Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual

Currency Transaction Reporting Exemptions — Overview

Currency Transaction Reporting Exemptions — Overview Objective. Assess the bank’s compliance with statutory and regulatory requirements for exemptions from the currency transaction reporting requirements. U.S. Treasury regulations have historically recognized that the routine reporting of some types of large currency transactions does not necessarily aid law enforcement authorities and may place unreasonable burdens on banks. Consequently, a bank may exempt certain types of customers from currency transaction reporting. The Money Laundering Suppression Act of 1994 (MLSA) established a two-phase exemption process. Under Phase I exemptions, transactions in currency by banks, governmental departments or agencies, and listed public companies and their subsidiaries are exempt from reporting. Under Phase II exemptions, transactions in currency by smaller businesses that meet specific criteria laid out in FinCEN’s regulations may be exempted from reporting.

Phase I CTR Exemptions (31 CFR 1020.315(b)(1)-(5)) FinCEN’s rule identifies five categories of Phase I exempt persons: • A bank, to the extent of its domestic operations. • A federal, state, or local government agency or department. • Any entity exercising governmental authority within the United States.

• Any entity (other than a bank) whose common stock or analogous equity interests are listed on the New York Stock Exchange or the American Stock Exchange or have been designated as a NASDAQ National Market Security listed on the NASDAQ Stock Market (with some exceptions). • Any subsidiary (other than a bank) of any “listed entity” that is organized under U.S. law and at least 51 percent of whose common stock or analogous equity interest is owned by the listed entity. Filing Time Frames Banks must file a one-time Designation of Exempt Person report (DOEP) to exempt each eligible listed public company or eligible subsidiary from currency transaction reporting. The report must be filed electronically through the BSA E-Filing System within 30 days after the first transaction in currency that the bank wishes to exempt. Banks do not need to file a DOEP for Phase I-eligible customers that are banks, federal, state, or local governments, or entities exercising governmental authority. Nevertheless, a bank should take the same steps to assure itself of a customer’s initial eligibility for exemption, and document the basis for the conclusion, that a reasonable and prudent bank would take to protect itself from loan or other fraud or loss based on misidentification of a person’s status. Exemption of a Phase I entity covers all transactions in currency with the exempted entity, not only transactions in currency conducted through an account.

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