transaction which results in the transfer of funds, or of currency, other monetary instruments, checks, investment securities, or credit, of more than $10,000 to a person, account, or place outside the United States; and

A record of each advice, request, or instruction given to another financial institution or other person located within or without the United States regarding a transaction intended to result in the transfer of funds, or of currency, other monetary instruments, checks, investment securities, or credit, of more than $10,000 to a person, account or place outside the United States.

ADDITIONAL RECORDS TO BE MADE AND RETAINED BY BANKS

Section 103.34(a)(1) requires banks to obtain a social security number or taxpayer identification number for each deposit account opened after June 30, 1972 and each certificate of deposit sold or redeemed after May 31, 1978. The bank has 45 days to obtain the number but will not be held in violation of the regulations if it has made a reasonable effort to obtain the number and maintains a list of those customers names, addresses and account numbers from whom it has been unable to secure such identification numbers.

NOTE: A reasonable effort is considered to be at least one written follow-up request made within the 45 day period. Additionally, an opinion from the Corporation's Legal Division dated August 24, 1978 indicates that a bank is not required to maintain a current, up-to-date list of customers without taxpayer identification numbers if it has procedures to facilitate the creation of such a list in a reasonable time (about 2 weeks).

Section 103.34(b) generally requires banks to maintain records in either original form or on microfilm or other copy or reproduction of items needed to reconstruct demand deposit accounts and other receipts or remittances of funds through a bank. Refer to that section for more detailed information.

NATURE OF RECORDS AND RETENTION PERIOD

Records required to reconstruct a demand deposit account shall be retained for two years. All other records required by the regulations shall be retained for five years. Records should be accessible within a reasonable period of time (generally two weeks).

Module I-1

MODULE I

At the beginning of the examination, the examiner should meet with a senior bank officer and/or the compliance officer to

discuss the purpose of the examination and briefly outline the procedures which will be followed in the examination. The Module II-1 Checklist (Form FDIC 6500/54) and Bank Office Letter are to be distributed to a senior officer for completion and signature. The examiner should also distribute copies of the Currency Distribution Letter to each currency distribution center and Bank Office Letters to branch managers. Any large or unusual cash flows reported on the Currency Distribution Letter should be investigated to determine the source. Any exceptions on the Bank Office Letters should be discussed with senior bank management. The completed letters are to be retained in the workpapers.

EXEMPT CUSTOMERS

Module I-3

Module 1-4

The Examiner should obtain and retain in the workpapers for
future reference a copy of the bank's exempt customer list.
A review of any changes in the list dictated by direct
correspondence between the bank and the Treasury Department might
help to assess the reasonability of exemptions.

NOTE: The granting of exempt status to customers is a manage-
ment decision as long as those customers fit the criteria set
forth in Section 103.22(b). To comply with the regulations,
the bank must research and analyze each account to some extent
in order to justify an exemption and to set a dollar limit for
the deposits and withdrawals exempted. A dollar limit of $10,000
is meaningless since the transactions under that amount are not
reportable anyway. Any questionable exemptions should be dis-
cussed with bank management.

CURRENCY TRANSACTION REPORTS

When reviewing Forms 4789 (Currency Transaction Reports) that
the bank has filed since the last examination, deficiencies
should be noted and copies of deficient reports retained in
the workpapers. If any patterns are indicated, such as a large
number of forms filed for the same customer, the examiner should
retain copies of these forms and cross-check them to the
customer's account or to official checks to see that reports
have been filed for all covered transactions involving that
customer.

Module I-2, Policies and procedures should cover employee training and 1-5 should fix responsibility for collecting, reviewing, and filing the reports. The guidelines should also include a provision for periodic management review of the list of exempt customers to insure that the information on the list is up-to-date.

Module I-6

Module I-7

Periodic review is necessary because of the opening and closing of accounts and possible changes in a customer's needs. For example, a dollar limit on cash deposits of $15,000 set when the original exemption was granted may not be sufficient to meet the customer's needs a year later. If the dollar limits are not adjusted to reflect actual currency volume, the bank would be required to file reports for cash deposits over $15,000 for that

customer.

INTERNAL AUDIT COVERAGE

An effective internal audit program might include:

Periodic checks of cash-in and cash-out entries and the matching of those entries to offsetting documents to determine whether the transactions are reportable.

Review of large balance change reports (if used by the bank) and subsequent follow-up of any suspect transactions to determine whether any are reportable.

Review of cash control records to identify any large or unusual movements of cash between tellers, between offices, between the vault and tellers, and shipments into or out of the bank. Large or unusual movements should be traced to see if reportable transactions have been handled properly.

NOTE: Banks should be encouraged to adopt procedures for the documentation of transfers of cash between tellers. From an internal control standpoint, tellers should be prohibited from trading or exchanging cash among themselves unless transfers are properly documented.

Periodic review of selected teller tapes to identify large
cash transactions and determine the transactions which
should have been reported; then see that appropriate re-
ports were completed and filed.

Periodic review of the bank's list of exempt customers to
see that all required information has been provided and also
to test the eligibility of the exemptions which have been
granted.

Periodic quizzing of appropriate employees to insure that
they are aware of the reporting requirements of the regula-
tions.

The most recent internal audit report should be reviewed and exceptions traced to see if corrective measures have been taken. The examiner should review the audit workpapers to see that procedures are documented.

If the bank does not have an internal audit function, the examiner should determine what procedures the bank uses to insure compliance with the reporting requirements of the Regulation.

Module I-8

At this point, if the examiner is reasonably satisfied that the bank employs adequate procedures to assure compliance with the reporting requirements and is judged to be in substantial compliance with the regulations, the examination may be terminated. The reasons for concluding the examination

after completion of Module I are to be fully documented in the workpapers and capsulized on a blank report page following FDIC Form 6500/54.

If after completing Module I the examiner cannot conclude that the bank is in substantial compliance with the regulations, Module II should be implemented.

MODULE II

The examiner should review cash control records for the last
six months and note any significant increases in cash shipped
or received by the bank. The examiner should look for any
pattern in cash receipts or shipments. For instance, a con-
sistent pattern of shipping small bills and receiving large
bills might indicate that the bank is involved in exchanging
currency or "laundering" of currency. The examiner should
compare the current year's activity with a comparable period
from prior years to see if there are any significant differences
and determine the reasons for same.

SELECTING TELLERS.

Module II-3 Teller proof sheets should be obtained for a two-week period, keeping in mind that the bank has 15 days in which to file Currency Transaction Reports. The test period should end at least 15 days prior to the date of examination. Teller selection should be based on the bank's internal policies or procedures. If it is the bank's policy to direct large currency transactions to a specific teller or tellers, then it will be necessary to review the work of only those tellers. If the bank has no such policy or there is evidence of circumvention of the policy, then it will usually be necessary to review the work of all tellers. In multi-office systems, one to three branches should be included in the review.

Module II-2

SELECTING BRANCHES

In selecting branch offices for sampling, offices with the
largest flow of cash, those that never request large denomination
currency, or offices with no exempt customers might be
appropriate selections. If none of these indicators is pre-
sent, random sampling may be used.

NOTE:

The examiner should exercise some judgment in the review of teller work when it is required that all tellers must be included in the review. For example, if a teller's total

cash-ins or total cash-outs for a given day were $25,000 or
less; it would be logical to assume that there were few, if
any, cash transactions over $10,000 for that day. Therefore,
there would be no need to review that teller's tapes for that
day. Some work can also be eliminated if transfers between
tellers and the vault can be identified and eliminated from
the total cash-ins and total cash-outs for each teller. Since
many tellers' machines record the account number with each trans-
action, the account number should be compared with those on the
list of exempt customers and those transactions should be
eliminated, provided the cash portion of the transaction falls
within the dollar limit assigned by the bank for that customer.
Any cash transaction over the established dollar limit is report-
able. It is important to note that the exemptions cover only
deposits and withdrawals. Any other cash transaction over
$10,000, even by an exempt customer, must be reported. Any
suspect transactions should be traced to the offsetting entries to
determine whether or not the transactions should have been
reported.

NOTE: Before researching the identified transactions, the examiner should check to see if corresponding Forms 4789 were filed for those transactions. If so, there will be no need to do further research on those items.

UNUSUAL TRANSACTIONS

Module II-3 While reviewing teller work, the examiner should look for any significant decrease in large bills ($50 and $100) which is not supported by teller transactions. If any such situations are noted, they should be reported to management. Many banks do not document exchanges of currency. They should be encouraged to do so.

Module II-4
RD-222-80
(12-31-80)

Consecutive transactions involving cash in excess of $10,000
should be reviewed to determine if made by or for one deposi-
tor. Suspect transactions can be pursued further.
The following transactions should be checked:

Cashed checks pay particular attention to multiple items
cashed by the same person;

Cash deposits;

Savings withdrawals and certificate of deposit redemptions;
Personal money orders or official checks sold;

Official checks sold or cashed look for consecutive items.
Traveler's checks sold or cashed.

Loan payments or loan proceeds paid in cash.

Securities sold or purchased for cash if the bank acts

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