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The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)announced today a final rule and a proposed regulation aimed at significantly reducing thenumber of reports required to be filed by banks for large currency transactions. These tworegulations reflect a major effort to re-engineer regulatory and reporting requirementsthat have been in place for over a quarter of a century. The two regulations announcedtoday concern the process by which banks may exempt retail and other businesses from therequirement to report currency transactions exceeding $10,000.
FinCEN has worked closely with the banking industry over the years to simplify andfacilitate numerous regulatory requirements. A remaining problem has been the exemptionsystem, which over time has become increasingly complicated and confusing. "FinCENhas worked closely with the American Bankers Association and other groups in the re-designof our regulatory programs," said Stanley E. Morris, Director of FinCEN. "Welook forward to continuing these discussions as we all work together to determine how bestto fight money laundering."
The final rule adopts, with some minor changes, the terms and conditions of an interimrule on exemptions which FinCEN published in April of last year. The notice of proposedrulemaking would further reform and simplify the current exemption system and Treasury isseeking public comment.
The information provided on large currency transactions, reported to Treasury on aCurrency Transaction Report (CTR), is vital to investigators. However, reportingrequirements have been criticized by banks because they mandated repetitive paperwork forroutine transactions of legitimate cash intensive businesses and governments.
"These reports play a key role in helping analysts and investigators follow themoney trail of criminals," said Morris. "By eliminating reports of little or nouse to law enforcement we will enable banks to concentrate resources where they will dothe most good - toward reporting suspicious activity to law enforcement."
The final rule creates a streamlined exemption procedure that eliminates from reportingall transactions in currency between banks and certain classes of exempt persons. It willmake final the interim rule that exempts banks from reporting transactions in currencyinvolving (1) other banks operating in the United States; (2) government departments andagencies, and other entities which exercise governmental authority; (3) corporationslisted on the major national stock exchanges; and (4) subsidiaries of such listedcorporations. The final rule reflects modifications that respond to comments that FinCENreceived on the interim rule.
"The changes adopted in the final rule are intended to further improve theexemption process," said Morris. "Our goal is to reduce the burden of currencytransaction reporting, require reporting only of information that is of value to lawenforcement and regulatory authorities and create an exemption system that iscost-effective and that works."
The proposed rule aims to expand the reach of the exemption process to all types oflarge and small retail, service and wholesale businesses. One example is franchises whohave a recurring legitimate need to deal in currency but are not listed on the nationalstock exchange. To be exempted under the proposal, a company must be a bank customer for12 months, frequently engage in currency transactions exceeding $10,000 and beincorporated and organized under the laws of the United States.
These additional categories cover businesses of all sizes that are not subject to thesorts of regulatory and marketplace oversight as are entities listed on national stockexchanges. As proposed, banks would be required to provide an annual report to theTreasury Department for those customers they wish to exempt. The report would requestidentifying information and a summary of currency activity for the exempt customer.
As is the case for companies covered in the final rule, all transactions - whether ornot they are in currency - must still be reported if the transaction appears suspicious.
FinCEN believes that these new exemption procedures will constitute a significantimprovement over the current system. For example, there would no longer be any cash limitsor "permitted ranges" for exempt transactions; any transaction in currency withan exempt person would be exempt from routine reporting. There also would no longer be arequirement for banks to obtain from their customers signed, exempt statements.
FinCEN anticipates that these proposed regulations, when they are both made effective,could exceed the 30 percent reduction in the number of currency transaction reportsrequired to be filed by banks as mandated by the Money Laundering Suppression Act of 1994.
The final and proposed rules are published in the Federal Register today.