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Federal R eserve Bank
OF DALLAS
W ILLIAM
H. W ALLACE
FIRST VIC E PR ES ID EN T
AND CH IE F O PER ATING O FFIC ER
October 10, 1990
DALLAS, TEXAS 7 5 2 2 2
Circular 90-72
TO:
The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Proposed Bank Secrecy Act Amendments Regarding
Aggregation of Currency Transactions and Magnetic Media
Reporting of Currency Transaction Reports
DETAILS
The Department of the Treasury has announced proposed amendments to
the Bank Secrecy Act that would require mandatory aggregation of currency
transactions and mandatory magnetic media reporting of Currency Transaction
Reports for certain financial institutions. The amendments proposed by the
Department of the Treasury were published in the Federal Register on
September 6, 1990.
Specifically, financial institutions with deposit assets over $100
million would be required to put into place systems and procedures to track
and capture multiple currency transactions, by or on behalf of the same
account holder, that exceed $10,000 during any one business day. Additionally,
financial institutions that file more than 1,000 Currency Transaction Reports
during a calendar year would be required to file the reports by means of
magnetic media.
Comments on these proposed amendments to the Bank Secrecy Act should
be forwarded to:
Amy G. Rudnick, Director
Office of Financial Enforcement
Office of the Assistant Secretary
(Enforcement)
Department of the Treasury
Room 4320
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Comments are due by December 5, 1990.
For additional copies of any circular, please contact the Public Affairs Department at (214) 651-6289. Bankers and others are encouraged to use the following
toll-free number in contacting the Federal Reserve Bank of Dallas: (800) 333-4460.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
- 2 -
ATTACHMENT
A copy of the proposed amendments, as published in the Federal
Register on September 6, 1990, is attached.
MORE INFORMATION
For further information regarding the proposed amendments, please
contact Julie Stanton, Supervisory Bank Secrecy Act Specialist, Office of
Financial Enforcement, Department of the Treasury, at the above address or by
telephone at (202) 566-8022. For additional copies of this circular, please
contact the Public Affairs Department at (214) 651-6289.
Sincerely yours,
Federal Register / Vol. 55, No. 173 / Thursday, September 6, 1990 / Proposed Rules
DEPARTMENT OF THE TREASURY
31 CFR Part 103
Mandatory Aggregation of Currency
Transactions for Certain Financial
Institutions and Mandatory Magnetic
Media Reporting of Currency
Transaction Reports
a g e n c y : Departmental Offices,
Treasury.
ACTION: Notice of proposed rulemaking.
s u m m a r y : The Department of the
Treasury is issuing this Notice of
Proposed Rulemaking to solicit
comments on two related proposed
regulations. The first proposed
regulation would require: (1) That banks
with deposits of over $100 million be
required to maintain systems to
aggregate currency transactions that, at
a minimum, are conducted by or on
behalf of accountholders at the bank
and that affect an account during a
business day; and, (2) that currency
dealers and exchangers {including check
cashers) and transmitters of funds,
regardless of asset size, also be required
to maintain systems and procedures to
aggregate currency transactions that are
conducted by or on behalf of customers
at the financial institution during a
business day. The second proposed
regulation would require financial
institutions that file more than 1,000
Currency Transaction Reports a year to
file by use of magnetic media.
dates: Comments are due on December
5,1990.
ADDRESSES: Comments should be sent
to Amy G. Rudnick, Director, Office of
Financial Enforcement, Office of the
Assistant Secretary (Enforcement),
Department of the Treasury, Room 4320,
1500 Pennsylvania Avenue, NW„
Washington, DC 20220, (202) 566-8022.
FOR FURTHER INFORMATION CONTACT:
Julie Stanton, Supervisory Bank Secrecy
Act Specialist, Office of Financial
Enforcement, (202) 566-8022.
SUPPLEMENTARY INFORMATION: The
Bank Secrecy Act, Public Law No. 91508 (codified at 12 U.S.C. 1829b, 12
U.S.C. 1951, et seq., and 31 U.S.C. 53115326), authorizes the Secretary of the
Treasury to require financial institutions
to keep records and file reports that the
Secretary determines have a high degree
of usefulness in criminal, tax or
regulatory matters. Pursuant to 31 U.S.C.
5313 and the regulations thereunder,
financial institutions are required to file
reports on IRS Form 4789, the Currency
Transaction Report (“CTR”), that occur
on transactions in currency in excess of
$10,000 “by, through or to such financial
institution.” 31 CFR 103.22(a). In
addition, § 103.22(a)(1) provides that
multiple currency transactions shall be
treated as a single transaction if the
financial institution has knowledge that
they are “by or on behalf of any person
and result in either cash in or cash out
totaling more than $10,000 during any
one business day.” Financial institutions
at the present time are not required to
purchase new software or hardware in
order to aggregate currency
transactions. If they do not have an
automated or manual system for
aggregating transactions, they must rely
upon the personal knowledge of their
employees, officers, directors or
partners to determine if reportable
multiple transactions have taken place.
Mandatory Aggregation
As noted above, financial institutions
currently are not required to purchase
new computer software or hardware in
order to aggregate currency
transactions. However, if they have
computer systems which aggregate
transactions, they must use those
systems to comply with the Bank
Secrecy Act. Thus, while many financial
institutions have sophisticated computer
systems or less sophisticated manual
systems to enable them to track and
aggregate currency transactions during
the business day, others have opted
instead to rely on the personal
knowledge of the employees, officers,
directors or partners of the institution in
aggregating transactions.
While it is true that the number of
CTR’s filed rises each year, many
transactions continue to go unreported
by financial institutions because
automated or manual systems and
programs are not being used to track
and aggregate multiple currency
transactions. At some smaller financial
institutions within limited cash activity,
it is possible for the employees, officers,
directors or partners to notice when
multiple transactions are being
conducted by or on behalf of the same
person. That is not generally true with
the larger multi-branch financial
institutions which have large numbers of
customers coming into the financial
institution every day.
In addition, as many banks have
become increasingly more expert in
detecting possible structuring activity
directed against them, many people
seeking to evade the CTR reporting
36663
requirements have turned to non-bank
financial institutions, particularly
transmitters of funds and currency
dealers and exchangers (including check
cashers), to structure currency
transactions.
These institutions generally do not
have the Bank Secrecy Act training and
compliance programs which are found at
banks, generally are not subject to
regular Federal or State regulatory
oversight and examination, and may not
have employees, officers, partners or
directors who are as knowledgeable
about possible money laundering
schemes as employees, officers, partners
or directors at banks.
Therefore, Treasury is proposing that
certain financial institutions be required
to put into place systems and
procedures to capture multiple
transactions conducted by or on behalf
of the same person that exceed $10,000
during any one business day. Banks, as
defined in 31 CFR 103.11(b), with deposit
assets over $100 million would be
required to put into place systems and
procedures to track and capture, at a
minimum, multiple currency
transactions that exceed $10,000 by or
on behalf of the same accountholder
that affect an account during any one
business day [i.e., deposits and
withdrawals). In addition, all currency
dealers and exchangers (including check
cashers) and transmitters of funds,
regardless of asset size, also would be
required to put into place aggregation
systems and procedures that track and
capture currency transactions by or on
behalf of any one person during one
business day. These systems and
procedures may be manual or
computerized.
Treasury arrived at the $100 million
figure for banks by reviewing the
present top filers of CTR’s and these
filers’ asset sizes. It also considered the
fact that many $100 million banks have
multiple branches. After review of the
comments, the $100 million figure may
be adjusted, either up or down.
Treasury feels that a multi-branch
bank that does not have an aggregation
system in place should be required to
take sufficient steps to detect multiple
transactions and to prevent possible
structuring activity. Banks must take
measures to know their customer’s cash
transaction activity and protect
themselves from being used by
individuals who are able to structure
their transactions at one institution by
merely going from branch to branch.
Banks which do not have systems
linking their branches are unable to
determine if multiple transactions
totaling more than $10,000 have
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Federal Register / Vol. 55, No. 173 / Thursday, September 6, 1990 / Proposed Rules
occurred by or on behalf of the same
person on the same business day.
Commenters should note that, with
respect to banks only, this provision
does not require the aggregation of
transactions occurring at a bank by or
on behalf of non-accountholders, or by
or on behalf of accountholders that do
not affect an account (e.g., cash sale of a
traveler's check). However, Treasury
would encourage all banks to aggregate
such transactions if they have systems
that can do so.
In addition, non-bank financial
institutions such as transmitters of funds
and currency dealers and exchangers
which are especially susceptible to
possible abuse by money launderers
need to be particularly sensitive to that
possibility and take extra precautions to
prevent it. Thus, it is in their own
interest for these financial institutions to
have a system for determining whether
multiple currency transactions
exceeding $10,000 have taken place by
or on behalf of a person at their
institutions. Commenters should note
that this particular part of the proposal
applies only to limited categories, not
all, of the non-bank financial institutions
subject to the Bank Secrecy Act
regulations. For example, the proposal is
not applicable to securities brokers and
dealers, the Postal Service and casinos.
Finally, Treasury encourages all
financial institutions to have
aggregation systems and, to the extent
possible, to have systems to track ail
currency transactions by or on behalf of
all persons, whether or not they affect
one account or multiple accounts.
Mandatory Magnetic Media Filing
On March 30,1987, the Department of
the Treasury issued a Notice stating that
it was conducting a voluntary pilot
program for financial institutions which
preferred to file required CTR's on
magnetic media. 52 FR 10183. Prior to
that time, only paper reporting was
permitted by the Secretary. After
evaluating the pilot program, Treasury
made the voluntary magnetic media
filing program permanent. (52 FR 49567,
December 31,1987).
CTR’s are required to be filed at the
time and in the manner prescribed by
the Secretary. 31 U.S.C. 5313, 31 CFR
103.27. Since 1970, the number of CTR’s
being filed by financial institutions has
steadily increased, with approximately 6
million CTR’s filed in 1989. However, at
the present time, less than one percent
(1%) of all CTR’s are filed magnetically.
All information required on a CTR
form must be reported regardless of
whether a financial institution files
CTR's on paper or by magnetic media. In
addition, the magnetic tape must be
accompanied by a transmittal document
containing the signature of an official of
the financial institution attesting to the
completeness and accuracy of the
information transmitted. Both paper
CTR’s and CTR’s filed by magnetic
media are sent to the Internal Revenue
Service (“IRS") Detroit Computing
Center.
Treasury has studied this issue and
believes that mandatory magnetic media
filing would be of benefit to both
Treasury and the financial institutions.
The advantages to Treasury include the
receipt of more complete and accurate
information as well as more timely
access to, and thus quicker analysis of,
CTR information.
Rapid analysis of CTR information is
especially important in money
laundering, drug and other
investigations. In addition, IRS has
found that there is a 90 percent
reduction in original filing errors on
magnetically filed CTR’s. Moreover, IRS
estimates that the average time before a
magnetic document is available for use
by investigative personnel is reduced
from an average of about 45 days for a
paper CTR to approximately 18 days for
a magnetically filed CTR.
The benefits to the financial
community include: (1) Immediate
acknowledgment of receipt of the tape
by Detroit, thus helping the financial
institution to account for filings; (2)
reduced costs for preparation, correction
and storage of documents once a
financial institution’s program is in
operation; and (3) an ability to ensure
better compliance with the Bank
Secrecy Act regulations, thereby
preventing misuse of the financial
institutions by narcotics traffickers,
money launderers and other criminals.
Therefore, Treasury is proposing that
financial institutions filing over 1,000
CTR's a year be required to file by
magnetic media. After consideration of
the comments, the 1,000 number may be
lowered or increased. Magnetic media
could be accomplished by filing by
magnetic tape or diskettes. It is
estimated that the 1,000 CTR’s a year
threshold for mandatory filing would
affect approximately 740 financial
institutions, less than 2.65 percent of the
approximately 30,000 financial
institutions filing CTR's per year, yet
would represent approximately 57
percent of the annual volume of reports
received by Treasury. Of course, if
mandatory aggregation systems are
required for all currency dealers and
exchangers (including check cashers)
and transmitters of funds, and for banks
with more than $100 million in deposits,
the number of filers reaching the 1,000
CTR's treshhold probably will increase.
Treasury envisions that financial
institutions filing more than 1,000 CTR’s
a year for 1990 would be required to
begin filing magnetically by July 1,1991.
Those financial institutions that reach
the 1,000 CTR’s in a year subsequent to
1990 would have six months from the
beginning of the following year to begin
filing magnetically. For example, a
financial institution filing 950 CTR’s in
1990 and 1,150 CTR’s in 1991 would be
required to begin filing magnetically by
July 1,1992. Once a financial institution
is filing magnetically, it will continue to
do so, even if the financial institution’s
filings fall below 1,000 in a subsequent
year.
In addition, those filers with fewer
than 1,000 CTR annual filings could, and
are encouraged to, file magnetically, but
would not be required to do so. Filers
who would like more information about
the magnetic media filing program
should address inquiries to; Chief,
Currency and Banking Reports Division,
Internal Revenue Service Computing
Center, 1300 John Lodge Drive, Detroit,
MI 48226, Attention: Roger Hatcher, CTR
Magnetic Filing Coordinator.
Comments
Treasury welcomes comments on all
aspects of the proposal, but in particular
wishes to receive information and
comments on the following issues:
Aggregation Issues
(1) For those financial institutions not
currently possessing aggregation
systems, a comparison of the present
number of CTR’s the financial institution
files per year against the projected
number of CTR’s that would be filed if
an aggregation system, whether manual
or computerized, were put into place;
(2) The costs of putting in aggregation
systems, whether manual or
computerized, for those banks with over
$100 million in deposits; and
(3) The costs of putting in aggregation
systems, whether manual of
computerized, for money transmitters
and currency dealers.
Magnetic Media
The costs of mandatory magnetic
media filing for those financial
institutions not filing magnetically at the
present time.
In providing comments, it would be
helpful if the financial institution
commenting would indicate whether it
currently aggregates and to what extent
it uses the exemption provisions in 31
CFR 103.22. Estimation of costs should
be as specific as possible and should
include, not only the dollar amount for
filing magnetically, but the costs
Federal Register / Vol. 55, No. 173 / Thursday, September 6, 1990 / Proposed Rules______ 36665
involved in training, purchasing system
enhancements and other related costs
associated with mandatory aggregation
systems and/or mandatory magnetic
media filing that the financial institution
does not presently incur. Treasury also
welcomes any alternative that
commenters may wish to propose.
Submission of Comments
Treasury requests comments from all
interested persons concerning the
proposed amendments. All comments
received before the closing date will be
carefully considered. Oral comments
must be reduced to writing and
submitted to Treasury to receive
consideration. Comments received after
the closing date and too late for
consideration will be treated as possible
suggestions for future action* The
Treasury Department will not recognize
any materials or comments, including
the name of any person submitting
comments, as confidential. Any material
not intended to be disclosed to the
public should not be included in
comments. All comments submitted will
be available for public inspection during
the hours that the Treasury Library is
open to the public. The Treasury Library
is located in Room 5030,1500
Pennsylvania Ave., NW„ Washington,
DC 20220. Appointments must be made
to view the comments. Persons wishing
to view the comments submitted should
contact the Office of Financial
Enforcement at the number listed above.
Executive Order 12291
This proposed rule, if adopted as a
final rule, is not a major rule for
purposes of Executive Order 12291. It is
not anticipated to have an annual effect
on the economy of $100 million or more.
It will not result in a major increase in
costs or prices for consumers, individual
industries. Federal, state, or local
government agencies, or geographic
regions. It will not have any significant
adverse effects on competition,
employment, investment, productivity,
innovation, or on the ability of United
States-based enterprises to compete
with foreign-based enterprises in
domestic or foreign markets. A
Regulatory Impact Analysis therefore is
not required.
Regulatory Flexibility Act
It is hereby certified under section
605(b) of the Regulatory Flexibility Act,
5 U.S.C. 601, et seq., that this proposed
rule, if adopted, will not have a
significant economic impact on a
substantial number of small entities.
Paperwork Reduction Act
Drafting Information
The collections of information
contained in this Notice of Proposed
Rulemaking have been submitted to the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act of 1980 (44
U.S.C. 3504(h)). Comments on the
collections of information and the
burden estimate should be directed to
the Office of Financial Enforcement at
the address noted above or to the Office
of Management and Budget, Paperwork
Reduction Project (1505-0063),
Washington, DC 20503.
The collections of information in this
regulation are authorized by 31 U.S.C.
5313. This information is required by
Treasury, and will be used, to accurately
determine the number and amount of
large currency transactions taking place
by, through or to financial institutions.
The likely respondents are financial
institutions within the definition in 31
CFR 103.11(h).
The principal author of this document
is the Office of the Assistant General
Counsel (Enforcement). However,
personnel from other offices participated
in its development.
Mandatory Aggregation
It is estimated that the mandatory
aggregation proposal would increase the
present recordkeeping and reporting
burden for CTR’s by 17%.
Estimated number of financial
institutions that would be required to
put an aggregation system into place
under this proposal that do not
otherwise have one in place now: 15,000
(1,000 banks and 14,000 nonbank
financial institutions).
Estimated number of additional CTR's
that would be filed as a result of this
proposal: 1,000,000.
Magnetic Media
For those filers who would be
required to file CTR's by magnetic
media as opposed to paper, the
estimated reporting burden per form
would be 12 minutes. In contrast, the
total reporting burden per form for filing
by paper is 24 minutes.
It is also estimated that the average
annual recordkeeping burden per
respondent who would be required to
file by magnetic media under this
proposal as opposed to paper would
decrease by 50%.
Estimated number of respondents that
would be affected by this proposal: 740.
The total number of filers of CTR's, by
both paper and magnetic media, is
approximately 30,000.
The estimated annual number of
reports filed is 6.5 million. That number
does not necessarily change merely
because the filer is filling by magnetic
media as opposed to paper.
List of Subjects in 31 CFR Part M3
Authority delegations (Government
agencies), Banks and banking, Currency,
Foreign banking, Investigations, Law
enforcement, Reporting and
recordkeeping requirements. Taxes.
Proposed Amendment
For the reasons set forth below in the
preamble, it is proposed to amend 31
CFR part 103 as set forth below:
PART 103— FINANCIAL
RECORDKEEPING AND REPORTING
OF CURRENCY AND FOREIGN
TRANSACTIONS
1. The authority citation for part 103
would continue to read as follows:
Authority: Pub. L. 91-508, Title I, 84 Slat.
1114 (12 U.S.C. 1829b and 1951-1959): and the
Currency and Foreign Transactions Reporting
Act; Pub. L. 91-508, Titie II, 84 Stat. 1118, as
amended (31 U.S.C. 5311-5326).
2. It is proposed to amend § 103.22 by
adding a new paragraph (a)(5) to read as
follows:
§ 103.22
R e p o rts of cu rren cy tran sactio n s.
(a) * * *
(5) Each bank with depository assets
over $100 million shall have in place
systems and procedures that, at a
minimum, capture multiple currency
transactions that are by or on behalf of
the same person and result in cash-in to
or cash-out from an account totaling
more than $10,000 on the same business
day. In addition, each transmitter of
funds, and each currency dealer and
exchanger (including a check casher)
shall have in place systems and
procedures that capture multiple
currency transactions that result in
cash-in or cash-out totaling more than
$10,000 on the same business day by or
on behalf of the same person.
*
*
*
*
*
3. It is proposed to amend § 103.27 by
adding a new paragraph (a)(5) to read as
follows:
§ 103.27
Filing o f r e p o r t s .
(a) * * *
(5) Financial institutions that file more
than 1,000 reports required by § 103.22 in
1990 shall begin filing such reports by
magnetic media by July 1.1991.
Financial institutions that file more than
1,000 reports required by § 103.22 in a
subsequent calendar year shall, within
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Federal Register / Vol. 55, No. 173 / Thursday, September 6, 1990 / Proposed Rules
six months of the close of that calendar
year, begin to file such reports for all
subsequent calendar years by magnetic
media as specified by the Secretary.
*
*
*
*
*
Dated: August 23,1990.
John P. Simpson,
Acting Assistant Secretary, (Enforcement).
IFR Doc. 20933 Filed 9-5-90; 8:45 am]
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