FinCEN Issues Exemption Form for Banks

The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)announced today that it has developed a "Designation of Exempt Persons"Form to help depository institutions use FinCEN’s new rules to reduce significantlythe burden of large currency transaction reporting. Banks, thrifts, and credit unions canuse the rules – and the Form – to eliminate the reporting obligation fortransactions by most business customers with routine needs for currency.

A series of amendments made to the Bank Secrecy Act’s currency transactionreporting rules in 1996 and 1998 have created a simplified procedure that banks can use tolimit the customers whose currency transactions they must continue to report. The rulesexempt from reporting transactions involving (1) other banks operating in the UnitedStates; (2) government departments and agencies, and other entities which exercisegovernmental authority; (3) companies listed on the major national stock exchanges; (4)subsidiaries of such listed companies; (5) smaller, non-listed companies, and (6)businesses that use cash simply for payroll purposes. Rules for the last two categories ofcustomers were issued in final form on September 21, 1998, and became effective on October21, 1998. The rules apply only to the reporting obligations of depository institutions anddo not affect other classes of financial institutions.

A crucial part of the new procedures requires depository institutions to inform theTreasury of each customer that they exempt. The new Form is to be used for that purpose,beginning on January 1, 1999. (Prior to that time, institutions were able to reporteligible exemptions under the new rules by writing "designation of exemptperson" in box 36 of the Currency Transaction Report Form (IRS Form 4789) itself.)The new Form also can be used by depository institutions to revoke or amend an existingexemption, and to renew biennially the exempt status of non-listed businesses and payrollcustomers, as required by the new procedures.

Depository institutions are permitted to adopt the new procedures as soon as they wish.In addition, any exemptions in place under the old system will be invalid starting July 1,2000. The Designation of Exempt Persons Form and instructions can be viewed and downloadedfrom FinCEN’s website under "BSA Forms" at www.fincen.gov.