The BSA Laundry Room
By: Erik Berggren, Senior Review Examiner
Recently I was asked a question that had not been presented directly to me before. Apparently, it is a relatively common question and turned out to be a good learning experience for most everyone involved. The learning experience is why this topic has been chosen as the BSA feature.
The scenario is one where the bank's BSA Officer was out of the bank for an extended period. A State of Kansas law enforcement official came to the bank requesting that seized drug money be counted and converted to a Cashier's Check made payable to the U.S. Marshall. The bank refused to count the money and issue a Cashier's Check because the law enforcement official would not provide his own social security number (SSN), as requested by the bank. The law enforcement official conveyed that he/they had conducted like transactions at other banks in Kansas without having to provide personal information of this nature.
Once this situation came to our attention, we placed a call to the Financial Crimes Enforcement Network's (FinCEN's) Regulatory Helpline (1-800-949-2732) and also conferred with our counterparts at FDIC since the bank involved was a state nonmember bank. Both of these sources directed us to the frequently asked questions (FAQs) on FinCEN's website at: http://www.fincen.gov/reg_faqs.html. The applicable FAQ reads as follows:
Question 21: When a federal, state or local government official, as part of his or her official duties, engages in a transaction in currency over $10,000, or purchases a monetary instrument for more than $3,000 in currency, as a non-accountholder, what kind of identifying information must a financial institution obtain?
Answer 21: Government officials sometimes need to conduct large currency transactions as part of their official duties. For example, a law enforcement official may wish to convert seized currency into monetary instruments for security reasons. In such cases, when a transaction in currency over $10,000 is conducted on behalf of a government agency, rather than on behalf of an individual, the financial institution involved in the transaction should file a one-time Designation of Exempt Person form (TD F 90-22.53), to exempt the government agency from the currency transaction reporting requirements and document the basis for its conclusion. Subsequent transactions on behalf of the same government agency would be similarly exempt from the currency reporting requirements. If a financial institution chooses to file a currency transaction report, it generally is required only to obtain, verify, and record identifying information pertaining to the agency for which the individual is working. Thus, any employee identification number, address, or other identifying information obtained should correspond to the government agency involved, and not the government official conducting the transaction.
Notwithstanding the above, a financial institution should still obtain and record the name of the government official conducting the transaction and take those steps that a reasonable and prudent bank would take to verify and document that the customer is a government official conducting business on behalf of a government agency. Regarding the purchase of a monetary instrument for more than $3,000 in currency, a financial institution should record the date of birth of the government official, in addition to his or her name.
Considering this information, the bank could have opted to immediately exempt the law enforcement agency by filing a Phase I Designation of Exempt Person (DEP) and been free of any requirements to file a Currency Transaction Report (CTR). Phase I DEPs do not need to meet the test of eight transactions per year. Furthermore, the bank would not have had to require that the law enforcement officer provide his personal SSN, which is a required piece of information when a CTR is filed. In fact, FinCEN would prefer that banks file Phase I DEPs so CTRs are not unnecessarily submitted and entered into its database, cluttering the system and perhaps distorting monitoring reports generated by FinCEN.
It should be noted, however, that a bank may choose to have an internal policy that requires information such as SSNs from all persons conducting reportable transactions, even from those that have been exempted. If that is the case, that policy would have to be enforced on all persons proposing to conduct reportable transactions, and those persons would have to decide whether they wanted to provide the information requested and continue with the reportable transaction or go elsewhere.
The end to this particular story is that the above information was shared with the bank official involved, which resulted in a relatively easy fix to the matter; the bank plans to file a Phase I DEP.
This is also an opportunity to remind you of the resources available to you should you be uncertain of the answers to BSA related situations you encounter. FinCEN's Regulatory Helpline is one resource (1-800-949-2732). Other resources are your applicable Federal regulatory agency and your one and only Office of the State Bank Commissioner. Please know that all are dedicated to giving you the fastest and most accurate response possible.
