The Financial Crimes Enforcement Network (“FinCEN”) released a final rule (“Final Rule”) easing certain currency transaction report (“CTR”) requirements for depository institutions. In general and to detect criminal activity, depository institutions and others are required to file CTRs to report transactions in currency exceeding $10,000. Existing CTR filing rules exempt from filing certain types of currency transactions posing a lower risk of criminal activity. The Final Rule seeks to amend the existing requirements to streamline the reporting process and lower the burden on depository institutions to obtain exemptions from filing requirements for certain types of transactions. The Final Rule was issued, in part, to respond to a General Accounting Office report issued in February 2008 which recommended that CTR requirements could be amended to ease the reporting burden while maintaining law enforcement efforts.
The Final Rule makes a number of changes to the CTR requirements. The principal revisions are as follows:
For customers that are other depository institutions, U.S. or state governments, or entities acting with governmental authority, depository institutions will no longer be required to review CTR exemptions annually or make a designation of exempt person filing.
Depository institutions will be able to designate an otherwise eligible non-listed company or a payroll customer after either two months time (the requirement was previously twelve months) or after conducting a risk-based analysis of the legitimacy of the customer’s transactions. The proposed rule, issued in April 2008, contained only the risk-based analysis exemption.
For exempting nonpublic businesses conducting “frequent” transactions, the threshold has been lowered from eight transactions per year to five.
FinCEN removed the existing requirement that depository institutions biennially renew a designation of exempt person filing for otherwise eligible Phase II customers, but retained a requirement to conduct an annual review of such customers. Phase II customers include “non-listed businesses” and “payroll customers” as those terms are defined in 31 CFR 103.22(d)(2).
The proposed rule would have required depository institutions to notify regulators when customers were no longer deemed subject to a CTR exemption, but this requirement was dropped from the Final Rule. The Final Rule becomes effective on January 5, 2009.