Compliance Blog

Written by Bernadette Clair, Regulatory Compliance Counsel

FinCEN’s been on a roll lately.  In the last few weeks, we’ve blogged about their ANPR on creating a customer due diligence rule, the upcoming requirement to e-file most BSA reports, and their advisory on SAR confidentiality.

FinCEN’s latest guidance, issued March 16, 2012, provides clarification on when currency transactions conducted by businesses with common ownership should be aggregated for CTR reporting purposes.

Generally speaking, a financial institution must aggregate multiple currency transactions if it knows that the transactions are by or on behalf of any person and result in either cash in or cash out totally more than $10,000 during any one business day.  But what if those multiple currency transactions occur on different business accounts at your credit union and those accounts share a common owner?

To aggregate or not to aggregate.  Whether you aggregate these transactions or not will depend on your determination of whether the accounts are operating independently of each other.

FinCEN indicates that separately incorporated entities are presumed to be independent persons, so currency transactions should not be automatically aggregated simply because multiple businesses are owned by the same person.  However, if the credit union has obtained information in the ordinary course of business that leads it to determine the businesses are not operated independently of each other, that’s a different story – and one in which currency transactions should be aggregated for CTR reporting purposes.

How do we make this determination?  There isn’t a bright-line test.  FinCEN indicates that a financial institution must use its knowledge of relevant facts and circumstances to make this determination.

The guidance does provide the following examples of activity that might lead you to determine accounts are not being operated independently.  Note:  This determination could include both business and personal accounts of the owner.

• The businesses are staffed by the same employees and are located at the same address;
• The bank accounts of one business are repeatedly used to pay the expenses of another business, or
• The business bank accounts are repeatedly used to pay the personal expenses of the owner.

To see how this might work in practice, the guidance provides the following scenario:

“For example, a bank knows that Company A and Company B have the same owner, operate out of the same address, and continually comingle funds between their separate accounts. Because of this information, the bank has determined that Company A and Company B are not independent of each other. One day, an employee of Company A deposits $6,000 into the account of Company A. That same business day, an employee of Company B deposits $5,000 into the account of Company B. Because the bank has determined that the businesses are not independent of each other, the bank should file a CTR listing Company A and Company B in separate sections identifying the person(s) on whose behalf the transaction is conducted and listing a cash-in deposit of $11,000. The remaining sections of the CTR should be filled out according to the form instructions.”

Bottom Line.  Your credit union’s determination in these situations may be the difference between whether you aggregate certain currency transactions for CTR reporting or not.  So if this type of situation comes up in your shop, it’s probably a good idea to document your determination of whether the accounts are, or are not, being operated independently for CTR reporting purposes.