Sec. 366. Efficient Use of CTRs
In 1970, U.S. Congress established currency transaction reporting requirements via the BSA. However, though government agencies found the reports to be extremely useful in criminal, tax and regulatory investigations, it soon became apparent that the sheer volume of such reports was becoming overwhelming. Therefore, in 1986, Congress passed the Money Laundering Control Act (MLCA), which did two things: firstly, it made it easier to report this information (previously, tellers had to contact an agent directly, the Act allowed tellers to merely fill in a form and submit it to the agency); and secondly, it gave legal immunity to financial institutions that did report such transactions. The MLCA also made mandatory exceptions to certain reports that had little use to U.S. law enforcement agencies. In 2001, however, Congress found that some financial institutions were not utilizing the exemption system and, once again, the volume of reports was interfering with law enforcement. In fact, the number of Currency transaction reports (CTRs) filed on in the 2002 financial year was 12.3 million. Though this represented a decrease from the 13 million filed in the 2000 financial year, only 118,678 exemptions were made: a tiny fraction of the total amount of CTRs filed.
Congress ordered a study to be made to determine why the volume of CTRs were being made and how this problem could be alleviated. The study was completed in October 2002, and found that the most frequently cited reasons by survey respondents for not using the exemption system were:
- The fear of regulatory action if an exemption turns out to be wrong;
- Difficulty in determining whether a customer is eligible for exemption;
- The additional costs associated with due diligence;
- Lack of staff time to review CTRs for possible exemptions; and
- The transactions requiring CTR filings are too infrequent. According to the study:
- "This response reflects the fact that smaller depository institutions, which are less likely to conduct large cash transactions, constituted the majority of depository institutions in the survey, and, in fact, outnumber such large institutions."
Based on the findings, the Secretary offered the following recommendations for legislative and/or regulatory change:
- "FinCEN should work with the federal bank regulators, as well as banks, to reduce, as appropriate, fear of adverse regulatory consequences from making incorrect exemption determinations, including issuing an Advisory encouraging the use of the exemption process.
- "FinCEN, in conjunction with the federal bank regulators, should draft and disseminate a new exemption handbook with a view to making the exemption system easier for bank personnel to understand.
- "FinCEN should revise the waiting period requirement for non-listed customers to permit banks to use a risk-based approach in determining when to exempt a customer.
- "FinCEN should amend the exemption regulation to simplify and make less burdensome the biennial certification and monitoring system requirement for non-listed customers.
- "The exemption process should not be made mandatory, nor are any other statutory changes necessary at this time. FinCEN should continue to seek ways to improve the efficiency and efficacy of the CTR reporting system. It should also work toward achieving an accurate measurement of the success of the system. These steps will help achieve the goal of finding the optimal balance between the value of the BSA reporting system and database and the burdens imposed to create and maintain it."
Read more about this topic: USA PATRIOT Act, Title III, Subtitle B
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