BSA/AML Manual

TRANSACTIONS OF EXEMPT PERSONS EXAMINATION AND TESTING PROCEDURES

Objective:  Assess the bank’s compliance with the BSA regulatory requirements for exemptions from the currency transaction reporting requirements.

1. Review the bank’s policies, procedures, and processes that address exempting customers from CTR filings. Determine whether the policies, procedures and processes provide steps for:

• Assuring that a person is an exempt person, including completing the required annual reviews of eligibility,
• Documenting the basis for conclusions regarding eligibility, and
• Documenting compliance with the regulation.

2. Select a sample of filed Designation of Exempt Person reports to determine whether:

• The reports are filed in accordance with FinCEN instructions within 30 days of the first reportable transaction that the bank sought to exempt.
• The customer is eligible for designation as exempt (see categories of Phase I exempt persons and Phase II exempt persons).
• The bank maintains documentation to support that designated non-listed businesses do not receive more than 50 percent of gross revenue from ineligible business activities.

3. Determine that the information supporting the eligibility of each exempt person that is a listed public company, a listed public company subsidiary, a non-listed business, or a payroll customer is reviewed by the bank at least once a year to determine whether the person remains eligible for an exemption. Determine that the bank appropriately documents the annual review and information used to confirm eligibility. 
4. Determine whether the bank’s internal controls are designed to assure ongoing compliance with CTR exemption requirements and are commensurate with the bank’s size or complexity and organizational structure.
5. On the basis of examination and testing procedures completed, form a conclusion about the adequacy of policies, procedures, and processes the bank has developed to meet BSA regulatory requirements associated with exemptions from currency transaction reporting.