[Federal Register Volume 62, Number 229 (Friday, November 28, 1997)]
[Proposed Rules]
[Pages 63298-63299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31299]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA12


Financial Crimes Enforcement Network; Bank Secrecy Act 
Regulations; Exemptions From the Requirement to Report Transactions in 
Currency--Phase II; Extension of Comment Period; Request for Comments

AGENCY: Financial Crimes Enforcement Network, Treasury.

ACTION: Proposed regulations; extension of comment period; request for 
additional comments.

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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is 
extending the comment period for the proposed Bank Secrecy Act 
regulations relating to exemptions from the requirement to report 
transactions in currency, published on September 8, 1997. FinCEN is 
also soliciting comments regarding additional alternatives to the 
proposed requirement to estimate, and to file annual reports of, the 
aggregate currency deposits and withdrawals of certain customers, and 
regarding certain other matters.

DATES: Written comments on all aspects of the proposed rule are welcome 
and must be received on or before January 16, 1998.

ADDRESSES: Written comments should be submitted to: Office of Legal 
Counsel, Financial Crimes Enforcement Network, Department of the 
Treasury, 2070 Chain Bridge Road, Vienna, VA 22182, Attention: NPRM--
CTR Exemptions, Phase II. Comments may also be submitted by electronic 
mail to the following Internet address: 
``[email protected]'' with the caption in the body of the 
text, ``Attention: NPRM--CTR Exemptions, Phase II.'' For additional 
instructions on the submission of comments, see Supplementary 
Information under the heading ``Submission of Comments'' in the notice 
of proposed rulemaking on this topic.

FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director (703) 
905-3819, and Charles Klingman, Financial Institutions Policy 
Specialist, Office of Program Development FinCEN, (703) 905-3602; 
Stephen R. Kroll, Legal Counsel (703) 905-3534, Cynthia L. Clark, 
Acting Senior Counsel for Regulatory Affairs, (703) 905-3758, and 
Albert R. Zarate, Attorney-Advisor, Office of Legal Counsel, FinCEN, 
(703) 905-3807.

SUPPLEMENTARY INFORMATION: On September 8, 1997, FinCEN issued proposed 
regulations (62 FR 47156) to reform and simplify the process by which 
banks may exempt transactions of retail and other businesses from the 
requirement to report transactions in currency in excess of $10,000. As 
part of the simplified exemption system, the proposed regulations 
introduced two new classes of exempt persons: ``non-listed businesses'' 
and ``payroll customers.'' To prevent abuse of the new system, however, 
the proposed regulations would require a bank initially to estimate and 
then to report annually the aggregate currency deposits and withdrawals 
of any non-listed business or payroll customer that the bank exempted. 
In the proposal, FinCEN solicited comments on a number of matters, 
including alternative ways to counter potential abuse of the proposed 
system.
    FinCEN announced (62 FR 58909, October 31, 1997) that it would hold 
an

[[Page 63299]]

open working meeting on November 7, 1997, in Washington, D.C. to 
discuss the proposed regulations. At the meeting a number of commenters 
expressed their views and concerns concerning a number of matters, 
including most importantly the requirement in the proposed rule that 
banks estimate when granting an exemption, and file annual reports of, 
aggregate currency deposits and withdrawals by non-listed businesses 
and payroll customers. The decision to extend the comment period, and 
the request for additional comments contained in this document, result 
from that meeting.

Annual Reporting of Aggregate Currency Transactions

    In light of the comments made at the meeting, FinCEN does not 
believe that additional comments concerning the proposed estimation and 
aggregate currency reporting provision are necessary to complete the 
administrative record. Thus persons who attended the meeting, and other 
commenters, need not, if they do not wish to, file written comments 
regarding these provisions.
    The comments made at the open meeting did indicate, however, that 
it is important that alternatives to annual aggregate currency 
reporting be brought forward by interested parties. The preamble to the 
proposed rule specifically sought comment on several such possible 
alternatives. FinCEN is considering an additional alternative about 
which it would like to receive specific comments.
    The proposed alternative has two elements.
    1. The initial designation of a non-listed business or payroll 
customer as an ``exempt person'' under the rule would include a 
specific statement by the bank of the manner in which it applies its 
``know-your-customer'' standards to the tracking of currency deposits 
of commercial businesses. (The necessary statements could be made once 
for all exempt persons designated by a bank, as reflective of general 
bank policies.)
    2. The annual renewal of the status of a non-listed or payroll 
customer as an exempt person would include a certification by the bank. 
The bank would certify that during the preceding year there was no 
transaction involving any accounts of the person at the bank that would 
have required the bank to file a suspicious transaction report with 
respect to that person under 31 CFR 103.21 (that is, no transaction had 
occurred with respect to the account that the bank knew, suspected, or 
had reason to suspect was described in 31 CFR 103.21(a)(2)(i), (ii), or 
(iii).1
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    \1\ Under the proposed rule, non-listed businesses are 
businesses, otherwise eligible for exemption, whose stock is not 
listed on the nation's major securities exchanges. Payroll customers 
are businesses, otherwise eligible for exemption, that require cash 
withdrawals for payroll purposes.
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    FinCEN specifically invites comment on this alternative and on ways 
to allow such an alternative to operate with clear lines and without 
uncertainty or unnecessary burdens. It also again invites suggestion of 
any other alternatives to the proposed requirement that a bank 
initially estimate and subsequently report annually the aggregate 
currency deposits and withdrawals of a non-listed business or payroll 
customer that the bank wishes to exempt.

Uniform Treatment of Accounts of Exempt Persons

    FinCEN understands from comments at the November 7 meeting that 
banks are concerned about the use of the words ``shall'' in proposed 31 
CFR 103.22(d)(5)(v) and ``may'' in proposed 31 CFR 103.22(d)(5)(vi). As 
stated in the notice of proposed rulemaking, the intent of the proposed 
rule is to reform and simplify the process by which banks may exempt 
transactions from the reporting requirements. FinCEN believes that 
relief would be better provided by making both provisions optional 
rather than mandatory, so that institutions may, but need not, treat 
all accounts of a person at a single institution as exempt. FinCEN 
would appreciate comments on whether such a change would improve the 
operation of the proposed rule.

Commingling

    Other comments at the November 7 meeting indicated that banks were 
not exempting certain publicly traded businesses, such as grocery 
stores, under the first phase of exemptive relief, 31 CFR 103.22(h), 
because of the uncertainty about the treatment of currency deposits 
that commingle receipts from the sale of groceries with receipts from 
the sale of money services products such as money orders or money 
transmissions. FinCEN specifically solicited comments on this matter in 
the proposed rule, as it relates not only to the treatment of non-
listed companies but also listed companies.
    The extent to which segregation of funds is required in 
circumstances such as these is still under consideration, and FinCEN 
repeats here the request, made in the notice of proposed rulemaking, 
for comments on that issue. Any rule requiring a grocery store or 
similar entity that qualifies as a listed entity under 31 CFR 
103.22(h)(2)(iii), (iv), or (v) to segregate money from the sale of 
money services products in order to secure treatment as an ``exempt 
person'' for any deposit, will not become effective until the effective 
date of the proposed regulations, when issued in final form.

    Dated: November 24, 1997.
Stephen R. Kroll,
Federal Register Liaison Officer, Financial Crimes Enforcement Network.
[FR Doc. 97-31299 Filed 11-26-97; 8:45 am]
BILLING CODE 4820-03-P