BSA/AML Examiner School Case Study

Internal Use Only

Exemptions The BSA Department will consider only the following as being eligible for "exempt person" status: PHASE I Banks are not required to file CTRs, for transactions by certain classes of "Exempt Persons." Phase I Exempt Persons are defined as: • A department or agency of the United States, to or of any political 'subdivision of any state; • Any entity established under the laws of the United States, of any state, or of any political subdivision of any state, or under an interstate compact between two or more states, that exercises governmental authority on behalf of the United States or any such state or political subdivision; • Any entity (other than a bank) whose common stock or corresponding equity interests are listed on the New York Stock Exchange or American Stock Exchange (except stock listed on the Emerging Company Marketplace of the American Stock Exchange) or whose common stock has been designated as a NASDAQ National Market Security listed on the NASDAQ Stock Market (except stock listed under the separate "NASDAQ Small-Cap Issues' heading); • Any subsidiary, other than a bank, of any entity described above, that is organized under the laws of the United States or of any State and at least 51% of whose common stock is owned by the listed entity; and • Notwithstanding the above, any financial institution, other than a bank, that is an entity described above, to the extent to such financial institution's domestic operations. • Franchisees of listed corporations (or of their subsidiaries) are not included within the definition of exempt person under "Phase I" unless such franchisees are independently exempt as listed corporations or listed corporation subsidiaries. For example, a local corporation that holds a McDonald's franchise is not an exempt person simply because McDonald's Corporation is a listed corporation. A McDonald's outlet owned by McDonald's Corporation directly, on the other hand, would be an exempt person because McDonald's Corporation's common stock is listed on the New York Stock Exchange. PHASE II A "non-listed business", which is defined as any other commercial enterprise, to the extent of its domestic operations and only with respect to transactions conducted through its exemptible accounts, any other commercial enterprise, other than an enterprise. With respect solely to withdrawals for payroll purposes from existing exemptible accounts, any other person (a "payroll customer") that: • Has maintained a transaction account at the Bank for at least 2 months or prior to the passing of 2 months' time if the Bank conducts a risk-based analysis of the customer that allows the Bank to form and document a reasonable belief that the customer has a legitimate business purpose for conducting frequent large cash transactions; • Frequently engages (at least 5 times) in transactions in currency with the Bank in excess of $10,000; and • Is incorporated or organized under the laws of the United States or a State, or is registered as, and is eligible to do business within the United States or a State. The exemption applies only to transactions involving the exempt person's own funds. A transaction carried out by an exempt person as an agent for another person, who is the beneficial owner of the funds involved in a transaction in currency, is not subject to the exemption from reporting.

For Training Purposes Only

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