--If, however, it is determined that further work is warranted,
the examiner should implement Module II.

MODULE II

The purpose of this module is to conduct on-site examination of teller operations relative to Financial Recordkeeping and Reporting Regulations. This module sets out procedures and guidelines the examiner should use when conducting test checks for compliance with the regulations. Criteria for selection of branches for detailed review are listed along with general guidelines applicable to either multiple or single office financial institutions.

This phase of the examination should include a minimum of five (preferably ten or more) days of transactions and one to three branch offices. Branch examinations should encompass a review of the work of selected tellers within the days selected.

The selection of tellers should be governed by the bank's internal procedures. For example, if it is the bank's practice to direct all large currency transactions to specific tellers, the examiner may concentrate on the work of those tellers. In the absence of such procedures, or if the

procedures are not being followed, the work of all tellers should be reviewed.

1.

2.

A REVIEW OF CURRENCY DISTRIBUTION/CASH CONTROL CENTER AND BRANCH
OPERATIONS

a) Submit the Currency Distribution and Cash Control Center Letter
and its attached Currency Shipment/Distribution Report to the
Officer-in-Charge of the Center.

b) If branches ship directly to a Federal Reserve Bank or a correspondent
institution, then a copy of the letter and the currency shipment
report must be submitted to every branch that ships currency directly
to a Federal Reserve or correspondent institution.

c) Check the records maintained at the currency distribution/cash control
center or the branch to ensure that the information in those records
is compatible with information provided by the Officer-in-Charge and
the Guidelines outlined below. (See Section 2)

d) A Bank Office Letter should be personally addressed and sent to every branch.

GUIDELINES FOR SELECTION OF BRANCHES FOR ON-SITE REVIEW

a) In reviewing the information provided in the Currency Distribution Letter and Bank Office Letters, examiners should use the following criteria to select those branches for on-site review.

(1) Branch requests for large denomination currency represent
the most significant portions of their total currency
requirements;

3.

4.

(2) Branch requests for large denomination currency are
significantly greater than average branch requirements;

(3) Branch does not ship large denomination currency;

(4) Branch reports no exempt list;

(5) Branch manager would not sign the statement contained in the
Bank Office Letter;

(6) Branch is characterized by unusual cash transactions

with Cash Control Center, Federal Reserve Bank, or

correspondent institution.

b) In the absence of significant leads, consider selection of branches for on-site review by sampling on a random basis.

GENERAL GUIDELINES FOR ON-SITE REVIEW

a) When at the office location, the examiner is to review the work of
selected tellers within a specific time period. (See above criteria
for selection of tellers. Recommended time period: minimum five
days, preferably ten days.) The examiner should take into account the
time period allowed for filing Forms 4789 and 4790 in selecting the
time frame in which the examination will be conducted. For example,
if the date of examination is 12/31/80, the grace period for filing is
15 days, and the examiner is reviewing transactions for 2 weeks, or 14
days, then the examiner should review transactions at least 29 days
before 12/31/80.

b) Obtain, for selected tellers, completed cash proof sheets for as many consecutive dates as practical. From a day-to-day comparison of total $50 bills and $100 bills, determine specific tellers who experienced a significant ($10,000) fall-off in these denominations that is not supported by the tellers' transactions. Incidents of this type should be reported to management as possible incidents of currency washing.

REVIEW PROCEDURES FOR SELECTED TELLERS AND SELECTED DATES

a) Obtain and review tellers' documentation for the selected dates.

b) Note any cash-in or cash-out transactions of more than $10,000.

c) In instances where such transactions are discovered, determine the
type of transaction and if it was reported. Transactions with
non-exempt customers not reported should be researched to ascertain if
they are truly subject to the regulation.

d) Review consecutive transactions which total in excess of $10,000 to ascertain if made by or for one depositor.

.

e) The following transactions should be checked:

(1) Cashed checks items should be traced to ascertain if
they are a cash-out of more than $10,000 or part of a
split transaction. Split transactions which do not
involve a cash-out of more than $10,000 should be
eliminated.

(2) Cash deposits

any transaction involving the receipt of more than $10,000 cash.

5.

(4) Personal money orders or official checks sold
any
sale for more than $10,000 cash must be reported, even
to an exempt customer. Be aware of consecutive items
sold. A check of paid items could reveal that they
were sold to same customer.

(8) Securities sold or purchased

if institution acts as agent for an individual and the transaction involves more than $10,000 cash.

f) The examiner should obtain and review the list of exempt
customers. Lists which appear inordinately long or which
contain names of customers the size or nature of whose
business would not ordinarily merit exempt status should be
discussed with management of the institution under examina-
tion. If after discussion with management, the examiner
feels that criticism may still be warranted, the matter
should be referred to the regional office.

List exceptions for possible inclusion in the report of examination.

To facilitate our examination of compliance with Financial Recordkeeping and
Reporting Regulations under Public Law 91-508, please furnish the
examiner-in-charge with the information listed below.

Examiner

1) A copy of your list of customers who are considered to be exempt from the reporting requirements of the Regulations.

2) Describe how currency transactions over $10,000 for customers are recorded and reported by individual tellers at your office.

3) Describe the records used at your office to document, by denomination, currency transfers between tellers, including transfer from and to vault cash.

4) Name of person in your office who is responsible for filing Currency Transaction Reports (Form 4789).

5) Indicate where copies of all Currency Transaction Reports (Form 4789)
prepared by your office are maintained.

6) A list of all transactions for which Currency Transaction Reports (Form
4789) are due to be filed but have not yet been submitted by your
office.

7) If periodic reviews are conducted by office management of exempt
customers to ensure that their status has not changed under
Recordkeeping and Reporting Regulations, please make supporting
documentation available, including:

a) dates of last two reviews;

b) description of work reviewed;

c) names of individuals who conducted the review and their findings.

Currency Transaction Reports (Form 4789) have been completed for all required transactions. A centralized list of exempt customers is currently maintained.

In order to facilitate our review for compliance with Financial Recordkeeping and Reporting Regulations, please submit to the below-named examiner the following information. Supporting source records should be made available for review upon request.

Examiner

Please provide, according to the attached format, the following information for the period from inclusive.

to

1) For offices which ship and receive currency through a central currency
distribution.center within the institution, please provide:

a) A list of all currency shipments between the distribution center and
the Federal Reserve Bank of correspondent institution;

b) A list, by office, of all currency shipments between the distribution
center and offices;

c) A list of currency shipments between offices;

d) A list of offices which have shown a significant increase in their
use of large bills during the past twelve months, either as a portion
of their total shipment of currency or in comparison to other
offices.

2) For offices which transact (ship and/or receive currency) with the Federal Reserve Bank or correspondent institution, please provide:

a) A list of all currency transactions between the office and the
Federal Reserve Bank or correspondent institution;

b) A list of all currency transactions with other offices.

(Signed)

(Title and Position)