Whether a Business that Cashes Checks Payable to Customers to Apply Proceeds to the Repayment of Customers’ Obligations is a Money Services Business

FinCEN Ruling 2002-1 – Guidance on Using “Gross Revenue” to Determine CTR

Exemption Eligibility

January 15, 2002

Dear [ ]:

This responds to your letter of September 26, 2001, on behalf of [ ] (the “Bank”), to the

Internal Revenue Service-Detroit Computing Center (IRS), regarding the requirement to

file Currency Transaction Reports (CTRs) in accordance with the Bank Secrecy Act

(BSA), 31 U.S.C. 5311 et seq., and its implementing regulations, 31 C.F.R. Part 103.

As you know, the matter was referred to the Financial Crimes Enforcement Network

(FinCEN) for disposition. The BSA regulations allow depository institutions to exempt

large cash transactions for certain customers from the requirements to file CTRs. The

categories of exempt persons and other requirements relevant to the proper administration

of the exemption rules are set forth at 31 C.F.R. § 103.22 (d). Determining if a business

is eligible for exemption from CTR reporting as a non-listed business depends, in part, on

whether the customer is primarily engaged in one or more of the ineligible business

activities listed in 31 C.F.R. § 103.22(d)(6)(viii). Non-listed type businesses primarily

engaged in certain ineligible business activities, such as gaming of any kind, are not

eligible for an exemption. However, if a business engages in multiple business activities,

such as sales of cigarettes and lottery tickets, it may be treated as an exempt, non-listed

business so long as no more than 50% of its gross revenues is derived from one or more

of the ineligible business activities listed in § 103.22 (d)(6)(viii).

You have asked whether, in determining if a business derives more than 50% of its gross

revenue from gaming, the bank should consider the amount of money that the business

takes in on behalf of the state lottery system, or the amount of money that the store

actually earns from such sales

ues is derived from one or more

of the ineligible business activities listed in § 103.22 (d)(6)(viii).

You have asked whether, in determining if a business derives more than 50% of its gross

revenue from gaming, the bank should consider the amount of money that the business

takes in on behalf of the state lottery system, or the amount of money that the store

actually earns from such sales. The term “gross revenue” in the CTR exemption

regulations is intended to encompass the amount of money that a business actually earns

from a particular activity, rather than the sales volume of such activity conducted by the

business.

Therefore, based on information provided in your letter, it appears that [ ]qualify for

exemption from CTR reporting and were properly exempted from March 31, 2000,

through September 13, 2001. Accordingly, FinCEN will not require backfiled CTRs for

the companies named above during this time period.

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In arriving at our decision to resolve this matter without backfiled CTRs, FinCEN relied

on the accuracy and completeness of the information provided by the Bank. Nothing

precludes FinCEN from seeking further action should any of this information prove

inaccurate or incomplete.

FinCEN considers BSA compliance by banks to be a critical part of the government’s

effort against money laundering and other financial crimes. BSA forms, including CTRs

and suspicious activity reports, must be filed in an accurate, timely manner. Furthermore,

while FinCEN encourages banks to adopt the exemption rules, as set forth in 31 C.F.R.

103.22(d), care should be taken to ensure such exemptions are implemented and

maintained in accordance with the BSA. This letter reminds the Bank that such

compliance can only be accomplished by way of a sound BSA compliance program with

appropriate internal controls, training and testing.

Should you have any questions, please contact [ ] [FinCEN’s Regulatory Helpline at

in 31 C.F.R.

103.22(d), care should be taken to ensure such exemptions are implemented and

maintained in accordance with the BSA. This letter reminds the Bank that such

compliance can only be accomplished by way of a sound BSA compliance program with

appropriate internal controls, training and testing.

Should you have any questions, please contact [ ] [FinCEN’s Regulatory Helpline at

(800) 949-2732.]

Sincerely,

//signed//

Christine E. Carnavos

Executive Associate Director

Office of Compliance and Regulatory Enforcement

cc:

[ ], Chief, Special Activities Section, FDIC

Compliance Review Group, IRS-DCC [ ]

Albert R. Zarate, Senior Regulatory Counsel, FinCEN

Dawn Adams, Regulatory Program Specialist, FinCEN

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