccount for more than 50% of the gross rev-enues. The Bank must require that a depositorrenew its attestations by signing a now Exemp-tion Statement. Beyond the foregoing specialrequirements, the Bank must comply with all

other exemption requirements as described inTreasury’sExemption Handbook.

This authority is limited to the customers andaccount numbers[s] identified in a bank’s requestand continues in effect only until otherwisedirected by Treasury through any subsequentapplicable regulation or Administrative Rulingwhich address this issue. Please be advised thatshould a bank become aware of any accounts ofretail businesses that also sell money orders andare currently exempted, the Bank must makeseparate application to Treasury for exemptionwithin 60 days. However, the exemption neednot be revoked. If the account is not exempted,until such time as special exemption authority isgranted, the Bank must report all currencytransactions in excess of $10,000. Applicationsfor special exemptions of such accounts must bemade to the Director, Office of FinancialEnforcement (Room 5000, Annex), Departmentof the Treasury, 1500 Pennsylvania AvenueN.W., Washington, D.C. 20220.

With respect to retail businesses which selllottery tickets and traveler’s checks and/or moneyorders, a bank may request additional authorityto exempt the account. Authority to exempt sucha business’ account will be granted under thesame conditions described above provided thatthe retail proceeds account for more than 50% ofthe business’ gross revenues.

1401.0 AD 93-56 (FIS)


SR 95-10 (FIS)Section 1402.0

SR 95-10 (FIS)


SUBJECT: Payable Through Accounts

BACKGROUND

Over the past year, Board staff has becomeaware of the increasing use of an accountservice known as a ‘‘payable through account’’that is being marketed by U.S. banks, Edgecorporations and the U.S. branches and agenciesof foreign banks (‘‘U.S. banking entity(ies)’’) toforeign banks that otherwise would not have theability to offer their customers direct access tothe U.S. banking system. This account servicehas also been referred to by other names, such as‘‘pass through accounts’’ and ‘‘pass by accounts.’’We have worked with representatives from theFederal Deposit Insurance Corporation, theOffice of the Comptroller of the Currency, andthe Office of Thrift Supervision to monitorpayable through account activities and to ensurethat all banking organizations supervised by theFederal Reserve and the other agencies areadvised about the matters described below.

The payable through account mechanism haslong been used in the United States by creditunions (e.g.,for checking account services) andinvestment companies (e.g.,for checking accountservices associated with money market manage-ment accounts) to offer their respective custom-ers the full range of banking services that only acommercial bank has the ability to provide. Theproblems described below do not relate to thesetraditional uses of payable through accountrelationships.

EXPLANATION OF ‘‘PAYABLETHROUGH ACCOUNTS’’

The recent use of payable through accounts asan account service being offered by U.S. bank-ing entities to foreign banks involves the U.S.banking entity opening a checking account forthe foreign bank. The foreign bank then solicits

customers that reside outside of the UnitedStates who, for a fee, are provided with themeans to conduct banking transactions in theUnited States through the foreign bank’s accountat the U.S. banking entity. Typically, the foreignbank will provide its customers, commonlyreferred to as ‘‘sub-account holders,’’ with checksthat enable the sub-account holder to draw onthe foreign bank’s account at the U.S. bankingentity. The group of sub-account holders, whichmay number several hundred for one payablethrough account, all become signatories on theforeign bank’s account at the U.S. bankingentity.1 This results in individuals and busi-nesses, who may not have been subject to thesame requirements imposed on U.S. citizens orresidents for opening an account at a U.S.banking entity, possessing the ability to writechecks and make deposits at a U.S. bankingentity, as if such individuals and businesseswere the actual account holders at the U.S.banking entity.2

1. In a recent adaptation of the payable through accountservice, foreign banks have opened accounts at U.S. bankingentities and then solicited other foreign banks, rather thanindividuals, to use their accounts at the U.S. banking entities.These second tier foreign banks then solicit individuals ascustomers. This has resulted in thousands, rather than hun-dreds, of individuals having signatory authority over a singleaccount at a U.S. banking entity.

2. Payable through account activities should not be con-fused with traditional correspondent banking relationships.Under typical correspondent banking arrangements, a smallerbank will enter into an agreement with a larger bank to processand complete transactions on behalf of the smaller bank’scustomers or the smaller bank itself. In such an arrangement,the smaller bank’s customers are not aware of the correspon-dent banking relationships their bank has with other financialinstitutions. The smaller bank’s customers certainly do nothave access to their bank’s account at the larger correspondentbank. This differs significantly from the payable throughaccount situations where the sub-account holders have directcontrol of the payable through account at the U.S. bankingentity by virtue of their signatory authority over the foreignbank’s account at the U.S. banking entity.


It appears that some U.S. banking entities arenot exercising the same degree of care withrespect to payable through accounts that theyexercise for domestic customers that want toopen checking or other types of account rela-tionships directly with the banking organiza-tions. Our experience has shown that some U.S.banking entities simply collect signature cardsthat have been completed abroad and have beensubmitted to them in bulk by the foreign banks,and then proceed to process thousands of checksissued by the sub-account holders, as well asother banking transactions, through the foreignbanks’ accounts at the U.S. banking entities.These U.S. banking entities undertake little or noeffort independently to obtain or verify informa-tion about the individuals and businesses whouse their accounts.

POSSIBLE ILLEGAL ORIMPROPER CONDUCTASSOCIATED WITH PAYABLETHROUGH ACCOUNTS

The traditional use of payable through accountsby financial organizations in the United States(i.e., credit unions and investment companies)has not been a cause for concern by bankregulators. These organizations are regulated byfederal or state agencies, or are otherwise sub-ject to established industry standards; and theyappear to have adopted adequate policies andprocedures to establish the identity of, andmonitor the activity of, sub-account holders—inessence the credit union’s depositors or theinvestment company’s mutual fund account hold-ers. The same types of safeguards do not appearto be present in some U.S. banking entities thatprovide payable through account services toforeign banks.

Board staff is concerned that the use ofpayable through accounts by foreign banks atU.S. banking entities may facilitate unsafe andunsound banking practices and other miscon-duct, including money laundering and relatedcriminal activities. Unless a U.S. banking entityis able to identify adequately, and understandthe transactions of, the ultimate users—all ormost of whom are off-shore—of the foreignbank’s account maintained at the U.S. bankingentity, there is a potential for serious illegalconduct. Recent reports from law enforcementagencies, as well as our own investigatory

efforts, confirm that some money launderingand related illicit schemes have involved the useof foreign banks’ payable through accountarrangements at U.S. banking entities. Shouldaccounts at U.S. banking entities be used forillegal purposes, the entities could be exposednot only to reputational risks, but also to seriousrisks of financial losses as a result of assetseizures and forfeitures brought by law enforce-ment authorities.

GUIDELINES ON PAYABLETHROUGH ACCOUNTACTIVITIES

Because of the possibility of illicit activitiesbeing conducted through payable throughaccounts at U.S. banking entities, we believethat it is inconsistent with the principles of safeand sound banking for U.S. banking entities tooffer payable through account services withoutdeveloping and maintaining policies and proce-dures designed to guard against the possibleimproper or illegal use of their payable throughaccount facilities by foreign banks and theircustomers.

These policies and procedures must be fash-ioned to enable each U.S. banking entity offeringpayable through account services to foreignbanks to identify sufficiently the ultimate usersof its foreign bank customers’ payable throughaccounts, including obtaining (or having theability to obtain) in the United States substan-tially the same type of information on theultimate users as the U.S. banking entity obtainsfor its domestic customers. This may require areview of the foreign bank’s own procedures foridentifying and monitoring sub-account holders,as well as the relevant statutory and regulatoryrequirements placed on the foreign bank toidentify and monitor the transactions of its owncustomers by its home country supervisoryauthorities. In addition, U.S. banking entitiesshould have procedures whereby they monitoraccount activities conducted in their payablethrough accounts with foreign banks and reportsuspicious or unusual activity in accordancewith applicable Federal Reserve criminal refer-ral regulations.

In those situations where (1) adequate infor-mation about the ultimate users of the payablethrough accounts cannot be obtained; (2) theU.S. banking entity cannot adequately rely on

1402.0 SR 95-10 (FIS)


the home country supervisor to require theforeign bank to identify and monitor the trans-actions of its own customers; or (3) the U.S.banking entity is unable to ensure that its pay-able through accounts are not being used formoney laundering or other illicit purposes, it isrecommended that the U.S. banking entity ter-minate the payable through arrangement withthe foreign bank as expeditiously as possible.

NOTICE TO U.S. BANKINGENTITIES ANDNEW EXAMINATIONPROCEDURES

Because of the existing and potential problemsassociated with payable through accounts, weare asking that U.S. banking entities immedi-ately begin to establish and maintain policiesand procedures designed to guard against thepossible improper or illegal use of their payablethrough account facilities, and that your ReserveBank start to review such activities during thecourse of future examinations. To assist thebanking organizations in your District with theirunderstanding of our concerns in this area, wehave attached a suggested letter to disseminateour payable through account guidelines to thestate member banks, Edge corporations, andU.S. branches and agencies of foreign banks inyour District. We have also developed newexamination procedures that should be used byyour examination staff to review payable throughaccount activities. The new examination proce-dures will be sent to you under separate covershortly.

After your Reserve Bank disseminates theattached suggested letter and begins to use thenew payable through account examination pro-cedures, we ask that, for the next six months,your examiners concentrate on reviewing U.S.banking entities’ existing policies and proce-dures related to monitoring payable throughaccount activities, to the extent that the bankingorganizations conduct such activities, and thatthey make suggestions for improvements orenhancements, where appropriate, consistentwith our new guidelines in this area. Because theFederal Reserve, as well as other federal bankregulators, have not previously issued any guid-ance regarding the operation of payable throughaccounts at U.S. banking entities, we requestthat, until September 30, 1995, you focus on

improvements and enhancements at U.S. bank-ing entities where some deficiencies in this areaare discovered and not include criticisms of U.S.banking entities’ payable through accountactivities in your reports of examination. Inaddition, we request that your Reserve Bank notrecommend any follow-up supervisory actionsrelated to a U.S. banking entity’s policies andprocedures regarding its payable through accountactivities until the fourth quarter of 1995, unlessyour examiners find apparent violations of theBank Secrecy Act or indicia of other seriouscriminal misconduct associated with suchactivities.

COLLECTION OF DATA RELATEDTO PAYABLE THROUGHACCOUNTS

Board staff is in the process of collecting data onpayable through accounts in order to determineas soon as possible the extent of such activitiesin the United States. In this regard, pleaseprovide the following information to Ronald J.Ranochak, Senior Financial Analyst, Interna-tional Supervision Section, Mail Stop 182, assoon as such information becomes availablethrough your upcoming examinations, contactswith U.S. banking entities following the dissemi-nation of the attached suggested letter, or throughother sources:

1. The name and location of each U.S. bankingentity offering payable through accounts toforeign banks.

2. For each such banking entity, as identifiedabove:a. the name, location and licensing authority

of each foreign bank that maintains apayable through account, to the extent thatsuch information is available at the U.S.banking entity;

b. the ownership structure data on each for-eign bank, to the extent that such infor-mation is available at the U.S. bankingentity; and

c. the number of sub-account holders in eachpayable through account, including thename and number of foreign banks thatare sub- account holders.

In the event that you have any questions con-cerning any of the matters described herein,

SR 95-10 (FIS) 1402.0


please contact Richard A. Small, Special Coun-sel, at (202) 452-5235, or Daniel D. Soto, SeniorSpecial Examiner, at (202) 728-5829. For ques-tions related to the collection of data on payablethrough accounts, Mr. Ranochak can be reachedat (202) 452-5275.

Richard SpillenkothenDirector

Attachment

1402.0 SR 95-10 (FIS)


SUGGESTED LETTER

TO THE CHIEF EXECUTIVE OFFICER OF EACH STATE MEMBER BANK,EDGE CORPORATION, AND U.S. BRANCH AND AGENCY OF A FOREIGN BANK

SUBJECT: PAYABLE THROUGH ACCOUNTS

DEAR :

Over the past year, the Federal Reserve hasbecome aware of the increasing use of anaccount service known as a ‘‘payable throughaccount’’ that is being marketed by U.S. banks,Edge corporations and the U.S. branches andagencies of foreign banks (‘‘U.S. banking enti-ty(ies)’’) to foreign banks that otherwise wouldnot have the ability to offer their customersaccess to the U.S. banking system. This accountservice has also been referred to by other names,such as ‘‘pass through accounts’’ and ‘‘pass byaccounts.’’ We have worked with representa-tives from the Federal Deposit Insurance Cor-poration, the Office of the Comptroller of theCurrency, and the Office of Thrift Supervision tomonitor payable through account activities andto ensure that all banking organizations super-vised by the Federal Reserve and the otheragencies are advised about the matters describedbelow.

The payable through account mechanism haslong been used in the United States by creditunions (e.g.,for checking account services) andinvestment companies (e.g.,for checking accountservices associated with money market manage-ment accounts) to offer their respective custom-ers the full range of banking services that only acommercial bank has the ability to provide. Theproblems described below do not relate to thesetraditional uses of payable through accountrelationships.

EXPLANATION OF ‘‘PAYABLETHROUGH ACCOUNTS’’

The recent use of payable through accounts asan account service being offered by U.S. bank-ing entities to foreign banks involves the U.S.banking entity opening a checking account forthe foreign bank. The foreign bank then solicitscustomers that reside outside of the UnitedStates who, for a fee, are provided with themeans to conduct banking transactions in theUnited States through the foreign bank’s account

at the U.S. banking entity. Typically, the foreignbank will provide its customers, commonlyreferred to as ‘‘sub-account holders,’’ with checksthat enable the sub-account holder to draw onthe foreign bank’s account at the U.S. bankingentity. The group of sub-account holders, whichmay number several hundred for one payablethrough account, all become signatories on theforeign bank’s account at the U.S. bankingentity.1 This results in individuals and busi-nesses, who may not have been subject to thesame requirements imposed on U.S. citizens orresidents for opening an account at a U.S.banking entity, possessing the ability to writechecks and make deposits at a U.S. bankingentity, as if such individuals and businesseswere the actual account holders at the U.S.banking entity.2

It appears that some U.S. banking entities arenot exercising the same degree of care withrespect to payable through accounts that theyexercise for domestic customers that want toopen checking or other types of account rela-tionships directly with the banking organiza-tions. Our experience has shown that some U.S.banking entities simply collect signature cardsthat have been completed abroad and have beensubmitted to them in bulk by the foreign banks,

1. In a recent adaptation of the payable through accountservice, foreign banks have opened accounts at U.S. bankingentities and then solicited other foreign banks, rather thanindividuals, to use their accounts at the U.S. banking entities.These second tier foreign banks then solicit individuals ascustomers. This has resulted in thousands, rather than hun-dreds, of individuals having signatory authority over a singleaccount at a U.S. banking entity.

2. Payable through account activities should not be con-fused with traditional correspondent banking relationships.Under typical correspondent banking arrangements, a smallerbank will enter into an agreement with a larger bank to processand complete transactions on behalf of the smaller bank’scustomers or the smaller bank itself. In such an arrangement,the smaller bank’s customers are not aware of the correspon-dent banking relationships their bank has with other financialinstitutions. The smaller bank’s customers certainly do nothave access to their bank’s account at the larger correspondentbank. This differs significantly from the payable throughaccount situations where the sub-account holders have directcontrol of the payable through account at the U.S. bankingentity by virtue of their signatory authority over the foreignbank’s account at the U.S. banking entity.

SR 95-10 (FIS) 1402.0


and then proceed to process thousands of checksissued by the sub-account holders, as well asother banking transactions, through the foreignbanks’ accounts at the U.S. banking entities.These U.S. banking entities undertake little or noeffort independently to obtain or verify informa-tion about the individuals and businesses whouse their accounts.

POSSIBLE ILLEGAL ORIMPROPER CONDUCTASSOCIATED WITH PAYABLETHROUGH ACCOUNTS

The traditional use of payable through accountsby financial organizations in the United States(i.e., credit unions and investment companies)has not been a cause for concern by bankregulators. These organizations are regulated byfederal or state agencies, or are otherwise sub-ject to established industry standards; and theyappear to have adopted adequate policies andprocedures to establish the identity of, andmonitor the activity of, sub-account holders—inessence the credit union’s depositors or theinvestment company’s mutual fund account hold-ers. The same types of safeguards do not appearto be present in some U.S. banking entities thatprovide payable through account services toforeign banks.

Federal Reserve staff is concerned that the useof payable through accounts by foreign banks atU.S. banking entities may facilitate unsafe andunsound banking practices and other miscon-duct, including money laundering and relatedcriminal activities. Unless a U.S. banking entityis able to identify adequately, and understandthe transactions of, the ultimate users—all ormost of whom are off-shore—of the foreignbank’s account maintained at the U.S. bankingentity, there is a potential for serious illegalconduct. Recent reports from law enforcementagencies, as well as the Federal Reserve’s owninvestigatory efforts, confirm that some moneylaundering and related illicit schemes haveinvolved the use of foreign banks’ payablethrough account arrangements at U.S. bankingentities. Should accounts at U.S. banking entitiesbe used for illegal purposes, the entities could beexposed not only to reputational risks, but alsoto serious risks of financial losses as a result ofasset seizures and forfeitures brought by lawenforcement authorities.

GUIDELINES ON PAYABLETHROUGH ACCOUNTACTIVITIES

Because of the possibility of illicit activitiesbeing conducted through payable throughaccounts at U.S. banking entities, we believethat it is inconsistent with the principles of safeand sound banking for U.S. banking entities tooffer payable through account services withoutdeveloping and maintaining policies and proce-dures designed to guard against the possibleimproper or illegal use of their payable throughaccount facilities by foreign banks and theircustomers.

These policies and procedures must be fash-ioned to enable each U.S. banking entity offeringpayable through account services to foreignbanks to identify sufficiently the ultimate usersof its foreign bank customers’ payable throughaccounts, including obtaining (or having theability to obtain) in the United States substan-tially the same type of information on theultimate users as the U. S. banking entity obtainsfor its domestic customers. This may require areview of the foreign bank’s own procedures foridentifying and monitoring sub-account holders,as well as the relevant statutory and regulatoryrequirements placed on the foreign bank toidentify and monitor the transactions of its owncustomers by its home country supervisoryauthorities. In addition, U.S. banking entitiesshould have procedures whereby they monitoraccount activities conducted in their payablethrough accounts with foreign banks and reportsuspicious or unusual activity in accordancewith applicable Federal Reserve criminal refer-ral regulations.

In those situations where (1) adequate infor-mation about the ultimate users of the payablethrough accounts cannot be obtained; (2) theU.S. banking entity cannot adequately relyon the home country supervisor to requirethe foreign bank to identify and monitor thetransactions of its own customers; or (3) theU.S. banking entity is unable to ensure thatits payable through accounts are not beingused for money laundering or other illicit pur-poses, it is recommended that the U.S. bankingentity terminate the payable through arrange-ment with the foreign bank as expeditiously aspossible.

Even though we are asking that you beginimmediately to establish and maintain policies

1402.0 SR 95-10 (FIS)


and procedures designed to guard against thepossible improper or illegal use of payablethrough account facilities, we understand thatsuch new policies and procedures will take sometime to implement fully. As a first step, youshould contact each foreign bank that maintainsany type of payable through account relation-ship with your banking organization in orderto bring the records related to its accountsinto conformity with the aforementionedguidelines.

Over the next several months, during ourregular examinations, Reserve Bank examinerswill be reviewing your existing policies andprocedures related to payable through accountactivities, to the extent that you conduct suchactivities, any improvements or enhancementsthat you may make in light of the aforemen-tioned guidelines, and your efforts, if needed, tocontact foreign banks that maintain payablethrough accounts at your institution.

In order to provide your banking organizationwith sufficient time to implement our guidelinesin this area, our examiners will not includecriticisms of any U.S. banking entity’s payablethrough account activities in reports of exam-inations until the fourth quarter of 1995.Also, we will not recommend any follow-upsupervisory actions addressing deficiencies inthis area until the fourth quarter of 1995, exceptin those situations where examiners find appar-ent violations of the Bank Secrecy Act or indiciaof other serious criminal misconduct associatedwith such activities.

Should you have any questions with regard tothis matter, please contact at theReserve Bank.

Sincerely,

SR 95-10 (FIS) 1402.0


SR 97-19 (SUP)June 30, 1997 Section 1403.0

SR 97-19 (SUP)

June 30, 1997


SUBJECT: Private Banking Activities

Private banking activities, which involve, amongother things, personalized services such as moneymanagement, financial advice, and investmentservices for high net worth clients, have becomean increasingly important aspect of the opera-tions of some large, internationally active bank-ing organizations. The Federal Reserve hastraditionally reviewed private banking activitiesin connection with regular on-site examinations.In 1996 and 1997, the Federal Reserve Bankof New York undertook a comprehensive reviewof private banking activities at approximately40 domestic and foreign banking organizationsin the Second District in order to enhance theFederal Reserve’s understanding about privatebanking operations. Examiners focused princi-pally on assessing each institution’s ability torecognize and manage the potential reputationaland legal risks that may be associated withinadequate knowledge and understanding of itsclients’ personal and business backgrounds,sources of wealth, and uses of private bankingaccounts. In carrying out the reviews, examinersconsidered the parameters of an appropriatecontrol infrastructure that is suited to support theeffective management of these risks.

The reviews indicated that there are certainessential elements associated with sound privatebanking activities, and these elements aredescribed in a paper, prepared by the FederalReserve Bank of New York, entitled ‘‘Guidanceon Sound Risk Management Practices Govern-ing Private Banking Activities.’’ A copy of thesound practices paper is attached for the use ofyour examiners, and we are requesting that youprovide copies to each domestic and foreignbanking organization in your District that con-ducts private banking activities.1 A suggestedtransmittal letter is also attached.

The sound practices paper provides bankingorganizations with guidance regarding the basiccontrols necessary to minimize reputational andlegal risk and to deter illicit activities, such asmoney laundering. The essential elements asso-ciated with sound private banking activities are,in brief outline, as follows:

• Management Oversight.Senior management’sactive oversight of private banking activitiesand the creation of an appropriate corporateculture are crucial elements of a sound riskmanagement and control environment. Goalsand objectives must be set at high levels, andsenior management must be proactive in over-seeing compliance with corporate policies andprocedures.

• Policies and Procedures.All well run privatebanking operations have written ‘‘Know YourCustomer’’ policies and procedures, consis-tent with guidance provided by the FederalReserve over the past several years, thatrequire banking organizations to obtain iden-tification and basic background informationon their clients, describe the clients’ source ofwealth and lines of business, request refer-ences, handle referrals, and identify red flagsand suspicious transactions. They also haveadequate written credit policies and proce-dures that address, among other things, moneylaundering-related issues, such as lendingsecured by cash collateral.

• Risk Management Practices and MonitoringSystems.Sound private banking operationsstress the importance of the acquisition andretention of documentation relating to theirclients, as well as due diligence regardingobtaining follow-up information where neededto verify or corroborate information provided1. See section 1301 of the BSA manual.


by a customer or his or her representative.Inherent in sound private banking operationsis the retention of beneficial owner informa-tion in the United States for accounts openedby financial advisors or through the use ofoff-shore facilities. Adequate managementinformation systems capable of, among otherthings, monitoring all aspects of an organiza-tion’s private banking activities are alsostressed. These include systems that providemanagement with timely information neces-sary to analyze and effectively manage theprivate banking business and systems thatenable management to monitor accounts forsuspicious transactions and to report any suchinstances to law enforcement authorities andbanking regulators as required by the regula-tors’ suspicious activity reporting regulations.

• Segregation of Duties, Compliance, andAudit. Because private banking activities aregenerally conducted through relationship man-agers, banking organizations need to have aneffective system of oversight by senior offi-cials and by board committees, as well asguidelines pertaining to the segregation ofduties to prevent the unauthorized waiver ofdocumentation requirements, poorly docu-mented referrals, and overlooked suspiciousactivities. Likewise, strong compliance andinternal audit programs are essential to ensurethe integrity of the risk management andinternal control environment established bysenior management and the board of directors.

OTHER RELATED PROJECTS ANDPRODUCTS

The lessons learned from the private bankingreviews will be incorporated into a new exami-nation manual for private banking activities.The manual will be in two parts: one whichdescribes the examination procedures for a com-prehensive, top to bottom review of a privatebanking operation; and the other, a set of ‘‘riskfocused’’ guidelines aimed at assisting examin-ers in determining which procedures should befollowed depending, for example, on the level ofprivate banking activity, any noted deficiencies,management’s responsiveness in implementingcorrective action, and the sufficiency of theorganization’s internal audit program. We expect

to start field testing these new procedures withinthe next three months.

In the next few weeks, the Federal Reservewill also distribute an updated Bank Secrecy Actexamination manual. The updated version willinclude examination procedures relating to recentadditions and changes to the Bank Secrecy Act,as well as updated sections related to anti-money laundering initiatives.

Staff is in the process of developing a draftregulation that would require banking organiza-tions to establish ‘‘Know Your Customer’’ poli-cies and procedures. The results of the privatebanking reviews will be incorporated into theproposed regulation. In moving forward withthis initiative, the Federal Reserve will coordi-nate its efforts with the other federal bankingagencies regarding the breadth and scope of therules in order to ensure that all banking organi-zations in the United States operate under thesame standards.

In the event you have any questions regardingthe attached sound practices paper, please con-tact Ms. Nancy Bercovici, Senior Vice Presi-dent, Federal Reserve Bank of New York, at(212) 720-8227, or Mr. Richard A. Small, Spe-cial Counsel, Division of Banking Supervisionand Regulation, at (202) 452-5235. Other ques-tions can be directed to Mr. Small.

Richard SpillenkothenDirector

ATTACHMENTS TRANSMITTEDELECTRONICALLY BELOW

1403.0 SR 97-19 (SUP)


SUGGESTED LETTER

TO THE CHIEF EXECUTIVE OFFICER OR GENERAL MANAGEROF EACH STATE MEMBER BANK, BANK HOLDING COMPANY, ANDU.S. BRANCH AND AGENCY OF A FOREIGN BANKTHAT CONDUCTS PRIVATE BANKING ACTIVITIES

SUBJECT: ‘‘SOUND PRACTICES’’ FOR PRIVATE BANKING ACTIVITIES

DEAR :

Private banking activities, which involve, amongother things, personalized services such as moneymanagement, financial advice, and investmentservices for high net worth clients, have becomean increasingly important aspect of the opera-tions of some large, internationally activebanking organizations. The Federal Reservehas traditionally reviewed private bankingactivities in connection with regular on-siteexaminations. In 1996 and 1997, the FederalReserve Bank of New York undertook a com-prehensive review of private banking activitiesat approximately 40 domestic and foreign bank-ing organizations in the Second District in orderto enhance the Federal Reserve’s understandingabout private banking operations. Examinersfocused principally on assessing each institu-tion’s ability to recognize and manage thepotential reputational and legal risks that may beassociated with inadequate knowledge andunderstanding of its clients’ personal and busi-ness backgrounds, sources of wealth, and usesof private banking accounts. In carrying out thereviews, examiners considered the parametersof an appropriate control infrastructure that issuited to support the effective management ofthese risks.

The reviews indicated that there are certainessential elements associated with sound privatebanking activities, and these elements aredescribed in a paper, prepared by the FederalReserve Bank of New York, entitled ‘‘Guidanceon Sound Risk Management Practices Govern-ing Private Banking Activities.’’ A copy of thesound practices paper is attached for yourinformation.

The sound practices paper provides you withguidance regarding the basic controls necessaryto minimize reputational and legal risk and todeter illicit activities, such as money laundering.The essential elements associated with soundprivate banking activities are, in brief outline, asfollows:

• Management Oversight.Senior management’sactive oversight of private banking activitiesand the creation of an appropriate corporateculture are crucial elements of a sound riskmanagement and control environment. Goalsand objectives must be set at high levels, andsenior management must be proactive in over-seeing compliance with corporate policies andprocedures.

• Policies and Procedures.All well run privatebanking operations have written ‘‘Know YourCustomer’’ policies and procedures, consis-tent with guidance provided by the FederalReserve over the past several years, thatrequire banking organizations to obtain iden-tification and basic background informationon their clients, describe the clients’ source ofwealth and lines of business, request refer-ences, handle referrals, and identify red flagsand suspicious transactions. They also haveadequate written credit policies and proce-dures that address, among other things, moneylaundering-related issues, such as lendingsecured by cash collateral.

• Risk Management Practices and MonitoringSystems.Sound private banking operationsstress the importance of the acquisition andretention of documentation relating to theirclients, as well as due diligence regardingobtaining follow-up information where neededto verify or corroborate information providedby a customer or his or her representative.Inherent in sound private banking operationsis the retention of beneficial owner informa-tion in the United States for accounts openedby financial advisors or through the use ofoff-shore facilities. Adequate managementinformation systems capable of, among otherthings, monitoring all aspects of an organiza-tion’s private banking activities are alsostressed. These include systems that providemanagement with timely information neces-sary to analyze and effectively manage theprivate banking business and systems that

SR 97-19 (SUP) 1403.0


enable management to monitor accounts forsuspicious transactions and to report any suchinstances to law enforcement authorities andbanking regulators as required by the regula-tors’ suspicious activity reporting regulations.

• Segregation of Duties, Compliance, andAudit. Because private banking activities aregenerally conducted through relationship man-agers, banking organizations need to have aneffective system of oversight by senior offi-cials and by board committees, as well asguidelines pertaining to the segregation ofduties to prevent the unauthorized waiver ofdocumentation requirements, poorly docu-mented referrals, and overlooked suspiciousactivities. Likewise, strong compliance and

internal audit programs are essential to ensurethe integrity of the risk management andinternal control environment established bysenior management and the board of directors.

In the event you have any questions regardingthe attached sound practices paper, please con-tact Ms. Nancy Bercovici, Senior Vice Presi-dent, Federal Reserve Bank of New York, at(212) 720-8227, or Mr. Richard A. Small, Spe-cial Counsel, Division of Banking Supervisionand Regulation, Board of Governors of theFederal Reserve System, at (202) 452-5235.

Sincerely,

Enclosure

1403.0 SR 97-19 (SUP)


Basle Committee Statement of PrinciplesPrevention of Criminal Use of the Banking Systemfor the Purpose of Money-Laundering Section 1501.0

PREAMBLE

1. Banks and other financial institutions may beunwittingly used as intermediaries for thetransfer or deposit of funds derived fromcriminal activity. Criminals and their associ-ates use the financial system to make pay-ments and transfers of funds from one accountto another; to hide the source and beneficialownership of money; and to provide storagefor bank-notes through a safe-deposit facility.These activities are commonly referred to asmoney-laundering.

2. Efforts undertaken hitherto with the objectiveof preventing the banking system from beingused in this way have largely been under-taken by judicial and regulatory agencies at anational level. However, the increasing inter-national dimension of organized criminalactivity, notably in relation to the narcoticstrade, has prompted collaborative initiativesat the international level. One of the earliestsuch initiatives was undertaken by the Com-mittee of Ministers of the Council of Europein June 1980. In its report1 the Committee ofMinisters concluded that ‘‘. . . the bankingsystem can play a highly effective preventa-tive role while the cooperation of the banksalso assists in the repression of such criminalacts by the judicial authorities and the police’’.In recent years the issue of how to preventcriminals laundering the proceeds of crimethrough the financial system has attractedincreasing attention from legislative authori-ties, law enforcement agencies and bankingsupervisors in a number of countries.

3. The various national banking supervisoryauthorities represented on the Basle Commit-tee on Banking Regulations and SupervisoryPractices2 do not have the same roles andresponsibilities in relation to the suppression

of money-laundering. In some countries super-visors have a specific responsibility in thisfield; in others they may have no directresponsibility. This reflects the role of bank-ing supervision, the primary function of whichis to maintain the overall financial stabilityand soundness of banks rather than to ensurethat individual transactions conducted bybank customers are legitimate. Nevertheless,despite the limits in some countries on theirspecific responsibility, all members of theCommittee firmly believe that supervisorscannot be indifferent to the use made ofbanks by criminals.

4. Public confidence in banks, and hence theirstability, can be undermined by adverse pub-licity as a result of inadvertent association bybanks with criminals. In addition, banks maylay themselves open to direct losses fromfraud, either through negligence in screeningundesirable customers or where the integrityof their own officers has been underminedthrough association with criminals. For thesereasons the members of the Basle Committeeconsider that banking supervisors have ageneral role to encourage ethical standards ofprofessional conduct among banks and otherfinancial institutions.

5. The Committee believes that one way topromote this objective, consistent with dif-ferences in national supervisory practice, isto obtain international agreement to a State-ment of Principles to which financial institu-tions should be expected to adhere.

6. The attached Statement is a general state-ment of ethical principles which encouragebanks’ management to put in place effectiveprocedures to ensure that all persons conduct-ing business with their institutions are prop-erly identified; that transactions that do notappear legitimate are discouraged; and thatcooperation with law enforcement agenciesis achieved. The Statement is not a legaldocument and its implementation will dependon national practice and law. In particular, itshould be noted that in some countries banksmay be subject to additional more stringentlegal regulations in this field and the State-ment is not intended to replace or diminishthose requirements. Whatever the legal posi-tion in different countries, the Committee

1. Measures against the transfer and safeguarding of fundsof criminal origin. Recommendation No. R(80)10 adoptedby the Committee of Ministers of the Council of Europe on27th June 1980.

2. The Committee comprises representatives of the centralbanks and supervisory authorities of the following countries:Belgium, Canada, France, Germany, Italy, Japan, Netherlands,Sweden, Switzerland, United Kingdom, United States, andLuxembourg.


considers that the first and most importantsafeguard against money-laundering is theintegrity of banks’ own managements andtheir vigilant determination to prevent theirinstitutions becoming associated with crimi-nals or being used as a channel for money-laundering. The Statement is intended toreinforce those standards of conduct.

7. The supervisory authorities represented onthe Committee support the principles set outin the Statement. To the extent that thesematters fall within the competence of super-visory authorities in different member coun-tries, the authorities will recommend andencourage all banks to adopt policies andpractices consistent with the Statement. Witha view to its acceptance worldwide, theCommittee would also recommend the State-ment to Supervisory authorities in othercountries.

Basle, December 1988

STATEMENT OF PRINCIPLES

I. Purpose

Banks and other financial institutions mayunwittingly be used as intermediaries for thetransfer or deposit of money derived from crimi-nal activity. The intention behind such transac-tions is often to hide the beneficial ownershipof funds. The use of the financial system in thisway is of direct concern to police and other lawenforcement agencies; it is also a matter ofconcern to banking supervisors and banks’ man-agements, since public confidence in banks maybe undermined through their association withcriminals.

This Statement of Principles is intended tooutline some basic policies and procedures thatbanks’ managements should ensure are in placewithin their institutions with a view to assistingin the suppression of money-laundering throughthe banking system, national and international.The Statement thus sets out to reinforce existingbest practices among banks and, specifically, toencourage vigilance against criminal use of thepayments system, implementation by banks ofeffective preventive safeguard, and cooperationwith law enforcement agencies.

II. Customer Identification

With a view to ensuring that the financial systemis not used as a channel for criminal funds,banks should make reasonable efforts to deter-mine the true identity for all customers request-ing the institution’s services. Particular careshould be taken to identify the ownership of allaccounts and those using safe-custody facilities.All banks should institute effective proceduresfor obtaining identification from new customers.It should be an explicit policy that significantbusiness transactions will not be conducted withcustomers who fail to provide evidence of theiridentity.

III. Compliance with Laws

Banks’ management should ensure that businessis conducted in conformity with high ethicalstandards and that laws and regulations pertain-ing to financial transactions are adhered to. Asregards transactions executed on behalf of cus-tomers, it is accepted that banks may also haveno means of knowing whether the transactionstems from or forms part of criminal activity.Similarly, in an international context it may bedifficult to ensure that cross-border transactionson behalf of customers are in compliance withthe regulations of another country. Nevertheless,banks should not set out to offer services orprovide active assistance in transactions whichthey have good reason to suppose are associatedwith money-laundering activities.

IV. Cooperation with LawEnforcement Authorities

Banks should cooperate fully with national lawenforcement authorities to the extent permittedby specific local regulations relating to customerconfidentiality. Care should be taken to avoidproviding support or assistance to customersseeking to deceive law enforcement agenciesthrough the provision of altered, incomplete ormisleading information. Where banks becomeaware of facts which lead to the reasonablepresumption that money held on deposit derivesfrom criminal activity or that transactionsentered into are themselves criminal in purpose,appropriate measures, consistent with the law,should be taken, for example, to deny assistance,

1501.0 Basle Committee Statement of Principles


sever relations with the customer and close orfreeze accounts.

V. Adherence to the Statement

All banks should formally adopt policies con-sistent with the principles set out in this State-ment and should ensure that all members of theirstaff concerned, wherever located, are informed

of the bank’s policy in this regard. Attentionshould be given to staff training in matterscovered by the Statement. To promote adherenceto these principles, banks should implementspecific procedures for customer identificationand for retaining internal records of transac-tions. Arrangements for internal audit may needto be extended in order to establish an effectivemeans of testing for general compliance with theStatement.

Basle Committee Statement of Principles 1501.0


Financial Action Task Force and its 40 RecommendationsSection 1502.0

INTRODUCTION

1. The Financial Action Task Force on MoneyLaundering (FATF) is an inter-governmentalbody whose purpose is the development andpromotion of policies to combat moneylaundering—the processing of criminal pro-ceeds in order to disguise their illegal origin.These policies aim to prevent such proceedsfrom being utilized in future criminal activi-ties and from affecting legitimate economicactivities.

2. The FATF currently consists of 26 countries1

and two international organizations.2 Itsmembership includes the major financial cen-ter countries of Europe, North America andAsia. It is a multi-disciplinary body—as isessential in dealing with money laundering—bringing together the policy-making powerof legal, financial and law enforcementexperts.

3. This need to cover all relevant aspects ofthe fight against money laundering isreflected in the scope of the forty FATFRecommendations—the measures which theTask Force have agreed to implement andwhich all countries are encouraged to adopt.The Recommendations were originally drawnup in 1990. In 1996 the forty Recommenda-tions were revised to take into account theexperience gained over the last six years andto reflect the changes which have occurred inthe money laundering problem.3

4. These forty Recommendations set out thebasic framework for anti-money launderingefforts and they are designed to be of univer-sal application. They cover the criminal jus-tice system and law enforcement; the finan-

cial system and its regulation, and interna-tional cooperation.

5. It was recognized from the outset of theFATF that countries have diverse legal andfinancial systems and so all cannot takeidentical measures. The Recommendationsare therefore the principles for action in thisfield, for countries to implement accordingto their particular circumstances and consti-tutional frameworks allowing countries ameasure of flexibility rather than prescribingevery detail. The measures are not particu-larly complex or difficult, provided thereis the political will to act. Nor do theycompromise the freedom to engage in legiti-mate transactions or threaten economicdevelopment.

6. FATF countries are clearly committed toaccept the discipline of being subjected tomultilateral surveillance and peer review. Allmember countries have their implementationof the forty Recommendations monitoredthrough a two-pronged approach: an annualself-assessment exercise and the more detailedmutual evaluation process under which eachmember country is subject to an on-siteexamination. In addition, the FATF carriesout cross-country reviews of measures takento implement particular Recommendations.

7. These measures are essential for the creationof an effective anti-money launderingframework.

THE FORTYRECOMMENDATIONS OF THEFINANCIAL ACTION TASKFORCE ON MONEYLAUNDERING

A. General Framework of theRecommendations

1. Each country should take immediate stepsto ratify and to implement fully, the 1988United Nations Convention against IllicitTraffic in Narcotic Drugs and PsychotropicSubstances (the Vienna Convention).

2. Financial institution secrecy laws should beconceived so as not to inhibit implementa-tion of these recommendations.

1. Reference in this document to ‘‘countries’’ should betaken to apply equally to ‘‘territories’’ or ‘‘jurisdictions.’’ Thetwenty six FATF member countries and governments are:Australia, Austria, Belgium, Canada, Denmark, Finland,France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy,Japan, Luxembourg, the Kingdom of the Netherlands,New Zealand, Norway, Portugal, Singapore, Spain, Sweden,Switzerland, Turkey, United Kingdom, and the United States.

2. The two international organizations are: the EuropeanCommission and the Gulf Cooperation Council.

3. During the period 1990 to 1995, the FATF also elabo-rated various Interpretive Notes which are designed to clarifythe application of specific Recommendations. Some of theseInterpretive Notes have been updated in the StocktakingReview to reflect changes in the Recommendations (notincluded in this manual).


3. An effective money laundering enforcementprogram should include increased multilat-eral co-operation and mutual legal assis-tance in money laundering investigationsand prosecutions and extradition in moneylaundering cases, where possible.

B. Role of National Legal Systems inCombating Money Laundering

Scope of the Criminal Offense of MoneyLaundering

4. Each country should take such measures asmay be necessary, including legislative ones,to enable it to criminalize money launderingas set forth in the Vienna Convention. Eachcountry should extend the offense of drugmoney laundering to one based on seriousoffenses. Each country would determinewhich serious crimes would be designatedas money laundering predicate offenses.

5. As provided in the Vienna Convention, theoffense of money laundering should applyat least to knowing money laundering activ-ity, including the concept that knowledgemay be inferred from objective factualcircumstances.

6. Where possible, corporations themselves—not only their employees—should be sub-ject to criminal liability.

Provisional Measures and Confiscation

7. Countries should adopt measures similar tothose set forth in the Vienna Convention, asmay be necessary, including legislative ones,to enable their competent authorities toconfiscate property laundered, proceedsfrom, instrumentalities used in or intendedfor use in the commission of any moneylaundering offense, or property of corre-sponding value, without prejudicing therights of bona fide third parties.

Such measures should include the author-ity to: 1) identify, trace and evaluate propertywhich is subject to confiscation; 2) carry outprovisional measures, such as freezing andseizing, to prevent any dealing, transfer ordisposal of such property; and 3) take anyappropriate investigative measures.

In addition to confiscation and criminalsanctions, countries also should considermonetary and civil penalties, and/or pro-ceedings including civil proceedings, to voidcontracts entered into by parties, whereparties knew or should have known that asa result of the contract, the State would beprejudiced in its ability to recover financialclaims, e.g. through confiscation or collec-tion of fines and penalties.

C. Role of the Financial System inCombating Money Laundering

8. Recommendations 10 to 29 should applynot only to banks, but also to non-bankfinancial institutions. Even for those non-bank financial institutions which are notsubject to a formal prudential supervisoryregime in all countries, for example bureauxde change, governments should ensure thatthese institutions are subject to the sameanti-money laundering laws or regulationsas all other financial institutions and thatthese laws or regulations are implementedeffectively.

9. The appropriate national authorities shouldconsider applying Recommendations 10to 21 and 23 to the conduct of financialactivities as a commercial undertaking bybusinesses or professions which are notfinancial institutions, where such conduct isallowed or not prohibited. Financial activi-ties include, but are not limited to, thoselisted in the annex at the end of this docu-ment. It is left to each country to decidewhether special situations should be definedwhere the application of anti-money laun-dering measures is not necessary, for exam-ple, when a financial activity is carried outon an occasional or limited basis.

Customer Identification andRecordkeeping Rules

10. Financial institutions should not keep anony-mous accounts or accounts in obviouslyfictitious names: they should be required(by law, by regulations, by agreementsbetween supervisory authorities and finan-cial institutions or by self-regulatory agree-ments among financial institutions) to iden-

1502.0 Financial Action Task Force and its 40 Recommendations


tify, on the basis of an official or otherreliable identifying document, and recordthe identity of their clients, either occa-sional or usual, when establishing businessrelations or conducting transactions (in par-ticular opening of accounts or passbooks,entering into fiduciary transactions, rentingof safe deposit boxes, performing large cashtransactions).

In order to fulfill identification require-ments concerning legal entities, financialinstitutions should, when necessary, takemeasures:(i) to verify the legal existence and struc-

ture of the customer by obtaining eitherfrom a public register or from thecustomer or both, proof of incorpora-tion, including information concerningthe customer’s name, legal form,address, directors and provisions regu-lating the power to bind the entity.

(ii) to verify that any person purporting toact on behalf of the customer is soauthorized and identify that person.

11. Financial institutions should take reason-able measures to obtain information aboutthe true identity of the persons on whosebehalf an account is opened or a transactionconducted if there are any doubts as towhether these clients or customers are act-ing on their own behalf, for example, in thecase of domiciliary companies (i.e. institu-tions, corporations, foundations, trusts, etc.that do not conduct any commercial ormanufacturing business or any other formof commercial operation in the countrywhere their registered office is located).

12. Financial institutions should maintain, for atleast five years, all necessary records ontransactions, both domestic or international,to enable them to comply swiftly withinformation requests from the competentauthorities. Such records must be sufficientto permit reconstruction of individual trans-actions (including the amounts and types ofcurrency involved if any) so as to provide, ifnecessary, evidence for prosecution of crimi-nal behavior.

Financial institutions should keep recordson customer identification (e.g. copies orrecords of official identification documentslike passports, identity cards, driving licensesor similar documents), account files andbusiness correspondence for at least fiveyears after the account is closed.

These documents should be available todomestic competent authorities in the con-text of relevant criminal prosecutions andinvestigations.

13. Countries should pay special attention tomoney laundering threats inherent in new ordeveloping technologies that might favoranonymity, and take measures, if needed, toprevent their use in money launderingschemes.

Increased Diligence of FinancialInstitutions

14. Financial institutions should pay specialattention to all complex, unusual large trans-actions, and all unusual patterns of transac-tions, which have no apparent economic orvisible lawful purpose. The background andpurpose of such transactions should, as faras possible, be examined, the findingsestablished inwriting, and be available tohelp supervisors, auditors and law enforce-ment agencies.

15. If financial institutions suspect that fundsstem from a criminal activity, they shouldbe required to report promptly their suspi-cions to the competent authorities.

16. Financial institutions, their directors, offi-cers and employees should be protected bylegal provisions from criminal or civil lia-bility for breach of any restriction on dis-closure of information imposed by contractor by any legislative, regulatory or admin-istrative provision, if they report their sus-picions in good faith to the competentauthorities, even if they did not know pre-cisely what the underlying criminal activitywas, and regardless of whether illegalactivity actually occurred.

17. Financial institutions, their directors, offi-cers and employees, should not, or, whereappropriate, should not be allowed to, warntheir customers when information relatingto them is being reported to the competentauthorities.

18. Financial institutions reporting their suspi-cions should comply with instructions fromthe competent authorities.

19. Financial institutions should develop pro-grams against money laundering. These pro-grams should include, as a minimum:

(i) the development of internal policies,procedures and controls, including the

Financial Action Task Force and its 40 Recommendations 1502.0


designation of compliance officers atmanagement level, and adequate screen-ing procedures to ensure high stan-dards when hiring employees;

(ii) an ongoing employee training program;(iii) an audit function to test the system.

Measures to Cope with the Problem ofCountries with No or InsufficientAnti-Money Laundering Measures

20. Financial institutions should ensure that theprinciples mentioned above are also appliedto branches and majority owned subsidi-aries located abroad, especially in countrieswhich do not or insufficiently apply theseRecommendations, to the extent that localapplicable laws and regulations permit.When local applicable laws and regulationsprohibit this implementation, competentauthorities in the country of the motherinstitution should be informed by the finan-cial institutions that they cannot apply theseRecommendations.

21. Financial institutions should give specialattention to business relations and transac-tions with persons, including companiesand financial institutions, from countrieswhich do not or insufficiently apply theseRecommendations. Whenever these transac-tions have no apparent economic or visiblelawful purpose, their background and pur-pose should, as far as possible, be exam-ined, the findings established in writing, andbe available to help supervisors, auditorsand law enforcement agencies.

Other Measures to Avoid MoneyLaundering

22. Countries should consider implementing fea-sible measures to detect or monitor thephysical cross-border transportation of cashand bearer negotiable instruments, subjectto strict safeguards to ensure proper use ofinformation and without impeding in anyway the freedom of capital movements.

23. Countries should consider the feasibilityand utility of a system where banks andother financial institutions and intermediar-ies would report all domestic and interna-tional currency transactions above a fixed

amount, to a national central agency with acomputerized data base, available to com-petent authorities for use in money launder-ing cases, subject to strict safeguards toensure proper use of the information.

24. Countries should further encourage in gen-eral the development of modern and securetechniques of money management, includ-ing increased use of checks, payment cards,direct deposit of salary checks, and bookentry recording of securities, as a means toencourage the replacement of cash transfers.

25. Countries should take notice of the potentialfor abuse of shell corporations by moneylaunderers and should consider whetheradditional measures are required to preventunlawful use of such entities.

Implementation, and Role of Regulatoryand other Administrative Authorities

26. The competent authorities supervising banksor other financial institutions or intermedi-aries, or other competent authorities, shouldensure that the supervised institutions haveadequate programs to guard against moneylaundering. These authorities should coop-erate and lend expertise spontaneously oron request with other domestic judicial orlaw enforcement authorities in money laun-dering investigations and prosecutions.

27. Competent authorities should be designatedto ensure an effective implementation of allthese Recommendations, through adminis-trative supervision and regulation, in otherprofessions dealing with cash as defined byeach country.

28. The competent authorities should establishguidelines which will assist financial insti-tutions in detecting suspicious patterns ofbehavior by their customers. It is under-stood that such guidelines must developover time, and will never be exhaustive. It isfurther understood that such guidelines willprimarily serve as an educational tool forfinancial institutions’ personnel.

29. The competent authorities regulating orsupervising financial institutions shouldtake the necessary legal or regulatorymeasures to guard against control or acqui-sition of a significant participation in finan-cial institutions by criminals or theirconfederates.



D. Strengthening of InternationalCooperation

Administrative Cooperation

Exchange of general information

30. National administrations should considerrecording, at least in the aggregate, interna-tional flows of cash in whatever currency,so that estimates can be made of cash flowsand reflows from various sources abroad,when this is combined with central bankinformation. Such information should bemade available to the International Mone-tary Fund and the Bank for InternationalSettlements to facilitate international studies.

31. International competent authorities, perhapsInterpol and the World Customs Organi-zation, should be given responsibility forgathering and disseminating information tocompetent authorities about the latest devel-opments in money laundering and moneylaundering techniques. Central banks andbank regulators could do the same on theirnetwork. National authorities in variousspheres, in consultation with trade associa-tions, could then disseminate this to finan-cial institutions in individual countries.

Exchange of information relating to suspicioustransactions

32. Each country should make efforts to improvea spontaneous or "upon request" inter-national information exchange relating tosuspicious transactions, persons and corpo-rations involved in those transactionsbetween competent authorities. Strict safe-guards should be established to ensure thatthis exchange of information is consistentwith national and international provisionson privacy and data protection.

Other Forms of Cooperation

Basis and means for co-operation inconfiscation, mutual assistance and extradition

33. Countries should try to ensure, on a bilateralor multilateral basis, that different knowl-edge standards in national definitions—i.e.

different standards concerning the inten-tional element of the infraction—do notaffect the ability or willingness of countriesto provide each other with mutual legalassistance.

34. International cooperation should be sup-ported by a network of bilateral and multi-lateral agreements and arrangements basedon generally shared legal concepts withthe aim of providing practical measures toaffect the widest possible range of mutualassistance.

35. Countries should be encouraged to ratifyand implement relevant international con-ventions on money laundering such as the1990 Council of Europe Convention onLaundering, Search, Seizure and Confisca-tion of the Proceeds from Crime.

Focus of improved mutual assistance onmoney laundering issues

36. Cooperative investigations among coun-tries’ appropriate competent authoritiesshould be encouraged. One valid and effec-tive investigative technique in this respect iscontrolled delivery related to assets knownor suspected to be the proceeds of crime.Countries are encouraged to support thistechnique, where possible.

37. There should be procedures for mutualassistance in criminal matters regarding theuse of compulsory measures including theproduction of records by financial institu-tions and other persons, the search of per-sons and premises, seizure and obtaining ofevidence for use in money launderinginvestigations and prosecutions and inrelated actions in foreign jurisdictions.

38. There should be authority to take expedi-tious action in response to requests byforeign countries to identify, freeze, seizeand confiscate proceeds or other property ofcorresponding value to such proceeds, basedon money laundering or the crimes under-lying the laundering activity. There shouldalso be arrangements for coordinating sei-zure and confiscation proceedings whichmay include the sharing of confiscatedassets.

39. To avoid conflicts of jurisdiction, consider-ation should be given to devising andapplying mechanisms for determining thebest venue for prosecution of defendants in

Financial Action Task Force and its 40 Recommendations 1502.0


the interests of justice in cases that aresubject to prosecution in more than onecountry. Similarly, there should be arrange-ments for coordinating seizure and confis-cation proceedings which may include thesharing of confiscated assets.

40. Countries should have procedures in placeto extradite, where possible, individualscharged with a money laundering offense orrelated offenses. With respect to its nationallegal system, each country should recognizemoney laundering as an extraditable offense.Subject to their legal frame-works, coun-tries may consider simplifying extraditionby allowing direct transmission of extradi-tion requests between appropriate minis-tries, extraditing persons based only onwarrants of arrests or judgements, extradit-ing their nationals, and/or introducing asimplified extradition of consenting personswho waive formal extradition proceedings.

Annex to Recommendation 9: List ofFinancial Activities Undertaken by Businessor Professions Which Are Not FinancialInstitutions

1. Acceptance of deposits and other repayablefunds from the public.

2. Lending.4

3. Financial leasing.4. Money transmission services.5. Issuing and managing means of payment

(e.g. credit and debit cards, cheques, travel-ler’s cheques and bankers’ drafts . . .).

6. Financial guarantees and commitments.7. Trading for account of customers (spot,

forward, swaps, futures, options . . .) in:(a) money market instruments (cheques,

bills, CDs, etc.);(b) foreign exchange;(c) exchange, interest rate and index

instruments;(d) transferable securities;(e) commodity futures trading.

8. Participation in securities issues and theprovision of financial services related tosuch issues.

9. Individual and collective portfoliomanagement.

10. Safekeeping and administration of cash orliquid securities on behalf of clients.

11. Life insurance and other investment relatedinsurance.

12. Money changing.

4. Including inter alia• consumer credit• mortgage credit• factoring, with or without recourse• finance of commercial transactions (including forfeiting)



Financial Crimes Enforcement NetworkGuidance on the New Currency Transaction Report (CTR)(September 1995) Section 1503.0

INTRODUCTION

The Treasury Department’s Financial CrimesEnforcement Network (FinCEN) offers the fol-lowing guidance to filers of the new CurrencyTransaction Report (CTR) Form 4789 (Rev.October 1995). This guidance is intended toanswer general, basic questions about complet-ing and filing the new CTR. It is not meant to becomprehensive and does not replace the CTRForm instructions and/or the regulations. Itsdevelopment is based on questions receivedfrom the financial community by FinCEN andadvice received from the Treasury Department’sBank Secrecy Act Advisory Group (BSAAG).The BSAAG, comprised of approximately 30 pri-vate (bank and non-bank) and government rep-resentatives, was established by the TreasuryDepartment in March 1994 pursuant to theAnnunzio–Wylie Anti–Money Laundering Actof 1992.

Copies of this FinCEN ‘‘Guidance on theNew CTR’’ (published in September 1995)may be ordered: (1) by calling FinCEN’srecording at 1-800-949-2732, or (2) via com-puter with a modem from the Treasury BankSecrecy Act (BSA) Bulletin Board at313-234-1453.

WHY CTR REVISED

The purpose of revising the CTR was to furtherthe goal of reducing regulatory burdens onfinancial institutions. This CTR revision reducesthe amount of information required by approxi-mately 30 percent, which makes it the first time(in the 25-year history of the Bank SecrecyAct’s requirement that CTRs be filed by finan-cial institutions) that the form has been revisedto reduce the amount of regulatory informationrequired. The revised CTR is designed to bebeneficial to both the law enforcement andfinancial communities because it focuses on thequality of information rather than the quantity.

Generally, the new CTR was revised to requireonly basic information, such as who conductedthe transaction, on whose behalf it was con-ducted, the amount, a description of the trans-action, and where it occurred. The revised CTR

also lists broad categories of transactions, whichwere intended to make it easier to complete andanalyze. It eliminates duplication of informationand information that was difficult to obtain or oflimited value to law enforcement.

HOW CTR USED

Information from CTRs is routinely used in awide variety of criminal, tax, and regulatoryinvestigations and proceedings, and prosecu-tions, as investigative leads, intelligence for thetracking of currency flows, corroborating infor-mation, and probative evidence. The analysis ofCTR data, which is a major function of theTreasury Department’s FinCEN, is a vital toolin combating money laundering. CTRs filed byfinancial institutions facilitate the detection ofmoney laundering because they provide a ‘‘papertrail’’ for large cash transactions that may pointto the financial side of criminal activity.

FinCEN uses its computer access to CTRsindependently and in conjunction with other lawenforcement agency data bases to respond torequests by law enforcement agencies for tacti-cal reports on subjects under investigation. Also,FinCEN uses CTR data to examine and forecastthe currency flow in a particular area, and itproduces strategic intelligence reports contain-ing this information for use by law enforcementin detecting money laundering and other finan-cial crimes.

Additionally, FinCEN has developed an Arti-ficial Intelligence system. The system reviewsBSA filings in order to identify potentiallysuspicious activity. Each filing is matched toother filings by the same subjects and accessingthe same accounts, and all transactions, accounts,and subjects of BSA filings are evaluated againststandard sets of criteria developed by FinCEN’scomputer scientists in close consultation withFinCEN agents and analysts. The FinCENArtificial Intelligence system links and evaluatesreports of large cash transactions to identifypotential money laundering. Its objective is todiscover previously unknown, potential highvalue leads for possible investigation.

Another FinCEN program, called ‘‘Gate-way,’’ provides state and local law enforcement


agencies withdirect electronic access to all ofthe forms pursuant to the BSA that are on file inthe IRS Detroit Computing Center. Gatewaymakes greater use of the information capturedby the BSA and at the same time provides acoordination mechanism to agencies using thedata for investigative purposes. It also savesinvestigative time and money because agenciesdo not have to rely on the resources of anotheragency to obtain BSA information.

WHO, WHAT, WHEN, ANDWHERE

1. Question:Who should file the revised CTRForm 4789?

Answer:Each financial institution identifiedin the regulations in 31 CFR Part 103 (otherthan a casino, which instead must fileForm 8362 and the U.S. Postal Service forwhich there are separate rules), must file arevised CTR Form 4789 for each deposit,withdrawal, exchange of currency, or otherpayment or transfer, by, through, or to thefinancial institution which involves a trans-action in currency totaling more than$10,000 in one business day. Multiple trans-actions must be treated as a single trans-action if the financial institution has knowl-edge that: (1) they are by or on behalf of thesame person, and (2) they result in eithercurrency received (Cash In) or currencydisbursed (Cash Out) by the financial insti-tution totaling more than $10,000 in anyone business day.

2. Question: Should the revised CTR Form4789 be used to report suspicious activity?

Answer:The revised CTR should NOT befiled for SUSPICIOUS TRANSACTIONSinvolving $10,000 or less in currency OR tonote that a transaction of more than $10,000in currency is suspicious. Any suspicious orunusual activity should be reported by afinancial institution in the manner pre-scribed by its appropriate federal regulatoror FinCEN. If a transaction is suspiciousand in excess of $10,000 in currency, thenboth a revised CTR and the appropriatereferral form must be filed.

For banks, a new Suspicious ActivityReport (SAR) Form is being prepared for

distribution before the end of 19951 for usein reporting suspicious transactions involv-ing $10,000 or less in currency OR to notethat a transaction of more than $10,000 incurrency is suspicious. Until a similar formis developed for non-bank financial institu-tions, they should write ‘‘SUSPICIOUS’’across the top of the revised CTR.

3. Question: When should financial institu-tions begin using the revised CTR Form4789?

Answer:The revised CTR becomes effectiveon the business dayof October 1, 1995.Filers must continue to use the current CTRForm 4789 (Rev. July 1994) for reportabletransactions that occur before October 1,1995 (business day).

4. Question:Where can I get usable copies ofthe revised CTR Form 4789?

Answer: In September of 1995, usablecopies of the revised CTR will be availablefrom the IRS Forms Distribution Centersby calling 1-800-TAX-FORMS (1-800-829-3676). Prior to September 1995, anADVANCE COPY of the revised CTRForm 4789 (that has been available sinceMay 1995) could be ordered from the Inter-nal Revenue Service (IRS) Forms Distribu-tion Centers. This ADVANCE COPY of therevised CTR was for use by financial insti-tutions to train employees and make othernecessary changes required in order to com-plete and file the revised CTR, effective onthe business day of October 1, 1995.

5. Question:May the old CTR be filed afterOctober 1, 1995?

Answer: FinCEN is allowing a necessarytransition time until the end of December1995 for financial institutions to start filingthe new CTR. Between October 1 andDecember 31, 1995, paper filers willnotbe penalized for continuing to file the oldCTR or the ADVANCE COPY of the newCTR, which has been available for trainingpurposes since May 1995, while makingevery ‘‘good faith’’ effort to obtain and filethe new CTR as soon as possible afterOctober 1, 1995 (business day). This same

1. Effective April 1, 1996

1503.0 Financial Crimes Enforcement Network


policy will also apply to magnetic CTRfilers. (SeeAnswerto Question #7below.)

6. Question:Where can I get specifications forMAGNETIC FILING of the revised CTR?

Answer: Requests for specifications onmagnetic filing of the revised CTR shouldbe directed to the IRS Detroit ComputingCenter, ATTN: CTR Magnetic MediaCoordinator, P.O. Box 33604, Detroit, MI48232-5604.

7. Question: The IRS Detroit ComputingCenter issued specifications on magneticfiling of the revised CTR during the week ofJune 12, 1995. It will take at least six (6)months from the time of receipt of thesespecifications until they are fullly installedand usable on financial institutions’ sys-tems. Is it acceptable for financial institu-tions to continue to file magnetically the oldCTR Form 4789 (Rev. July 1994) untilDecember 1995?

Answer:Yes, because of the transition timenecessary to file the revised CTR magneti-cally, financial institutions will not bepenalized for continuing to use the old CTRwhile making every ‘‘good faith’’ effort towork with the IRS Detroit Computing Cen-ter to implement specifications for magneticfiling of the revised CTR. It is expected thatthis process should be completed at thelatest by the end of December 1995. Thissame policy will also apply to paper CTRfilers. (SeeAnswerto Question #5above.)

8. Question:Where should I file the revisedCTR?

Answer:File the CTR by the 15th calendarday after the day of the transaction with theIRS Detroit Computing Center, ATTN: CTR,P.O. Box 33604, Detroit, MI 48232-5604 orwith your local IRS office. Keep a copy(either paper or electronic) of each CTR forat least five years from the date filed.

Identification Requirements

9. Question: Is a U.S. passport acceptableidentification since it does not contain anaddress and is not specifically listed in theregulations (31 CFR Part 103.28)?

Answer: Yes, for purposes of completingthe new CTR, a U.S. passport is consideredan acceptable form of identification.Although verification of an address by offi-cial document or other means (e.g.,throughcredit bureaus) is desirable, acceptable iden-tification may be made by an official docu-ment containing name and a photograph(preferably with address) that is normallyacceptable by financial institutions as ameans of identification when cashing checksfor nondepositors.

10. Question:What is a cedular card?

Answer:A cedular card is the term used fora personal identification card issued byforeign governments, particularly in LatinAmerica and Spain, to citizens above acertain age (not issued to minors) and withincertain categories (excluding certain classi-fications of citizens,e.g., military).

Specific Instructions

11. Question:What should be included on addi-tional sheets attached to the original CTR?

Answer: In order for attached sheets to beclearly associated with the original CTR, itwould be desirable to have as much iden-tifying information as possible on theattached sheets, including: (1) the name ofthe bank filing the form and (2) the date ofthe transaction. At a minimum, on allattached sheets of paper to the originalCTR, the financial institution should notethe following: (1) the name(s) of the per-son(s) or organization(s) on whose behalfthe transaction(s) is conducted and (2) thesocial security or employer identificationnumber(s).

12. Question:Must a financial institution amendan incomplete old CTR after October 1,1995, if the missing information is no longerrequired on the revised CTR (e.g.,a CTR isfiled on September 28, 1995, then the finan-cial institution discovers additional informa-tion on October 3 that should have beenprovided as an amendment to the old CTR;however, that information is no longerrequired on the new CTR)? (Item 1a:Amends prior report.)

Financial Crimes Enforcement Network 1503.0


Answer:Because the revised CTR requiresless information, after October 1, 1995,there is no requirement to amend old CTRswhen the amendment concerns informationon fields that have been eliminated on therevised CTR.

13. Question:When should the box for ‘‘mul-tiple persons’’ be checked? (Item 1b: Mul-tiple persons.)

Answer: Multiple person transactions arethose conducted by or on behalf of two ormore individuals; on behalf of two or moreorganizations, or on behalf of at least oneindividual and at least one organization. Inthese cases, box ‘‘1b’’ (multiple persons)should be checked.

14. Question: Do all holders of the account,even if they do not come to the bank, needto be put on the revised CTR as ‘‘Person(s)on Whose Behalf Transaction(s) Is Con-ducted’’?

Answer: For deposits, all those who areknown to benefit from the transaction mustbe identified on the CTR. However, if aperson makes a withdrawal from a jointaccount, only his name needs to be listed asthe beneficiary of the transaction if: (1) hestates that the withdrawal is on his ownbehalf or the financial institution knows thatthe person making the withdrawal is theonly beneficiary, and (2) the financial insti-tution has no reason to believe otherwise.

15. Question:When should the box for ‘‘mul-tiple transactions’’ be checked? (Item 1c:Multiple transactions)

Answer:Multiple transactions are any twoor more transactions which the financialinstitution has knowledge are conducted byor on behalf of any person during the samebusiness day and which result in a totalcash-in or cash-out of over $10,000. Inthese cases, box ‘‘1c’’ (multiple transac-tions) should be checked.

Example:A customer places one depositbag into the night depository at a bank onFriday night, two deposit bags on Saturdayand two on Sunday; then on Monday morn-ing, a teller processes all five deposit bagsand deposit slips at the same time, but postseach individual deposit separately.

This should be reported as a multipletransaction. However, if the customer placesone bag containing the five deposits in thenight depository over a weekend, and theteller processes the deposit on Mondaymorning, totaling the five deposits and show-ing a single cash-in transaction, the finan-cial institution may report it as a singletransaction so that the CTR reflects thefinancial institution’s records.

PART I

Section A: Person(s) on WhoseBehalf Transaction(s) Is Conducted

One of the major changes on the new CTR is thereversal of Sections A and B from the old CTR:‘‘Person(s) on Whose Behalf Transaction(s) isConducted’’ which was Section B on the oldCTR is now Section A, and ‘‘Individuals(s)Conducting Transaction(s)’’ which was for-merly Section A is now Section B. This wasdone to place a greater emphasis on all thosewho benefit from (the beneficiaries of) thetransaction by noting that information first inSection A.

16. Question:Must the financial institution notewhether the number provided in Item 6 is asocial security number (SSN) or an employeridentification number (EIN) since there isno separate configuration of spaces?

Answer:It is not necessary to note whetherthe number in Item 6 is an SSN or EIN, andthe revised CTR has been simplified toeliminate the separate configuration of thesenumbers because they may be differentiatedsolely on the basis of their initial numbers.IRS Service Centers assign EINs, whichstart with numbers not assigned to SSNs;whereas, the Social Security Administrationassigns SSNs, which start with numbers notassigned to EINs.

17. Question:While an SSN or EIN is requiredon a CTR, if a CTR is filed without an SSNor EIN, should the financial institutionamend the CTR if it subsequently obtainsan SSN or EIN? (Items 6 and 19)

Answer:Yes, the CTR should be amended ifan SSN or EIN is subsequently obtained.



18. Question: Are the terms ‘‘homemaker,’’‘‘retired,’’ or ‘‘unemployed’’ acceptable asdescriptions for occupations? (Item 13)

Answer: ‘‘Homemaker,’’ ‘‘retired,’’ or‘‘unemployed’’ are acceptable as occupa-tion descriptions, but financial institutionsshould attempt to get more specific infor-mation. As a basic part of ‘‘know yourcustomer’’ programs, financial institutionsshould pay particular attention to customerswith such non-specific occupations whocontinually make large cash deposits. ‘‘Self-employed’’ is not acceptable without addi-tional information as it is too non-specific.

Section B: Individual(s) ConductingTransaction(s) (if other than above)

19. Question: Instructions state that financialinstitutions should enter as much informa-tion as is available in Section B. Does thismean that if it is not available, then they donot have to provide it? Should the financialinstitution refuse to conduct the transactionif the customer refuses to provide therequired information?

Answer:The law requires financial institu-tions to file complete and accurate CTRs.The CTR Form 4789 indicates the onlycircumstances in which incomplete data isacceptable (e.g.,Armored Car Service, MailDeposit or Shipment, etc.). If a financialinstitution elects to conduct a transactionfor which it files an incomplete CTR otherthan for these specified circumstances, thenit should attach an explanation of why theCTR is incomplete.

20. Question:If box ‘‘a’’ in Section B is checkedfor Armored Car Service, should the pro-vider’s name be inserted?

Answer:No, the Armored Car Service pro-vider’s name does not have to be recordedon the CTR.

21. Question:Is box ‘‘d’’ for Multiple Transac-tions on the revised CTR’s Part I—SectionB the same as the old CTR’s Part I, box 3d?If so, what is considered a ‘‘reasonableeffort’’ for obtaining information when the

aggregation of multiple transactions hasexceeded the reporting threshold? (Part I—Section B box d: Multiple Transactions)

Answer:Yes, box ‘‘d’’ in Part I—Section Bof the revised CTR is the same as box 3d forMultiple Transactions in Part I of the oldCTR, and should be checked to indicate thatsome or all of the information required inItems 15–25 is missing because the trans-action being reported is a multiple transac-tion. A reasonable effort to obtain informationfor reporting multiple transactions that whenaggregated exceeded the reporting thresh-old might include a check of bank records,telephone calls to customers, and obtaininginformation from tellers who handled themultiple transactions. However, if completeinformation is still not obtained, then box‘‘d’’ in Part I—Section B must be checkedto explain why.

PART II

Amount and Type of Transaction(s)

22. Question: Should ‘‘multiple transactions’’be aggregated?

Answer: Yes, to report multiple transac-tions, all the individual transactions of whichthe financial institution has knowledge mustbe aggregated, which means that debitsmust be added to debits, and credits must beadded to credits. If the cash debits or thecash credits totals exceed $10,000 in abusiness day, a CTR is required. If debitsand credits each exceed $10,000, they canboth be reported on a single CTR. Do notmix debits and credits by off-setting oneagainst the other; that is, do not mix cash-intransactions with cash-out transactions. Fol-lowing are several examples of how toreport aggregated transactions:

Example A:The financial institution hasknowledge that an individual deposits $5,000in cash into his account and returns later inthe day to deposit another $5,500 in cashinto his account. Both cash-ins should beadded (totaling $10,500) and reported on aCTR. Complete Section A on the indi-vidual, and enter his ID in Item 14; inSection B check box d (Multiple Transac-



tions) and box e (Conducted On OwnBehalf) to explain why Section B is leftblank.

Example B:An individual deposits $5,000in cash into his personal account and returnslater in the day to deposit $6,000 in cashinto his employer’s business account.Because the financial institution has knowl-edge that this individual has deposited$11,000 in one business day, it must file aCTR. Complete two Section As (one Sec-tion A on the individual, entering his ID inItem 14, and the other Section A on hisemployer’s business account, entering N/Ain Item 14); in Section B check box d(Multiple Transactions) and box e (Con-ducted On Own Behalf) to indicate whySection B is left blank.

Example C: An individual acting onbehalf of several others, deposits and with-draws various amounts during the day.Regardless of how many visits he makes, ifthe financial institution has knowledge thateither the debit or the credit total exceeds$10,000, a CTR must be filed. When theindividual conducting the transactions doesnot benefit, complete Section B with infor-mation on him, entering his ID in Item 25,and complete separate Section As on allbeneficiaries of the transactions, enteringtheir identifications in Item 14. (If benefi-ciaries’ identifications are not availablebecause individuals are not present or arenot applicable because beneficiaries areorganizations, enter N/A in Item 14.) Whenthe individual also benefits from the trans-actions, enter information on him and allother beneficiaries in separate Section As,indicating his ID and the identifications ofothers in Item 14, if available and applica-ble; in Section B check box d (MultipleTransactions) and box e (Conducted OnOwn Behalf) to indicate why Section B isleft blank.

Example D: Two or more individualsconduct separate transactions on behalf ofthe same account holder (a store) in thesame business day. If the financial institu-tion has knowledge that the aggregate of thetransactions exceeds $10,000, a CTR isrequired. Complete Section A with informa-tion on the same account holder (a store),indicating N/A for ID in Item 14, andcomplete separate Section Bs on the indi-viduals who conducted the transactions but

were not beneficiaries, entering their iden-tifications in Item 25.

23. Question:How should trusts and other thirdparty accounts be reported?

Answer: If Jane Doe, the trustee of theJohn Smith Trust, makes a reportable depositto the Trust Account, information on JaneDoe, the trustee, including the method usedto verify her identification, must be enteredin Part I, Section A. Identifying informationon the John Smith Trust, who is the bene-ficiary of the transaction, must also bereported in a separate Section A (on theback of the CTR Form). Then check box e(Conducted On Own Behalf) to indicatewhy Section B is left blank. However, ifthe transaction is conducted for Jane Doe,the trustee, by her secretary, then in additionto identifying Jane Doe, the trustee, andthe John Smith Trust, the beneficiary, inseparate Section ‘‘As,’’ report identifyinginformation on the secretary, who actuallyconducted the transaction, in Part I, Sec-tion B.

24. Question:When an individual presents anon-us check drawn on an account of some-one other than the presenter’s account, whichbox should a reporting bank check? Whenan individual presents an on-us check drawnon the account of the presenter to withdrawfunds from his/her own account, which boxshould be checked?

Answer: When an individual presentsan on-us check drawn on an account ofsomeone other than the presenter’s account,the bank should check box 32 (Negotia-ble Instrument(s) Cashed). When anindividual presents an on-us check drawnon the account of the presenter to withdrawfunds from his/her own account, box 32could be checked or box 34 (Deposit(s)/Withdrawal(s)) may be checked to indicatethat the transaction is a withdrawal. In anycase, list account numbers in Item 35(Account Number(s) Affected).

25. Question:When a corporation/retail store’stransaction exceeds its exempt limit, shoulda CTR be filed?

Answer:Yes, if a customer’s transaction(s)exceeds its exempt limit, a CTR must be



filed on the entire amount of the cashtransaction, not just the difference betweenthe amount exempted and the amount of thetransaction.

26. Question: How should the purchase andredemption of a Certificate of Deposit (CD)be reported?

Answer: It is preferred that box 34(Deposit(s)/Withdrawal(s) be checked sincethe purchase of a CD is a deposit and theredemption is a withdrawal. However, it isalso acceptable if a bank checks Item 36(Other) and writes in CD redeemed/purchased. In either case, enter the CDnumber(s) in Item 35 (Account Number(s)Affected).

27. Question:How should such transactions asloan and credit card payments be reported?

Answer: Transactions such as loan andcredit card payments should be indicatedand described in Item 36 (Other) withaccount numbers affected recorded inItem 35.

28. Question:If a customer uses a check (i.e.,anegotiable instrument) to purchase $20,000U.S. equivalent worth of foreign currency,how should the revised CTR be completed?

Answer: If a check is used to purchase$20,000 in foreign currency, check box 36(Other), indicate ‘‘check cashed to purchaseforeign currency,’’ and complete Items 27(Cash Out-Amount) and 29 (Foreign Cur-rency). It would also be considered accept-able to check Item 32 (Negotiable Instru-ment Cashed) because the check is anegotiable instrument and completeItems 27 and 29.

PART III

Financial Institution WhereTransaction(s) Takes Place

29. Question:Should dashes be used in record-ing the depository institution’s MagneticInk Character Recognition MCR) number?(Item 43)

Answer:No, dashes should not be insertedin recording of the MICR number inItem 43.

30. Question:May the preparer and the approverof the new CTR be the same person?

Answer:Yes, the preparer and the approv-ing official of the new CTR may be thesame person. This is a change in policybased on standardizing paper filing withmagnetic filing of the CTR. However, it isstill strongly recommended that financialinstitutions, as a matter of internal review ofCTRs, have two people involved.

31. Question:Must the signature of the approv-ing official be an original, or may it bepre-printed? (Item 45)

Answer: The signature of the approvingofficial in Item 45 must be an originalsignature; it may not be pre-printed.

32. Question: May a department’s name bepre-printed instead of the name of a personto contact? (Item 48)

Answer:The name of a person to contact forquestions about the CTR (not a depart-ment’s name) is preferred in Item 48; how-ever, the name of the compliance office orother designated department would beacceptable.



Bank Secrecy Act Recordkeeping Rule for Funds Transfersand Transmittals of Funds31 CFR Part 103 Section 1504.0

The following staff interpretive guidanceaddresses frequently asked questions about thenew recordkeeping rules for funds transfers andtransmittals of funds, which were issued underthe Bank Secrecy Act by the Federal ReserveBoard and the Financial Crimes EnforcementNetwork (FinCEN) of the Department of theTreasury.

The new requirements become effective onMay 28.

This guidance is not meant to be comprehen-sive and does not replace or supersede the termsof the rule itself.

SECTION 103.11—MEANING OFTERMS

1. Question:Beneficiary, Beneficiary’s Bank.Which parties are the beneficiary’s bankand the beneficiary with respect to a fundstransfer in which payment is made to acustomer of a foreign bank?

Answer:The foreign bank receiving a pay-ment order for payment to its customer isthe beneficiary’s bank. The foreign bank’scustomer is the beneficiary.

2. Question:Beneficiary, Beneficiary’s Bank,Recipient, Recipient’s Financial Institu-tion, Intermediary Financial Institution.Which parties are the beneficiary, the ben-eficiary’s bank, the recipient’s financialinstitution, and the recipient when funds arereceived by a bank for credit to an accountof a licensed transmitter of funds or otherperson engaged in the business of transmit-ting funds (‘‘money transmitter’’) for fur-ther credit to the money transmitter’scustomer?

Answer:The bank holding the money trans-mitter’s account is the beneficiary’s bank(and an intermediary financial institution);the money transmitter is both the recipient’sfinancial institution and the beneficiary; themoney transmitter’s customer is the recipient.

3. Question:Financial Institution. What typesof ‘‘financial institutions’’ are covered bythe rule?

Answer: The rule applies to all financialinstitutions subject to the Bank Secrecy Actregulations. Financial institutions, as definedin §103.11(n), include banks as well asnonbank financial institutions (NBFIs) suchas securities brokers or dealers required tobe registered with the SEC, currencyexchange houses, casinos, and personsengaged in the business of transmittingfunds. The definition of financial institutionis limited to those institutions located withinthe United States.

While the terms ‘‘beneficiary’s bank’’and ‘‘originator’s bank,’’ as defined in§103.11(e) and §103.11(w), respectively,include institutions located outside theUnited States, the requirements of the BankSecrecy Act generally do not apply toforeign beneficiary’s banks or foreign origi-nator’s banks. The definitions of ‘‘benefi-ciary’s bank’’ and ‘‘originator’s bank’’ wereexpanded to include foreign institutions inorder to clarify the role of domestic institu-tions involved in international transactions.Thus, domestic banks involved in interna-tional transactions are not required underthe rule to contact the foreign bank formissing information on the foreign bank’scustomer. The Board and the TreasuryDepartment encourage foreign banks, how-ever, to comply with efforts to obtain andinclude complete information on the partiesto a transfer where not otherwise forbiddenby law.

4. Question:Funds Transfer. Does the ruleapply only to ‘‘wire transfers’’?

Answer: No. The rule applies to fundstransfers and transmittals of funds, whichcover a broad range of methods for movingfunds. The rule includes certain internaltransfers, e.g., when a bank transfers fundsfrom an originator’s account to a beneficia-ry’s account at the same bank (if the origi-nator and beneficiary are different parties),as well as orders made in person or bytelephone, facsimile, or electronic messagessent or delivered by a customer or by anNBFI on behalf of a customer to the NBFI’sbank. The definition includes all funds trans-


fers that are made within the United States,regardless of whether the transfer originatesor terminates abroad.

5. Question:Originator. If a corporation hasone or several individuals who are autho-rized by the corporation to order fundstransfers through the corporation’s account,who is the originator in such a transfer?

Answer:The corporation, and not the indi-vidual(s) authorized to issue the order onbehalf of the corporation, is the originator.Accordingly, the information must beretrievable by name of the corporation, notby the name of the individual ordering thefunds transfer.

6. Question: Originator, Originator’s Bank.Which parties are the originator and theoriginator’s bank with respect to a fundstransfer initiated by a customer of a foreignbank?

Answer:The customer of the foreign bank,i.e., the sender of the first payment order, isthe originator. The foreign bank acceptingthe payment order from that customer is theoriginator’s bank.

7. Question: Originator, Originator’s Bank,Transmittor, Transmittor’s Financial Insti-tution, Intermediary Financial Institution.Which parties are the originator and trans-mittor of a funds transfer/transmittal offunds when funds are wired by a moneytransmitter (on behalf of its customer)through an account at a bank?

Answer:The transmittor is the money trans-mitter’s customer; the money transmitter isboth the transmittor’s financial institutionand the originator; the bank is the origina-tor’s bank and an intermediary financialinstitution.

8. Question: Originator, Originator’s Bank.Who is the originator in a transaction wherea trustee initiates a funds transfer from anaccount at a bank held by the trust?

Answer: The trustee is merely the personauthorized to act on behalf of the trust,which is a separate legal entity. The trust,itself, is the originator of the funds transferand the bank holding the account is theoriginator’s bank.

9. Question:Originator’s Bank. If a customerinitiates a funds transfer through Bank 1,which uses Bank 2 as its correspondent,which bank is considered the originator’sbank?

Answer: The customer is the originator;Bank 1 is the originator’s bank; Bank 2 is anintermediary bank.

10. Question:Payment Order.Is an instructionto a bank to effect payment under a letter ofcredit a payment order and subject to therecordkeeping requirements?

Answer:This issue is discussed at length inOfficial Comment 3 to UCC 4A-104. As ageneral matter, the instruction to a bank toeffect payment under a letter of credit issubject to a requirement that the beneficiaryperform some act such as delivery of docu-ments. Because the term ‘‘payment order’’is limited to instructions that do not state acondition to payment to the beneficiaryother than time of payment, the transactionis not a payment order and not a fundstransfer subject to the recordkeeping require-ments. Certain other transactions connectedwith a letter of credit, however, may meetthe definition of ‘‘payment order.’’

SECTION 103.33—RECORDS TOBE MADE AND RETAINED BYFINANCIAL INSTITUTIONS

(The following questions and answers, whichuse the terminology associated with funds trans-fers through banks, also are applicable totransmittals of funds through nonbank financialinstitutions (NBFIs).)

§103.33(e)(1)—RecordkeepingRequirements.

11. Question: When does the recordkeepingrule take effect?

Answer:May 28, 1996.

12. Question:Are all funds transfers subject tothe recordkeeping rule, regardless of thesize of the transaction?

1504.0 Bank Secrecy Act Recordkeeping Rule for Funds Transfers and Transmittals of Funds


Answer:No. Only funds transfers equal toor greater than $3,000 are subject to therule.

13. Question:How long must the informationcollected under the rule be kept?

Answer:Pursuant to §103.38(d), all infor-mation required to be collected under therule must be retained for at least five (5)years.

14. Question:Does the rule require any report-ing to the government of any information?

Answer:No. Information related to a fundstransfer may be subject to the Bank SecrecyAct’s suspicious activity reporting require-ments, however, which became effective onApril 1, 1996.

15. Question:What is the relationship betweenthe funds transfer recordkeeping rule andthe rules for reporting suspicious transac-tions by financial institutions?

Answer: The funds transfer recordkeepingrequirements do not affect an institution’sresponsibility to report a transaction assuspicious under the terms of the rulesrequiring such reporting. The two rules areseparate and distinct requirements under theBank Secrecy Act. Circumstances underwhich a bank should report a funds transferas suspicious are discussed more fully at61 FR 4326et seq., February 5, 1996.

16. Question:If oral payment order instructionsinitially are recorded on audio tape, mustthe record of those instructions required bythis rule be kept in that form?

Answer: No. The bank may retain eitherthe original or a microfiche, other copy, orelectronic record of the instructions. Thecopy of an audio recording of the paymentorder need not be a verbatim transcription,so long as it contains the requiredinformation.

17. Question:May a bank use a code name orpseudonym for its customer?

Answer: Banks might, for a number ofreasons, use various classification schemesin connection with their funds transferrecords. A bank must be able to retrieve the

records, however, based on its customer’strue name, rather than the code name orpseudonym.

18. Question:Is retaining the city and state (orcountry) considered a sufficient address?

Answer: Banks should obtain a completeaddress including street information whenpossible.

19. Question:If a customer arranges to have itsmail held for pick up at a bank location,may it use the bank’s address as the addressof its customer?

Answer: No. The bank should retain arecord of the customer s address, rather thanthe address of the bank location at which thecustomer’s mail is held for pickup.

20. Question:In some circumstances, transmit-tal orders may be ‘‘aggregated.’’ For exam-ple, a casa de cambio in Texas may collectseveral transmittal orders for small amountsfrom different individuals who are sendingmoney to relatives in Mexico and ‘‘bundle’’them into a single transmittal order to aTexas bank as part of a transmittal of fundsto a Mexican casa de cambio. The ‘‘aggre-gate’’ transmittal order does not identify theindividual transmittors or recipients of theunderlying transmittal orders. The Texasbank sends the ‘‘aggregate’’ transmittal orderto a Mexican bank (for which it holds aclearing account), and the Mexican bankpays the Mexican casa de cambio. The casade cambio pays the Mexican recipientsbased on the separate transmittal orders thatit received directly from the Texas casa decambio. What are the recordkeeping require-ments for the Texas casa de cambio and theTexas bank?

Answer:In this example, the payments arecompleted by a combination of (1) transmit-tals of funds between the casas’ de cambiocustomers and (2) a separate funds transferbetween the casas de cambio themselves.With respect to the first set of transmittals offunds, the individuals in Texas are thetransmittors and the Texas casa de cambiois the transmittor’s financial institution,which must collect and retain the informa-tion regarding the individual transmittalorders as required by §103.33(f)(1)(i) (except

Bank Secrecy Act Recordkeeping Rule for Funds Transfers and Transmittals of Funds 1504.0


for any transmittal order that is less than$3,000). The Texas casa de cambio sendsmessages (by telephone or telegraph), whichare transmittal orders, to the Mexican casade cambio providing instructions for pay-ment to the recipients. The Mexican casade cambio is the recipient’s financial insti-tution. The Mexican individuals are therecipients.

These transmittals of funds are settledthrough the separate ‘‘aggregated’’ fundstransfer, in which the Texas casa de cambiois the originator and the Texas bank is theoriginator’s bank. This is a separate fundstransfer because the Texas bank has aggre-gated several discrete transmittals of funds,thereby changing the payment order amountas well as the parties to the transfer. TheTexas bank is required to collect and retainthe information regarding the Texas casa decambio required by §103.33(e)(1)(i). Withrespect to the aggregated funds transfer, theMexican bank is the beneficiary’s bankand the Mexican casa de cambio is thebeneficiary.

21. Question: Are there any differences inrecordkeeping requirements for nonbankfinancial institutions compared to financialinstitutions?

Answer: There is one incremental record-keeping requirement on NBFIs. NBFIs, butnot banks, must keep the original or a copyof any form relating to the transmittal offunds that is completed or signed by theperson placing the transmittal order. (See§103.33(f)(1)(i)(G).) The transmittor’s finan-cial institution may either keep the originalor a microfilm, other copy, or electronicrecord of the information contained on theform.

§103.33(e)(2)—Originators other thanestablished customers.

22. Question: Is a bank obligated to accept apayment order from someone that is not anestablished customer?

Answer:No. This rule merely sets forth therequirements for payment orders acceptedby a financial institution.

§103.33(e)(3)—Beneficiaries otherthan established customers.

23. Question:If a beneficiary’s bank attemptsto obtain identification from a beneficiarywho is not an established customer, and theperson is unable or unwilling to provide theidentification, should the bank refuse thetransaction?

Answer:The responsibility of a beneficia-ry’s bank that accepts a payment orderinvolves laws other than the funds transferrecordkeeping rule. The recordkeeping ruledoes not affect that responsibility. If thebeneficiary’s bank is instructed to makepayment to the beneficiary in person and theperson claiming to be the beneficiary fails toprovide identification required by the rule,the beneficiary’s bank’s responsibility tomake that payment may be affected. If thebeneficiary s bank does not believe, how-ever, that the lack of cooperation of theperson claiming to be the beneficiary pro-vides an adequate basis for withholdingpayment, it should note in the record thelack of identification required by the rule. Inaddition, bank personnel should report anysuspicious transactions to law enforcementauthorities as required by the suspiciousactivity reporting rules.

The rule does not require identificationwhen proceeds are not delivered in personto the beneficiary. The beneficiary’s bankshould retain a copy of the check or otherinstrument used to effect payment, or theinformation contained thereon, as well asthe name and address of the person to whichit was sent.

§103.33(e)(4)—RetrievabilityRequirements.

24. Question: How quickly must records beretrieved?

Answer: The retrievability standard is setforth in §103.38(d). Under this standard, theexpected timeliness of retrievability willvary based on the circumstances. Generally,records should be accessible within a rea-sonable period of time, considering thequantity of records requested, the natureand age of the record, the amount and type



of information provided by the law enforce-ment agency making the request, as well asthe particular bank’s volume and capacityto retrieve the records. As a practical matter,the expected timeliness for retrievabilitywill depend on the terms of the request.

25. Question:How must records be retrievable?

Answer: Information retained by an origi-nator’s bank must be retrievable by theoriginator’s name and, if the originatormaintains an account that has been used forfunds transfers, by the originator’s accountnumber. A beneficiary’s bank must retainand retrieve information by the beneficia-ry’s name and, if the beneficiary is anestablished customer with an account, byaccount number.

The information need not be retained inany particular manner, as long as the bankretains the required records in such way thatit is able to meet the retrieval requirementsof the rule. A bank may take intermediarysteps as necessary to retrieve a requestedrecord. For example, if a bank were directedto retrieve a transfer based on the name ofits customer, the bank may first look up theaccount number for that customer, and thenreview the customer account statements forthe specific funds transfer(s). Using thetransaction number identifying the specifictransfer that is included on the customerstatement, the bank may then retrieve thattransfer from its funds transfer records. Inaddition, if the bank accepts transfers fromnoncustomers, the bank also must retrieverecords of any noncustomer transfers basedon the name provided.

26. Question: When there are two or morenames on an account, must banks be able toretrieve records by all names on the accountor just the primary account holder(s)?

Answer: Whenever a bank is obligated toprovide records under this rule and therequest contains the specific name of anindividual, the bank must be able to retrieverecords by that name, regardless of whetherthe person is a primary account holder.

27. Question:Must records retained under therule be maintained on-site?

Answer: No. There is no requirement forrecords to be maintained on-site.

28. Question:Must a bank automate its fundstransfer records and retrieval systems inorder to comply with the regulation?

Answer: No. Although an automated rec-ordkeeping and retrieval system is notrequired by the rule, a bank may wish toconsider implementing an automated sys-tem, depending on the demand for fundstransfer records and its current means ofkeeping the records. Based on the volumeof law enforcement requests, a bank shouldweigh the costs of implementing an auto-mated system versus the costs of searchingmanual records. The rule does not requirethat information be maintained in any par-ticular order. For example, a bank mayretain information about its customers in itscustomer file and information about fundstransfers in a separate file and may crossreference and retrieve the information.

§103.33(e)(6) Exceptions.

29. Question: What types of transfers areexcepted from the rule?

Answer:The following transfers are exceptedfrom the rule:

i) transfers of less than $3,000;ii) debit transfers;

iii) transfers governed by the ElectronicFund Transfer Act, as well as any otherfunds transfers made through ATM,ACH, and POS systems;

iv) transfers where both the originator andthe beneficiary are any of the following:(A) A domestic bank;(B) A wholly-owned domestic subsid-

iary of a domestic bank;(C) A domestic broker or dealer in

securities;(D) A wholly-owned domestic subsid-

iary of a domestic broker or dealerin securities;

(E) The United States;(F) A state or local government; or(G) A federal, state or local govern-

ment agency or instrumentality;(v) transfers where both 1) the originator

and the beneficiary are the same person,



and 2) the originator’s bank and thebeneficiary’s bank are the same domes-tic bank.

30. Question:Does the rule apply to transfersfrom a person’s individual bank account tothe person’s joint bank account at the samedomestic bank?

Answer:No. The originator and beneficiaryare the same person, and the originator’sand beneficiary’s bank are the same domes-tic bank. These transfers are excepted fromthe rule.

31. Question:Does the rule apply to intrabanktransfers where the originator and the bene-ficiary are different persons?

Answer:Yes. Intrabank transfers are exceptedfrom the rule only if the originator andbeneficiary are the same person (unless theoriginator and the beneficiary are bothexcepted entities, as described in A33).

32. Question:Does the rule apply to transferswhere the originator and beneficiary are thesame person and the originator’s bank andbeneficiary’s bank are separate banks ownedby the same bank holding company?

Answer: Yes. The rule applies to thesetransfers, because although the banks areaffiliated, they are separate legal entities.Transfers between U.S. branches of thesame domestic bank, even across state lines,are excepted, however, if the originator andthe beneficiary are the same person.

33. Question:Please clarify the application ofthe exceptions for funds transfers containedin §103.33(e)(6).

Answer: If both counterparties (originatorand beneficiary) to a funds transfer are anyof the listed excepted entities, the transac-tion is excepted. Examples of exceptedtransfers would include a transfer from theU.S. Treasury to a public school district (alocal government instrumentality); a trans-fer from a domestic bank to a domesticbroker/dealer; and a transfer from a domes-tic broker/dealer to a state treasurer.

34. Question:A bank’s trust department uses anominee, which is a partnership (not a

wholly-owned subsidiary of the bank), andthis nominee sends recurring wire transfersfrom the nominee account to an account inthe nominee name at another bank. Arethese transactions excepted from the record-keeping requirements?

Answer:It is not uncommon for a bank toestablish a nominee for purposes of regis-tering stock certificates, commercial paper,participations, and registered bonds. Thenominee generally is a partnership of des-ignated officers or staff members and pos-sesses a legal name (different from thebank) that is registered in accordance withstate laws. Because the nominee is a sepa-rate legal entity, and not a wholly-ownedsubsidiary of the bank, its funds transfersare not excepted from the recordkeepingrequirements.

35. Question: Comment 5 to UCC 4A-104states that there are limited instances inwhich the paper on which a check is printedcan be used as a means of transmitting apayment order that is covered by Article4A. For example, if an originator’s bank(Bank A) does not have a correspondentrelationship with the beneficiary’s bank(Bank B), Bank A may send a teller’s checkto Bank B if the amount of the transfer issmall and Bank A and Bank B do not havean account relationship. Bank A mayexecute the originator’s payment order byissuing a teller’s check payable to Bank Balong with instructions to credit the benefi-ciary account in that amount. The instruc-tion to Bank B to credit the beneficiary’saccount is a payment order, and the check isthe means by which Bank A pays its obli-gation as sender of the payment order. Theinstructions may be given in a separateletter accompanying the check, or printedon the check. According to the OfficialCommentary to UCC 4A-104, the instruc-tion to pay the beneficiary is the paymentorder, but the check itself is an instrumentunder Article 3 and not a payment order. Isthis type of transaction subject to the rule’srecordkeeping requirements?

Answer:Yes. If a transaction is defined as afunds transfer under UCC 4A and not sub-ject to any of the specific exceptions in therule, it is subject to the rule’s requirements.



The Treasury and the Board have attemptedto conform the definitions of the rule asclosely as possible to UCC 4A definitions toavoid confusion in the banking industry.The Treasury and the Board do not plan toexpand the exceptions to the rule at this

time, but may consider whether modifica-tions to the exceptions would be appropriateas part of Treasury’s study of the industryand law enforcement’s experience under therule.



Office of Foreign Asset ControlSection 1505.0

INTRODUCTION

The Office of Foreign Assets Control of the U.S.Department of Treasury (‘‘OFAC’’) administersand enforces economic and trade sanctionsagainst targeted foreign countries, terrorismsponsoring organizations and international nar-cotics traffickers based on U.S. foreign policyand national security goals. OFAC acts underPresidential wartime and national emergencypowers, as well as authority granted by specificlegislation, to impose controls on transactionsand freeze foreign assets under U.S. jurisdiction.Many of the sanctions are based on UnitedNations and other international mandates, aremultilateral in scope, and involve close coopera-tion with allied governments. While OFAC isresponsible for promulgating, developing andadministering the sanctions for the Secretaryunder eight basic statutes (not listed here), all ofthe bank regulatory agencies cooperate in ensur-ing financial institution compliance with theregulations.

EXAMINATION PROCEDURES

Contained within the BSA Workprogram is aseries of questions regarding the examination of

an institution’s OFAC compliance program. Spe-cific questions regarding possible applicabletransactions or other general OFAC questionscan be directed to OFAC offices in a variety ofways, including by phone at 1-800-540-OFAC(6322).

FEDERAL RESERVECOMMUNICATION OF OFACUPDATES

The Federal Reserve System disseminates OFACupdates to points of contact at each FederalReserve Bank. Specific questions regarding thedissemination of information or compliancequestions can be directed to the Federal ReserveBoard’s Special Investigations and Examina-tions Section at 202-452-3168.

OFAC HOME PAGE SITE

General information regarding prohibited trans-actions, compliance, penalties and other matterscan be located on OFAC’s home page site:http//www.ustreas.gov/treasury/services/fac/fac.html.


Interim Exemption Procedurefor Currency Transaction ReportingU.S. Department of the TreasuryFinancial Crimes Enforcement Network Section 1506.0

INTRODUCTION

This document is intended to answer general,basic questions about how to implement the newCTR exemption procedures. It is not meant to becomprehensive and does not replace or supple-ment the regulations.

The existing administrative exemption pro-cess is being amended to revise, expand andsimplify the exemption procedures. A copy ofthis interim rule is located in section 502 of thismanual. We welcome comments on how tosimplify or otherwise improve the proceduresstill further.

Copies of this FinCEN document ‘‘newexemption procedures for currency transactionreporting’’ (published in May 1996) may beobtained: via computer by a modem from theTreasury Bank Secrecy Act (BSA) BulletinBoard at 313-234-1453.

A. New Procedures

1. What new exemption procedures are ineffect?

The Financial Crimes Enforcement Network hasissued an interim rule that eliminates the require-ment that banks file currency transaction reports(CTR, Internal Revenue Service form 4789) fortransactions by exempt persons.

2. What is an interim rule?

An interim rule becomes effective immediately,without a notice and comment period. Onereason for its use is to grant immediate relieffrom an existing regulatory requirement.

3. Are banks required to adopt the newexemption procedure?

No. This interim rule permits but does notrequire banks to use the new simplified exemp-tion procedure for certain types of customers.This rule implements Bank Secrecy Act manda-

tory exemption requirements, and grants signifi-cant relief to banks. The Financial CrimesEnforcement Network believes that the benefitsof this rule will motivate banks to adopt this newprocedure voluntarily.

4. Is there a transition period betweenthe old exemption procedures, and thenew exemption procedure, for currencytransaction reporting by banks?

No. There is no formal transition period, becausebanks are not required to implement these newexemption procedures. A bank may continue tooperate under the previous, more labor-intensiveand cumbersome procedures if it wishes. But, ifa bank does so, the bank remains subject to allthe requirements, and to the penalty rules gov-erning that system. The Financial CrimesEnforcement Network anticipates that bankswill use the new exemption procedures becausethey require significantly less effort and affordbanks a limitation on liability.

5. Will this interim rule becomepermanent?

The Financial Crimes Enforcement Network isseeking public comment on this rule. The com-ments will be analyzed and any appropriateamendments will be made. The rule will then bepublished as a final (or permanent) rule in theFederal Register. Again, comments are wel-come regarding this rule and any suggestions toimprove or clarify it.

B. Suspicious Transaction Reportingand Other Bank Secrecy ActReporting

6. If a customer is exempt from currencytransaction reporting, is it then alsoexempt from other BSA requirements?

No. This is especially important for banks toremember, because of the new suspicious trans-


action reporting requirements. A customer thatis exempt from currency transaction reportingis, nonetheless, fully subject to the suspicioustransaction reporting requirements.

If a bank knows, suspects, or has reason tosuspect that a currency transaction constitutes asuspicious transaction, as defined in the suspi-cious transaction reporting rules that becameeffective April 1, 1996, a Suspicious ActivityReport is required. Thus, for example, if a banksuspects that a government agency is engaged insuspicious activity, the bank must file a suspi-cious activity report. Similarly, if a customer isengaged in frequent, large currency transactionsthat lack any apparent business purpose and thebank knows of no reasonable explanation for thetransactions, the bank may be required to file aSuspicious Activity Report.

C. Exempt Person

7. What is an ‘‘exempt person’’?

An ‘‘exempt’’ person is:

a) a bank (wherever chartered) to the extent ofits United States activities;

b) federal, state, or local government depart-ment or agency

c) any entity exercising governmental authority(such as the power to tax, to exercise eminentdomain, or to exercise police powers); and

d) any corporation whose common stock islisted on the New York Stock Exchangeorthe American Stock Exchange (but not theEmerging Company Market)or the NASDAQNational Market (but not the NASDAQSmall-Cap Issues Market).

e) any subsidiary of any listed exempt corpora-tion if it filed a consolidated federal incometax return with the publicly traded corporation.

8. What documentation do I need to showthat an entity is exempt?

In general, a bank must take steps to assure itselfthat a customer is exempt comparable to thosethat a reasonable and prudent bank would taketo protect itself from fraud based on mis-identification of a person’s status. The ruleincludes operating rules to make this easier.

In the case of a bank or federal, state or localgovernment, the same documentation a bankreceives now authorizing the establishment of a

business account with a bank or a governmentalunit is generally sufficient. Such documentationmight include a corporate resolution by the otherbank authorizing the establishment of an accountand granting signature authority over its accountto named individuals. In addition, any documen-tation that demonstrates that a customer is abank is sufficient. A bank is expected to exercisethe same prudent standards of due diligence thatit employs in the conduct of its banking activities.

The Financial Crimes Enforcement Networkis aware that certain small governmental units,such as a volunteer fire department, or a ruralwater authority may not issue detailed documen-tation that specifically attests to their govern-mental status. A bank may rely on reasonabledocumentation, based on the type and nature ofthe governmental agency involved. In addition,a bank may rely on community knowledge orknowledge based on the customer s name tomake such a determination.

In the case of an entity exercising governmen-tal authority, a bank must determine and docu-ment characteristics that make such an author-ity governmental in nature. Such characteris-tics include the authority to exercise eminentdomain, the authority to tax the public, and theauthority to routinely exercise police powers. Aclear example of governmental authority is thePort of New Orleans.

It is important to note that government con-tractors arenot governmental authorities solelyby virtue of the services that they provide to thegovernment.

9. How does a bank determine that acorporation’s common stock is listedon one of the exchanges that make thecorporation eligible for exemption?

The business section of many newspapers, andbusiness weeklies, such asBarron’s, the WallStreet Journal,or Investor’s Dailycontain list-ings for businesses that are listed on the stockexchanges.

10. How does a bank determine that abusiness is a subsidiary of one of theexemption-eligible corporationsandthat it files a consolidated tax returnwith the publicly traded corporation?

Any reasonable documentation will be suffi-cient. Examples of such documentation might

1506.0 Interim Exemption Procedure for Currency Transaction Reporting


include a letter signed by a company officer, orby a company official listed as a signatory on acompany account, or a copy of the affiliationschedule for the tax return filed.

11. How are franchises treated underthese rules?

Franchises arenot exempt simply because thecompany that awards the franchise licenseis exempt. For example, McDonald’s ownsapproximately 20% of all restaurants nation-wide. Thus, for the 80% of McDonald’s restau-rants that are franchises, a bank must determinewhether the franchise is itself a publicly tradedcorporation or its consolidated subsidiary. Inmany cases the result will be that the franchise isnot exempt.

D. Designation of Exemption

12. Is the designation of exemptionautomatic, once a bank determinesthat a customer is exempt?

No. There is one additional requirement. To takeadvantage of this new procedure, a bank mustgenerally make a designation of exemptionwithin 30 days of a reportable transaction, andstop filing CTRs. A designation of exemption ismade by filing a single CTR in which Part I,Section A and Part III are fully completed andbox 36 is marked ‘‘Designation of ExemptPerson.’’ The bank must file one such designa-tion of exemption for each customer that it treatsas an exempt person.

13. When a bank files a designation ofexemption, must it describe why aparticular customer is exempt?

No. However, internal records maintained at thebank should indicate why a particular customeris exempt (e.g.,a public school is a governmentagency, General Electric Corp. is listed on theNew York Stock Exchange, etc.). In addition, onthe designation of exemption, the bank muststate the occupation of the exempt person, andmay state County government or State police orsimilar occupations that will indicate why thecustomer is exempt.

14. Should a bank file a separateexemption for each account, or onefor all accounts that an eligiblecustomer has?

A single designation of exemption should befiled for each ‘exempt person’ that is a customerat a bank, regardless of the number of accountsheld by an exempt person.

15. What if an exempt customer does nothave an account at the bank?

An exempt customer, which does not have anaccount at a bank, is nonetheless exempt, and adesignation of exemption may be made. Com-mon examples are governmental agencies. It isnot uncommon for the United States govern-ment, especially the armed forces, to cash largechecks at banks at which it does not have anaccount. Such transactions are by exemptpersons.

A bank should bear in mind that large cur-rency transactions by many types of listed cor-porations, in contrast, may be suspicious, if thecorporation does not have an account at thebank. Such suspicious transactions may berequired to be reported.

E. Benefits and General Information

16. What is the benefit of this newexemption procedure to the bank?

There are several benefits. First, this is farsimpler than the existing system and shouldreduce the filing burden for banks.

Second—a bank that exempts a customer inthis mannercannot be penalizedfor a failure tofile a CTR unless the bank knowingly filed afalse or incomplete report, or if the bankknewor had reason to believethat the customer or thetransaction was not exempt or was not trans-acted by the exempt customer.

17. What is the benefit of this rule to thepublic?

This rule will significantly reduce the BankSecrecy Act compliance burden and liability forbanks, while maintaining the usefulness of CTRs

Interim Exemption Procedure for Currency Transaction Reporting 1506.0


for law enforcement, and regulatory purposes.As such, this rule advances the principles ofExecutive Order 12866 to create ‘‘regulationsthat are effective, consistent, sensible, andunderstandable.’’ By making the CTR processmore consistent, sensible and understandable,these rules will be more effective for both thegovernment and for the banking industries.

18. Will the Treasury Department exemptother types of businesses?

The Treasury Department is committed toreducing the number of CTRs while retainingfilings that arehighly usefulfor tax, regulatory,and criminal proceedings. FinCEN has solicitedpublic comments on whether businesses notincorporated that have equity interests publiclytraded on major exchanges should be deemed‘exempt persons.’

The Financial Crimes Enforcement Networkis interested in comments on whether privately

held firms should be able to be exempted, underan exemption process that takes into accountthe lower level of public scrutiny afforded suchfirms. FinCEN is aware that the new proce-dure will provide the greatest benefit to largebanks in urban areas, and may provide lessbenefit to smaller, community-based banks.FinCEN remains committed to providing a simi-lar degree of regulatory relief to community-based banks, and intends to propose a regulationthat will exempt other types of businesses aswell.

19. To whom may a bank go should ithave further questions?

Any bank may contact its primary Bank SecrecyAct examination authority, or the TreasuryDepartment’s Financial Crimes EnforcementNetwork can be contacted regarding questionson the Bank Secrecy Act rule at (800) 949-2732or (703) 905-3920.

1506.0 Interim Exemption Procedure for Currency Transaction Reporting


Workpaper Content and RetentionSection 1601.0

Workpapers are the written documentation ofthe procedures followed and the conclusionsreached during a Bank Secrecy Act examina-tion. In addition, the workpapers are used todocument management’s responses and commit-ments to issues raised during the course of theexamination. Accordingly, they include, but arenot necessarily limited to, examination proce-dures and verifications, memoranda, schedules,questionnaires, checklists, abstracts of bankdocuments and analyses prepared or obtained byexaminers.

The workpapers are important to the supervi-sory process because they are expected to sup-port the information and conclusions containedin the related report of examination. The pri-mary purposes of workpapers are to:

• Organize the material assembled during anexamination to facilitate review and futurereference.

• Aid the examiner in efficiently conducting theexamination.

• Document the policies, practices, proceduresand internal controls of the institution.

• Provide written support of the examinationand audit procedures performed during theexamination.

• Document the results of testing and formalizethe examiner’s conclusions.

• Substantiate the assertions of fact or opinioncontained in the report of examination.

• Aid the examiner-in-charge in planning,directing, and coordinating the work of theassistants.

• Guide future examinations in terms of esti-mated personnel and time requirements.

Workpapers are to be prepared in a mannerdesigned to facilitate an objective review, orga-nized to support an examiner’s current findings,and should document the scope of the currentexamination. The following is a listing of pos-sible workpapers to support the Bank SecrecyAct examination. The list is not meant to be allinclusive and the final contents should be dic-tated by the scope of the examination:

• Copy of previous findings/managementresponses.

• Listing of Currency Transaction Reportsobtained from the IRS database.

• Cash flow and/or Intelligence data obtainedduring examination, if applicable.

• Bank Secrecy Act policies and procedures.• Audit workprogram/independent review

program.• Most recent internal audit/independent review

results.• Bank Secrecy Act training program.• Exemption list and related documentation.• IRS and Treasury correspondence regarding

special exemptions.• Know Your Customer policies.• Copy of completed examiner BSA

workprogram.• Anti-money laundering/suspicious activity

reporting program.

Judgment is required as to what workpapersshould be retained for each examination. Lengthydocuments should be summarized or highlighted(underlined) so that the examiner who is per-forming the work in the related area can readilylocate the important provisions without havingto read the entire document. If the documentsare voluminous, as may be the case with theBank Secrecy Act policies and procedures, asummary of the document or table of contentsshould be included rather than the entiredocument.

WORKPAPER RETENTION

Examiners should retain on a readily availablebasis those workpapers from:

• the most recent Federal Reserve System BankSecrecy Act examination.

• past Federal Reserve System Bank SecrecyAct examinations where adverse findings arecited, up to a five-year period.

• examinations performed by other regulatoryagencies where adverse findings are cited (upto five years).

• examinations disclosing conditions which lead,or may eventually lead, to a suspicious activ-ity report or criminal investigation.

These guidelines are the minimum requiredretention period for workpapers; longer reten-tion periods may be set by individual ReserveBanks.


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