Risk Management Manual of Examination Policies - FDIC

BANK SECRECY ACT, ANTI-MONEY LAUNDERING,
AND OFFICE OF FOREIGN ASSETS CONTROL
also be incorporated or organized under U.S. laws and
be eligible to do business in the U.S. and may only be
exempted to the extent of its domestic operations.
• A “payroll customer,” which includes any other person
not covered under the “exempt person” definition that
operates a firm that regularly withdraws more than
$10,000 in order to pay its U.S. employees in
currency. “Payroll customers” must also be
incorporated and eligible to do business in the U.S.
“Payroll customers” may only be exempted on their
withdrawals for payroll purposes from existing
transaction accounts.
Commercial transaction accounts of sole proprietorships
can qualify for “non-listed business” or “payroll customer”
exemption.
Exemption of Franchisees
Franchisees of listed corporations (or of their subsidiaries)
are not included within the definition of an “exempt
person” under "Phase I" unless such franchisees are
independently exempt as listed corporations or listed
corporation subsidiaries. For example, a local corporation
that holds an ABC Corporation franchise is not a “Phase I”
“exempt person” simply because ABC Corporation is a
listed corporation; however, it is possible that the local
corporation may qualify for “Phase II” exemption as a
“non-listed business,” assuming it meets all other
exemption qualification requirements. An ABC
Corporation outlet owned by ABC Corporation directly, on
the other hand, would be a “Phase I” “exempt person”
because ABC Corporation's common stock is listed on the
New York Stock Exchange.
Ineligible Businesses
There are several higher-risk businesses that may not be
exempted from CTR filings. The nature of these
businesses increases the likelihood that they can be used to
facilitate money laundering and other illicit activities.
Ineligible businesses include:
• Non-bank financial institutions or agents thereof (this
definition includes telegraph companies, and money
services businesses [currency exchange, check casher,
or issuer of monetary instruments in an amount greater
than $1,000 to any person in one day]);
• Purchasers or sellers of motor vehicles, vessels,
aircraft, farm equipment, or mobile homes;
• Those engaged in the practice of law, medicine, or
accountancy;
• Investment advisors or investment bankers;
• Real estate brokerage, closing, or title insurance firms;
Section 8.1
• Pawn brokers;
• Businesses that charter ships, aircraft, or buses;
• Auction services;
• Entities involved in gaming of any kind (excluding
licensed para mutual betting at race tracks);
• Trade union activities; and
• Any other activities as specified by FinCEN.
Additional Qualification Criteria for
Phase II Exemptions
Both “non-listed businesses” and “payroll customers” must
meet the following additional criteria to be eligible for
“Phase II” exemption:
• The entity has maintained a transaction account with
the financial institution for at least twelve consecutive
months;
• The entity engages in frequent currency transactions
that exceed $10,000 (or in the case of a “payroll
customer,” regularly makes withdrawals of over
$10,000 to pay U.S. employees in currency); and
• The entity is incorporated or organized under the laws
of the U.S. or a state, or registered as, and eligible to
do business in the U.S. or state.
The financial institution may treat all of the customer’s
transaction accounts at that financial institution as a single
account to qualify for exemption. There may be
exceptions to this rule if certain accounts are exclusively
used for non-exempt portions of the business. (For
example, a small grocery with wire transfer services has a
separate account just for its wire business).
Accounts of multiple businesses owned by the same
individual(s) are generally not eligible to be treated as a
single account. However, it may be necessary to treat such
accounts as a single account if the financial institution has
evidence that the corporate veil has been pierced. Such
evidence may include, but is not limited to:
• Businesses are operated out of the same location
and/or utilize the same phone number;
• Businesses are operated by the same daily
management and/or board of directors;
• Cash deposits or other banking transactions are
completed by the same individual at the same time for
the different businesses;
• Funds are frequently intermingled between accounts or
there are unexplained transfers from one account to the
other; or
• Business activities of the entities cannot be
differentiated.
DSC Risk Management Manual of Examination Policies 8.1-3 Bank Secrecy Act (12-04)
Federal Deposit Insurance Corporation