Section 201.4

does management poriodically reinforce the importance of compliance?

76. Has installation, maintenance and operation of

security devices been in accordance with 12

CFR 21.3? 77. Do vaults, sates, ATM's, and night depositories

meet or exceed the minimum standards described in Appendix A of 12 CFR 21?

+ 31 CFR 103—Compliance Questionnaire X

78. Are forms 4789 and 4790 completed and sub

mitted within 15 days? 79. Has the bank established, in writing, formal op

erating procedures to ensure compliance with the regulation, or otherwise operated under standard nonwritten procedures if the volume of large currency transactions is not signifi

cant? 80. Do operating procedures set forth the reporting

requirements of the regulation and establish compliance guidelines for large cash transac

tions and exemptions granted to customers? 81. Does the record retention schedule, at a mini

mum, include the record retention requirements of the regulation and contain requirements for the maintenance of lists of exempt customers with retail affiliations and customers from whom taxpayer identification numbers have not

been obtained? 82. Has the bank established a program of em

International Division *83. Are foreign currency control ledgers and dollar

book value equivalents posted accurately? *84. Is each foreign currency revalued at least

monthly and are profit and loss entries passed

to the appropriate income accounts? *85. Are revaluation calculations, including the rates

used periodically, reviewed for accuracy by someone other than the foreign currency tell

ers? *86. Does the internal auditor periodically review for

accuracy revaluation calculations, including the verification of rates used and the resulting gen

eral ledger entries? Conclusion 87. 18 the foregoing intormation considered ade

quate as the basis for our evaluation of internal control in that there are no significant additional internal auditing procedures, accounting controlş, administrative controls, or other circumstances that impair any controls or mitigate any weaknesses indicated above (explain negative answers briefly, and indicate conclusions as to their effect on specific examination or verifica

tion procedures)? 88. Based on a composite evaluation (as evi

denced by answers to the foregoing questions). intemal control is considered

(good, medium or bad). A separate evaluation should be made for each area, i.e., cash on hand, cash items, etc.

Comptroller's Handbook for National Bank Examinars

August 1991

Section 201.5

Cash 1. Immediately upon arrival at the bank, determine

the location of all cash, cash items, securities,

and nonledger items to be controlled. 2. Establish control over all necessary items

(consider the use of seals) and, using appropriate sampling techniques, select funds to be counted and assign personnel to the various funds. There should be no movement of cash or securities into or out of the vault area unless such movement is controlled by an examiner. The examiner-in-charge is to be contacted im mediately it there are any movements which are not controlled. Also, all compartments in the vault should be sealed (including lockers reported to contain other than cash) until all items are counted and control is no longer necessary. (Note: Sealing of vaults containing other than cash is to be performed by examine

ers responsible for those areas.) 3. Inquire if the bank has incoming or outgoing

cash shipments and consider confirming such amounts. If bagged items are on hand, note contents without counting and control bags to armored car pick-up, etc., and confirm balances with the recipient on a test basis. This step applies to "Payroll Cash," "Change Fund Cash," "Mutilated Money · Fed Shipments," etc. Also examine, on a test basis, subsequent

payments for bagged cash. 4. Obtain a copy of the teller's proof sheets as of

the close of business the day of the examina.

tion and retain them for the working papers. 5. Count and agree cash (both U.S. currency and

er's initial on the working paper and release control over the fund. If a material difference is discovered by the examiner, the cash should be immediately recounted by the teller in the presence of the examiner. If the difference is not resolved, an officer should be called in to count the cash and both the officer and the teller should be required to sign the cash sheet

reflecting the actual amount of cash counted. 7. Review all after-hours items to ensure their va

lidity and trace the items to their final dispo

sition. 8. Detail all items on the cash sheet, other than

cash, found in the cash compartments even though they may not be required in the recon

ciliation process. 9. Prepare a listing of proof sheets and agree or

reconcile the total to the bank's daily statement and to the general ledger as of the examination date. (Note: The bank's daily cash form may be

appropriate for this purpose.) 10. Review the teller's proof sheets for the day of

the cash count and ascertain that all: fund balances are reasonable in relation to operating requirements. Note any fund balances in excess of reasonable amounts in the working papers for subsequent discussion with an appro

priate bank official. 11. For each foreign currency held, verity approxi

mate U.S. dollar carrying values by obtaining current bid bank note rates for the foreign currencies on hand. Using those rates, convert each foreign currency into U.S. dollar equivalents. The resulting U.S. dollar values should be verified with the amount shown on the bank's general ledger for reasonableness. The rates at which the bank buys and sells foreign currency will not exactly match the rates used by the examiner because of the different day's rates, shipping charges, insurance, and other

costs. 12. Check the accuracy of foreign currency revalu

ations and that resulting profit or losses are properly posted to appropriate income accounts. (Foreign cash may be revalued along with other foreign currency ledger and future

.

Section 201.5

.

exchange contracts by the bank's accounting/

auditing department). 31 CFR 103—Compliance Procedures 1. Submit the Currency Distribution and Cash

Control Center Letter and the Currency Shipment/Distribution Report to the officer in charge of the Center.

If branches ship directly to a Federal Reserve bank or a correspondent institution, submit a copy of the Currency Distribution and Cash Control Center Letter to every

such branch. 2. Check the records maintained at the Currency

Distribution/Cash Control Center or the branch to ensure that the intormation in those records agrees with that provided by the officer in

charge.
3. Send a Branch Office Letter to every branch.
4. In reviewing the previous information, use the

following criteria to select branches for on-site
review:
a. Branch requests for large denomination cur-

rency represent the most significant portion

of the branch currency requirements. b. Branch requests for large denomination cur

bank's internal procedures. For example, if it is the bank's practice to direct all large currency transactions to specific tellers, concentrate on

the work of those tellers. 6. Obtain, for selected tellers, completed cash

proof sheets for as many consecutive dates as are practical. From a day-to-day comparison of total $50 and $100 bills, determine specific tellers who experienced a significant ($10,000) fall-off in those denominations that is not supported by their transactions. Those incidents should be reported to the examiner in charge

as possible evidence of currency washing. 7. Determine compliance procedures of those

tellers selected above by:
a. Obtaining and reviewing their documentation

for the selected dates.
b. Noting any cash-in or cash-out transactions

of more than $10,000. c. When such transactions are discovered, de

termining the type of transaction and if it was reported. Transactions with non-exempt customers which were not reported should be researched to ascertain if they are truly sub

ject to the regulation. d. Reviewing consecutive transactions which

total in excess of $10,000 to ascertain if they

were made by or for one depositor. e. Checking the following transactions:

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.
• Cash deposits — Any transaction involving

the receipt of more than $10,000 cash.
Savings withdrawal Cash withdrawals of
more than $10,000.
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 the same customer.

Comptroller's Handbook for National Bank Examiners

August 1981

Section 201.5

Savings bonds sold or cashed - Transactions involving more than $10,000 cash. • Official checks cashed Cash-outs of

more than $10,000. • Loans – Note teller receipt or pay-out of

more than $10,000 cash. • Securities sold or purchased - If the bank

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

cash. 8. Obtain and review the list of exempt customers.

Lists which appear inordinately long or contain names of customers the size or nature of whose business would not ordinarily merit ex. empt status should be discussed with management. If criticism is warranted, the matter

should be referred to the regional office. Cash Items 1. Prepare (or request bank employees to pre

pare under our supervision) lists of outstanding

items. 2. Agree totals to the daily statement controls and •' to the general ledger. 3. Using an appropriate sampling technique, se

lect items for review of supporting documenta

tion and request confirmation of payor. 4. Review all cash items selected to determine if

they are legitimate, that they are being processed on a current basis, and that they con

tain no officer, employee or director items. 5. Scrutinize any additional cash items which are

not segregated in a control account to ensure

their validity. 6. Investigate, through inquiry or other appropriate

means, any unusual, stale, or recurring items and satisły yourself as to their reasonableness or final disposition. All items not in the process

of collection should be transferred to an appro

priate non-cash suspense account. 7. Prepare list of items recommended for charge

off and ascertain that appropriate entries are

made on the bank's books. 8. Release control of the cash items. Clearings 1. Have the bank prepare a schedule of all clear

ings by bank name and cash letter total. Doter. mine that the combined total agrees to the

bank's final recap and to the general ledger. 2. Select a number of individual clearing amounts

for confirmation. 3. Prepare and mail a positive confirmation re