The Confusion of CTR Exemptions
Many institutions that handle large sums of money cause a good deal of problems for those who are required to file CTR – Currency Transaction Report. The idea is that these institutions handle so many large transactions that it makes sense for both the Treasury and the reporting financial institution to petition some of their clients for the exemption. It makes sense for the Treasury to eliminate consistent large submissions that cause “noise” in their CTR data sets. It also makes sense for the institution to petition for the exemption since it cuts their costs.
However – all this does is exempt them from filing the CTRs. That is it. It does not exempt anyone from the AML and OFAC requirements.
In a recent examination of a few bank we noticed that they had different Title Companies as clients. Very reasonable the title company’s transactions were exempt from the CTR requirements. As the accounts were designated “Exempt” uniformly the compliance people in each of these banks did not monitor the accounts for AML purposes or for OFAC matters – thus AML and OFAC compliance on these accounts was ZERO.
The title companies were getting in large sums of money, hundreds of millions of dollars every month from overseas. We went to speak to the title companies on their AML and OFAC compliance. The AML compliance was horrid. In short the Title company’s general responses were – “We aske to see a source of funds and ask for a description from the buyer – if it looks good we put the documents provided in the file.” The rest of the Q and A is funny – in a dark way…
Q. Did you ever check the country of origin to see if the documents are genuine?
A. Why would we, we don’t speak Spanish or Russia or Arabic. ( Sub text they have documents but cannot read them).
Q. Have you ever refused a transaction based upon failing your AML requirement?
A. No – sometimes they do not seem to understand and the escrow does not close and we require them to give us directions on refunding the money. Sometimes they just come a pick up the refund check. (The funds are not sent back to the account of origin.)
Q, Do you scrub any of the buyers or sellers and account name origins against any of the Prohibited Parties Lists.
A. The banks do that, it part of what we pay them for.
This is amalgamation of Q & A is to show you – there is a huge gap in the system that good intentions and economic pressure have forced an overlook.
I can also assure many of you that OFAC and FinCEN are increasingly aware of this and one of the first questions they will ask when visiting is… “May I see your list of the CTR Exempt Institutions?
OFAC is also hiring many, many new investigators and they are not looking at banks, they are looking at Title Companies, Broker Dealers and Shippers.
A word from the wise, be careful be very careful. Mind your AML and OFAC’s
Link to FinCEN – Guidance on Determining Eligibility for Exemption from Currency Transaction Reporting Requirements