Compliance Blog

Written by Bernadette Clair, Regulatory Compliance Counsel

On Monday, FinCEN issued a final rule that may ease the burden of filing CTRs on payroll customers.  The final rule amends regulations allowing depository institutions to exempt transactions of certain payroll customers from the requirement to report currency transactions in excess of $10,000.

Under the final rule, the provision dealing with exemptions for payroll customers has been amended to replace the term “regularly” with “frequently.” The term “regularly” was never formally defined as it applied to the payroll customer exemption, and FinCEN indicates that the lack of a specific definition may have prevented institutions from taking advantage of the exemption.  The change also brings the payroll customer exemption in line with the terminology used in the non-listed business exemption.

With the change, the payroll exemption provision will read as follows:

“(7) With respect solely to withdrawals for payroll purposes from existing exemptible accounts, any other person (for purposes of this section, a “payroll customer”) that:

(i) Maintains a transaction account, as defined in paragraph (e)(9) of this section, at the bank for at least two months, except as provided in paragraph (c)(2)(ii) of this section;

(ii) Operates a firm that frequently withdraws more than $10,000 in order to pay its United States employees in currency; and

(iii) Is incorporated or organized under the laws of the United States or a State, or is registered as and eligible to do business within the United States or a State.”  31 CFR 1020.315(b)(7) (emphasis added).

FinCEN states that its prior interpretation of the term “frequently” used in the non-listed business exemption to mean five or more times a year would equally apply to exemption determinations in the payroll customer context.  Assuming the other prerequisites are met, an institution could exempt the currency transactions of a payroll customer if the customer withdraws currency five or more times a year in order to pay its employees.

The final rule takes effect upon publication in the Federal Register.

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