WASHINGTON — The Financial Crimes Enforcement Network is set to finalize a rule today designed to give bankers more leeway to decide when to file a currency transaction report.
The final rule, which was obtained by American Banker, makes it simpler for banks to obtain CTR exemptions, but falls short of satisfying some industry requests for even greater relief.
Still, Fincen Director Jim Freis said the changes will reduce the anti-money-laundering burden on banks while still providing law enforcement agencies with important data.
"We're taking advantage of good suggestions from the industry to make the rules more responsive to the ways they do business," Mr. Freis said in an interview Wednesday. "There were exemptions provided in the statute in our regulations, but what we at Fincen had seen was that the banking industry was not taking enough advantage of these exemptions."
Bankers have long complained that the cost of filing CTRs, which are required for any cash transaction of $10,000 or more, outweighs any law enforcement benefit.
Under existing rules, banks are allowed to exempt certain companies from CTR filing, but the industry has said the exemptions are too complicated and seldom used. Bankers filed 15.3 million CTRs in 2007 and requested only 60,064 exemptions.
The new rule is designed to make exemptions more useful and less burdensome. For example, it eliminates a requirement that bankers file documentation explaining a customer's eligibility for an exemption if the bank has already done so through other Bank Secrecy Act obligations, such as its customer identification program. Mr. Freis said this change was made as a direct response to industry complaints.
"One of the things we've changed in the final rule is to clarify and streamline the documentation requirements so it is lesser," he said.
The rule also eliminates a requirement that bankers annually review exemptions granted to other depository institutions or government agencies, and gives more latitude to exempt nonpublic business and payroll customers.
Under the existing system, banks could only exempt nonpublic businesses that conducted "frequent" transactions — eight cash withdrawals or deposits in a year. In the final rule, Fincen lowered that threshold to five.
Currently, banks must wait at least a year after nonpublic businesses and payroll customers open an account before obtaining an exemption. The rule as proposed last April would have allowed bankers to grant an exemption immediately if they determined the customer was a low money-laundering risk. Bankers, fearful regulators would scrutinize any decision, complained that granting a risk-based exemption opened up its own problems. In the final rule, Fincen — in addition to allowing an immediate risk-based exemption — also allows banks to grant customer exemptions through the regular process two months after an account is opened.
Fincen also agreed to drop a requirement in the proposal that banks notify regulators if they stop exempting a customer from CTR filings.
But Fincen did not give ground on larger complaints from the industry. For one, the rule still requires banks to review exemptions for public companies annually. Bankers argued that this unnecessarily complicated the process, but Fincen said confirming public companies each year was not onerous.
Bankers have also pushed for Fincen to go further and automatically allow a blanket exemption for all well-known business customers. Mr. Freis said a blanket exemption is unworkable but that the rule effectively enables banks to exempt so-called seasoned customers on a case-by-case basis.
"The notion of knowing your customer and then providing the exemption gets to the idea of the seasoned customer," he said.
