Financial Crimes Enforcement Network; Bank Secrecy Act Regulations; Exemptions From the Requirement to Report Transactions in CurrencyPhase II; Extension of Comment Period; Request for Comments

DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA12

Financial Crimes Enforcement Network; Bank Secrecy Act

Regulations; Exemptions From the Requirement to Report Transactions in

Currency--Phase II; Extension of Comment Period; Request for Comments

AGENCY: Financial Crimes Enforcement Network, Treasury.

ACTION: Proposed regulations; extension of comment period; request for

additional comments.

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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is

extending the comment period for the proposed Bank Secrecy Act

regulations relating to exemptions from the requirement to report

transactions in currency, published on September 8, 1997. FinCEN is

also soliciting comments regarding additional alternatives to the

proposed requirement to estimate, and to file annual reports of, the

aggregate currency deposits and withdrawals of certain customers, and

regarding certain other matters.

DATES: Written comments on all aspects of the proposed rule are welcome

and must be received on or before January 16, 1998.

ADDRESSES: Written comments should be submitted to: Office of Legal

Counsel, Financial Crimes Enforcement Network, Department of the

Treasury, 2070 Chain Bridge Road, Vienna, VA 22182, Attention: NPRM--

CTR Exemptions, Phase II. Comments may also be submitted by electronic

mail to the following Internet address:

``[email protected]'' with the caption in the body of the

text, ``Attention: NPRM--CTR Exemptions, Phase II.'' For additional

instructions on the submission of comments, see Supplementary

Information under the heading ``Submission of Comments'' in the notice

of proposed rulemaking on this topic.

FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director (703)

905-3819, and Charles Klingman, Financial Institutions Policy

Specialist, Office of Program Development FinCEN, (703) 905-3602;

Stephen R. Kroll, Legal Counsel (703) 905-3534, Cynthia L. Clark,

Acting Senior Counsel for Regulatory Affairs, (703) 905-3758, and

Albert R. Zarate, Attorney-Advisor, Office of Legal Counsel, FinCEN,

(703) 905-3807.

SUPPLEMENTARY INFORMATION: On September 8, 1997, FinCEN issued proposed

regulations (62 FR 47156) to reform and simplify the process by which

banks may exempt transactions of retail and other businesses from the

requirement to report transactions in currency in excess of $10,000. As

part of the simplified exemption system, the proposed regulations

introduced two new classes of exempt persons: ``non-listed businesses''

and ``payroll customers.'' To prevent abuse of the new system, however,

the proposed regulations would require a bank initially to estimate and

then to report annually the aggregate currency deposits and withdrawals

of any non-listed business or payroll customer that the bank exempted.

In the proposal, FinCEN solicited comments on a number of matters,

including alternative ways to counter potential abuse of the proposed

system.

FinCEN announced (62 FR 58909, October 31, 1997) that it would hold

an

[[Page 63299]]

open working meeting on November 7, 1997, in Washington, D.C. to

discuss the proposed regulations. At the meeting a number of commenters

expressed their views and concerns concerning a number of matters,

including most importantly the requirement in the proposed rule that

banks estimate when granting an exemption, and file annual reports of,

aggregate currency deposits and withdrawals by non-listed businesses

and payroll customers. The decision to extend the comment period, and

the request for additional comments contained in this document, result

from that meeting.

Annual Reporting of Aggregate Currency Transactions

In light of the comments made at the meeting, FinCEN does not

believe that additional comments concerning the proposed estimation and

aggregate currency reporting provision are necessary to complete the

administrative record. Thus persons who attended the meeting, and other

commenters, need not, if they do not wish to, file written comments

regarding these provisions.

The comments made at the open meeting did indicate, however, that

it is important that alternatives to annual aggregate currency

reporting be brought forward by interested parties. The preamble to the

proposed rule specifically sought comment on several such possible

alternatives. FinCEN is considering an additional alternative about

which it would like to receive specific comments.

The proposed alternative has two elements.

1. The initial designation of a non-listed business or payroll

customer as an ``exempt person'' under the rule would include a

specific statement by the bank of the manner in which it applies its

``know-your-customer'' standards to the tracking of currency deposits

of commercial businesses. (The necessary statements could be made once

for all exempt persons designated by a bank, as reflective of general

bank policies.)

2. The annual renewal of the status of a non-listed or payroll

customer as an exempt person would include a certification by the bank.

The bank would certify that during the preceding year there was no

transaction involving any accounts of the person at the bank that would

have required the bank to file a suspicious transaction report with

respect to that person under 31 CFR 103.21 (that is, no transaction had

occurred with respect to the account that the bank knew, suspected, or

had reason to suspect was described in 31 CFR 103.21(a)(2)(i), (ii), or

(iii).1

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\1\ Under the proposed rule, non-listed businesses are

businesses, otherwise eligible for exemption, whose stock is not

listed on the nation's major securities exchanges. Payroll customers

are businesses, otherwise eligible for exemption, that require cash

withdrawals for payroll purposes.

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FinCEN specifically invites comment on this alternative and on ways

to allow such an alternative to operate with clear lines and without

uncertainty or unnecessary burdens. It also again invites suggestion of

any other alternatives to the proposed requirement that a bank

initially estimate and subsequently report annually the aggregate

currency deposits and withdrawals of a non-listed business or payroll

customer that the bank wishes to exempt.

Uniform Treatment of Accounts of Exempt Persons

FinCEN understands from comments at the November 7 meeting that

banks are concerned about the use of the words ``shall'' in proposed 31

CFR 103.22(d)(5)(v) and ``may'' in proposed 31 CFR 103.22(d)(5)(vi). As

stated in the notice of proposed rulemaking, the intent of the proposed

rule is to reform and simplify the process by which banks may exempt

transactions from the reporting requirements. FinCEN believes that

relief would be better provided by making both provisions optional

rather than mandatory, so that institutions may, but need not, treat

all accounts of a person at a single institution as exempt. FinCEN

would appreciate comments on whether such a change would improve the

operation of the proposed rule.

Commingling

Other comments at the November 7 meeting indicated that banks were

not exempting certain publicly traded businesses, such as grocery

stores, under the first phase of exemptive relief, 31 CFR 103.22(h),

because of the uncertainty about the treatment of currency deposits

that commingle receipts from the sale of groceries with receipts from

the sale of money services products such as money orders or money

transmissions. FinCEN specifically solicited comments on this matter in

the proposed rule, as it relates not only to the treatment of non-

listed companies but also listed companies.

The extent to which segregation of funds is required in

circumstances such as these is still under consideration, and FinCEN

repeats here the request, made in the notice of proposed rulemaking,

for comments on that issue. Any rule requiring a grocery store or

similar entity that qualifies as a listed entity under 31 CFR

103.22(h)(2)(iii), (iv), or (v) to segregate money from the sale of

money services products in order to secure treatment as an ``exempt

person'' for any deposit, will not become effective until the effective

date of the proposed regulations, when issued in final form.

Dated: November 24, 1997.

Stephen R. Kroll,

Federal Register Liaison Officer, Financial Crimes Enforcement Network.

[FR Doc. 97-31299 Filed 11-26-97; 8:45 am]

BILLING CODE 4820-03-P