Bank Secrecy Act: Increased Use of Exemption Provisions Could Reduce Currency Transaction Reporting While Maintaining Usefulness to Law Enforcement Efforts
Highlights
To aid law enforcement efforts against financial crimes, under the Bank Secrecy Act (BSA) depository institutions must file the Treasury Department's Financial Crimes Enforcement Network's (FinCEN) currency transaction report (CTR) form on their customers' cash transactions of more than $10,000. While FinCEN's regulations allow institutions to exempt certain customers, over 15 million CTRs were filed in 2006. Public Law 109-351 directed GAO to report on (1) the usefulness of CTRs to law enforcement; (2) depository institutions' costs of meeting CTR requirements; and (3) ways to encourage use of exemptions to avoid unnecessary CTRs. Among other things, GAO obtained data from FinCEN on CTRs and exemptions from 2004 to 2006, surveyed 115 state and local law enforcement agencies and 680 depository institutions, held structured interviews with officials of federal agencies and depository institutions, and reviewed relevant laws and regulations.
Recommendations
Recommendations for Executive Action
Agency Affected | Recommendation | Status |
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Department of the Treasury | To help depository institutions better understand the value of CTRs to law enforcement efforts, the Secretary of the Treasury should direct FinCEN to consider routinely providing summary information on the use of CTRs in law enforcement efforts, similar to that provided on the use of Suspicious Activity Reports. |
Closed – Implemented
FinCEN committed to continuing to publish case examples that illustrate the use of Currency Transaction Reports (CTR) in law enforcement efforts. On May 14, 2008, FinCEN launched a new Web site with informational content that was reorganized and supplemented to provide a more user-friendly, informative and educational communications tool. Many case examples of law enforcement successes facilitated by Bank Secrecy Act information, including CTRs, are more prominently displayed and more easily retrievable.
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Department of the Treasury | To encourage greater use of CTR exemption provisions and avoid the burden of filing CTRs that are likely to be of little or no value to law enforcement efforts, the Secretary of the Treasury should direct FinCEN to provide guidance for depository institutions and federal banking regulators on the documentation needed to demonstrate the portion of a business's gross revenue that is derived from activities ineligible for the exemption. |
Closed – Implemented
FinCEN surveyed federal banking agencies concerning what documentation is required to support the evaluation of a customer's gross annual revenues when determining a customer's eligibility for a Phase II exemption from currency transaction reporting requirements and collaborated with federal banking agencies on guidance regarding such documentation. On April 27, 2009, FinCEN issued FIN-2009-G001 "Guidance on Supporting Information Suitable for Determining the Portion of a Business Customer's Annual Gross Revenues that Is Derived from Activities Ineligible for Exemption from Currency Transaction Reporting Requirements."
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Department of the Treasury | To encourage greater use of CTR exemption provisions and avoid the burden of filing CTRs that are likely to be of little or no value to law enforcement efforts, the Secretary of the Treasury should direct FinCEN to remove the regulatory requirement that depository institutions biennially renew Phase II exemptions--seeking legislation to provide additional authority, if needed. |
Closed – Implemented
FinCEN issued a final rule, effective January 5, 2009, that eliminated the requirement that depository institutions biennially file a designation of exempt person for non-listed and payroll customers (Phase II exempt customers. In concert with this change, FinCEN discontinued the requirement that depository institutions notify FinCEN of any change in control of a Phase II customer. No additional legislation was needed to make this change.
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Department of the Treasury | To encourage greater use of CTR exemption provisions and avoid the burden of filing CTRs that are likely to be of little or no value to law enforcement efforts, the Secretary of the Treasury should direct FinCEN to remove the regulatory requirement that depository institutions file exemption forms, and annually review the supporting information, for banks; federal, state, and local governmental agencies; and entities exercising federal, state, and local governmental authority. |
Closed – Implemented
FinCEN issued a final rule, effective January 5, 2009, that removed the requirement that depository institutions file an initial designation of exempt person form for Phase I eligible customers that are depository institutions; federal, state, or local governments; or entities exercising governmental authority. FinCEN also removed the requirement that depository institutions conduct an annual review of the continued eligibility of those customers.
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Department of the Treasury | To encourage greater use of CTR exemption provisions and avoid the burden of filing CTRs that are likely to be of little or no value to law enforcement efforts, the Secretary of the Treasury should direct FinCEN to consider changing the regulatory provisions in order to permit depository institutions to exempt otherwise-eligible nonlisted customers who frequently engage in large cash transactions within a period of time shorter than 12 months. |
Closed – Implemented
FinCEN issued a final rule, effective January 5, 2009, that permits depository institutions to exempt an otherwise eligible Phase II (non-listed) customer after two months, or prior to the passing of two months' time if the institution conducts a risk-based analysis of the customer that allows the institution to form and document a reasonable belief that the customer has a legitimate business purpose for conducting frequent large cash transactions, is now appropriate.
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Department of the Treasury | To encourage greater use of CTR exemption provisions and avoid the burden of filing CTRs that are likely to be of little or no value to law enforcement efforts, the Secretary of the Treasury should direct FinCEN to provide Web-based material to help train and guide staff of depository institutions in determining eligibility for exemptions. |
Closed – Implemented
On August 31, 2009, FinCEN issued "Guidance on Determining Eligibility for Exemption from Currency Transaction Reporting Requirements," to help banks determine whether a customer is eligible for exemption from currency transaction reporting requirements. This guidance provides information on exemption requirements in an understandable format and answers to commonly asked questions regarding the final rule that FinCEN issued in December 2008, which amended the currency transaction report (CTR) exemption requirements.
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