On December 4, 2008, the Financial Crimes Enforcement Network (FinCEN) published a final rule that modifies the process by which depository institutions exempt certain customers from filing currency transaction reports (CTRs). Modification of the CTR exemption process, which is codified at 31 CFR § 103.22 (d), is part of FinCEN's continuing effort to improve the efficiency and effectiveness of its anti-money laundering and counter-terrorist financing policies.
The final rule, which will take effect 30 days after publication in the Federal Register, makes several changes to the current CTR exemption process, including the following:
- Depository institutions will no longer be required to review annually or make an initial designation of exempt person filing (FinCEN Form 110) for Phase I customers that are depository institutions, federal, state, or local governments, or entities exercising governmental authority.
- Depository institutions will be able to exempt an otherwise eligible non-listed business or payroll customer (i.e., Phase II customer) after either two months time (previously twelve months) or after conducting a risk-based analysis of the legitimacy of the customer's frequent transactions in currency.
- FinCEN's guidance on the definition of "frequent" transactions will be reduced to five transactions per year instead of the current eight transactions per year for purposes of determining a customer's eligibility for Phase II exemption.
- Depository institutions will no longer be required to biennially file a designation of exempt person for otherwise eligible Phase II customers, but an annual review of those customers must still be conducted.
- Depository institutions will no longer be required to record and report a change of control in a designated Phase II customer.
A copy of the final rule as submitted to the Federal Register is available at http://www.fincen.gov/statutes_regs/frn/pdf/frnCTRExemptions.pdf.