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WASHINGTON-According to a new report to Congress by the Financial Crimes Enforcement Network (FinCEN), financial institutions are not taking full advantage of the exemptions for Currency Transaction Reports (CTRs) provided in the Money Laundering Suppression Act of 1994, amending the Bank Secrecy Act. The exemptions to CTRs include another depository institution, a government agency, government instrumentality, or publicly traded companies and certain subsidiaries. The reasons given by the 2,628 respondents, including 417 large credit unions (over $32 million in assets) and 219 small credit unions (under $32 million), included: * The fear of regulatory action if an exemption turns out to be wrong; * Difficulty in determining whether a customer is eligible for exemption; * The additional costs associated with due diligence; * Lack of staff time to review CTRs for possible exemptions; and * The transactions requiring CTR filings are too infrequent. CTRs filed annually are down from 13 million in FY2000 to 12.3 million through FY2002, but this number “is still extremely high,” the report said. Exemptions filed have been on the upswing with 118,678 filed in FY 2002, but represent only a small fraction of the total CTR filings. “Many financial institutions have taken advantage of exemptions for government entities, educational institutions and utilities, but financial institutions generally have not taken advantage of exemptions for large companies that either have a cash intensive business or are payroll customers. Some financial institutions are not taking advantage of the exemption process at all; for example, for small institutions that do not file many CTRs, exemptions do not appear to be cost effective,” FinCEN wrote in its report on behalf of the entire Treasury Department. FinCEN made the following recommendations to increase usage of the exemption: * FinCEN should work with federal regulators and banks to reduce fear of negative regulatory consequences from making incorrect exemptions and issue an advisory encouraging proper exemptions; * FinCEN, with the federal banking regulators, should draft a new exemption handbook making the system easier to understand; * FinCEN should revise the waiting period for non-publicly traded customers to allow use of a risk-based approach to determine exemptions; * FinCEN should simplify the exemption regulation and the biennial certification and monitoring system requirement for non-publicly traded customers; and * The exemption process should not be mandatory and no statutory changes are necessary. FinCEN should continue to improve the efficiency and effectiveness of the CTR reporting system and create an accurate measurement of its success. [email protected]

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