Seeking to reduce paperwork for small banks, the Treasury Department is proposing to exempt established customers from currency transaction reporting requirements.
But the proposal-which would cover businesses that have been customers at least a year and make frequent large-dollar transactions-is already drawing fire from some bankers.
Banks now are required to file currency transaction reports each time a U.S.-based retail, service, and wholesale company deposits or withdraws more than $10,000.
Under the proposal, published in today's Federal Register, banks would instead file a new annual report disclosing how much their established customers deposited and withdrew per year.
The initiative is part of a three-year effort by Treasury to streamline the process banks use to report cash transactions above $10,000. Bankers have long complained that the old rules were so convoluted that exemptions were not worth pursuing.
The Treasury Department, which is accepting public comment on the proposal through Dec. 8, said it would eliminate more than one million filings each year.
Community banks would benefit most from the proposal, said Stanley E. Morris, director of the Financial Crimes Enforcement Network-a Treasury unit that combats money laundering. "This is to deal with the hardware store that has been doing business with you for years," Mr. Morris said.
But banking industry executives said the plan is flawed, because while it eliminates frequent filings, it still requires extensive record keeping.
Bank computer systems would have to be reprogrammed to produce the annual reports, executives said, and institutions are already busy trying to cope with the year 2000 bug and other pressing technology challenges.
"It can be done, but it may just be easier to fill out the currency transaction report forms," said Phillip G. Gay, senior vice president with Commercial Bank of Florida, Miami.
Mr. Morris acknowledged the industry's concerns, but said law enforcement agencies want to ensure regulatory relief does not make it easier for criminals to launder money.
The worry is that money launderers could take advantage of the new rules by funneling modest amounts of cash through small businesses or splitting ill-gotten funds among accounts at different banks.
Mr. Morris noted that Fincen is inviting banks to propose alternatives, such as reporting cash transaction totals within specific dollar ranges or limiting reporting to businesses of a certain size or type.
"I appreciate law enforcement's objective," said Dennis L. Algiere, vice president of compliance for Washington Trust Co., Westerly, R.I., and a former state drug agent. "But I have questions about how midsize banks like mine can comply operationally."
John Byrne, senior counsel at the American Bankers Association, said he expects banks will "ferociously" object to the proposal. "If you want to give community banks a break, this will eliminate that possibility."
However, he said, bankers are cheering a related rule that is to be included in today's Federal Register.
The Treasury Department is making final a rule that would free banks from filing reports on cash transactions with companies listed on major stock exchanges, other banks, and government agencies. Banks still will report suspicious transactions.
Under a similar interim rule in effect since May 1996, Bank of America reduced its currency transaction reports by 15%, Mr. Byrne said.
