Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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5/9/2008 Following GAO Report, FinCEN Proposes Easing CTR Exemption Process

Banks do not need to file currency transaction reports on “exempt persons,” which include other banks, government agencies, entities established by governments, and exchange-listed companies and certain subsidiaries. Also exempt are certain non-exchange-listed businesses and payroll customers that maintain accounts at the bank, engage in frequent transactions, and meet certain other requirements. FinCEN has long complained that banks often ignore the exemption system, and a GAO report noted that in 2006 alone almost 87,000 CTRs were filed on depository institutions and 24,000 were filed on governmental entities, the easiest exemption categories. Hoping to encourage banks to exempt more customers, and thereby reduce CTR filings that are of little use to law enforcement agencies, FinCEN and Treasury are recommending removal of the regulatory requirement that banks file exemption forms for other banks, governmental agencies, and entities exercising governmental authority. The agencies are also recommending removing certain annual and biennial review requirements, though banks would be required to report changes in control of non-exchange listed and payroll customers. The proposed regulatory revisions will undoubtedly make exempting a bank’s eligible customers easier, but some will ask if the proposal goes far enough. Comments on the proposals are requested by June 23, 2008. The proposal will be discussed in a forthcoming Monitor.

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