NOTE: The examiner should determine if the bank has any
policy governing the sale of personal money orders or official
checks for cash, particularly large amounts of cash. If not,
the bank should be encouraged to adopt a policy to require
officer approval of official checks sold for cash for over
$10,000 to any individual customer. Purchasing official
checks is one popular form of "laundering" currency because,
in many instances, the actual purchaser of the checks is
difficult to identify. If the name of the purchaser is not
known, look for consecutive items issued to the same person
usually for even amounts, but not necessarily large amounts.
Endorsements should also be checked for similar or the same
names or to see if funds were deposited to the same account
at another bank. A random review of paid checks may be
sufficient to locate this type of activity. If such activity
is identified, see if proper reports were filed and contained
the information required in Part IV item 6 of Form 4789.
CENTRALIZED LIST OF EXEMPT CUSTOMERS
The regulation requires the bank to maintain a centralized list of exempt customers. There is nothing to prohibit the bank from keeping a list for each branch at the respective branches as long as one central "master" list is maintained.
Banks should be encouraged where practicable to designate one person, preferably an officer, to collect, review and file the reports for all offices and keep the copies in a central location. This will aid in internal control and auditing and will indicate to the reviewer which customer may be making large cash deposits at more than one office. This will also aid in the uniformity of the reports and the timely filing of the reports.
When citing an apparent violation, the following information
should be included:
Reference to the appropriate section of the regulation;
The nature of the apparent violation;
The date of the transaction;
The name of each party to the transaction;
The amount of the transaction; and
When discussing the findings of the examination with bank management, the examiner should be careful not to tell management or lead them to believe that if they correct the deficiences and violations they will eliminate the possiblility of civil money penalties for past violations. That decision is left to the Treasury Department.
Comments to the effect that violations appear to lack willful ness or criminality should not be included in the report. Conclusions such as this cannot always be supported without further investigation and should only be made by the Treasury Department. On the other hand, examiners should recommend civil money penalties where circumstances warrant. Recommendations for penalties must be supported by facts, not opinions.
NOTE: Whenever a bank has failed to file a required Currency
Transaction Report pursuant to Section 103.22(a) of the
Financial Recordkeeping and Reporting of Currency and Foreign
Transactions Regulations, the bank should be directed to promptly
file the report regardless of the time that may have elapsed since
the transaction. However, if in the examiner's judgment, the
customer for which the bank has failed to file a report could have
been legitimately exempted under guidelines in effect on the date
of the transaction, it may only be necessary to ask the bank to
amend its list of exempt customers.
NOTE: If repeat violations of the regulations are noted, the
report should include a brief explanation of the seriousness of
and reasons for continued noncompliance. For example, if random,
isolated violations resulted from minor deficiencies in the bank's
procedures, procedural changes should be recommended to insure
future compliance. However, where there appears to be a pattern
or practice resulting in numerous exceptions where these excep-
tions are not sufficiently explained and may reflect willful or
negligent disregard for the regulations, consideration should be
given to the inclusion of a recommendation for civil money
penalties in the report.
REPORTING OF INTERNATIONAL TRANSPORTATION
OF CURRENCY OR MONETARY INSTRUMENTS
Through observation or interview, the examiner should determine whether the bank has engaged in any transactions covered by Section 103.23 of the regulations. If so, the examiner should review copies of Form 4790 (Report of International Transportation of Currency or Monetary Instruments) filed by the bank since the last examination.
NOTE: A bank is not required to file a Form 4790 if it receives
currency or monetary instruments over the counter from a person
who may have transported same into the United States, or if the
bank delivers currency or monetary instruments over the counter
to a person who may transport same out of the United States. The
bank is not expected to inquire of the customer whether the funds
have been brought into or will be taken out of the country.
However, if a bank officer or a responsible employee of the bank
knows that a complete and truthful report has not been filed by
its customer, it must file a Form 4790. This is not a matter of
judgment but of personal knowledge.
Reports (Form 4790) should be reviewed for completeness and accuracy. Relevant bank records should be reviewed to insure that reports have been filed for all applicable transactions.
NOTE: A check payable to a named person is not a monetary instrument for the purpose of the Regulations unless it has been endorsed and is in bearer form at the time it is transported across the border.
RECORDKEEPING REQUIREMENTS
A copy of the bank's records retention schedule should be rereviewed to determine whether it meets at least the minimum requirements of Sections 103.33 and 103.34 of the regulations. Some of the items could be spot-checked to see if the schedule is being followed.
NOTE: Many banks use remote storage facilities for storage
of records. The companies which provide these services
generally maintain record retention schedules, and a copy should
be available in the bank.
A random sample of loans over $5,000, not secured by an interest in real property made since the last examination, should be reviewed for the following information:
Other deposit account records such as checks, deposit
slips, debit or credit slips, etc.
The examiner should ascertain whether or not the bank has
sufficient records to reconstruct demand deposit accounts
for the past two years in a reasonable period of time
(generally two weeks).
The examiner should obtain the bank's list of customers
from whom it has been unable to obtain taxpayer identi-
fication numbers. If the list appears unusually long, the
examiner should try to determine the reason and discuss
with bank management. Remember that the Regulation covers
all deposit accounts, not just savings and time deposits.
NOTE: The Regulations do not specifically require the
bank to maintain a current, up-to-date list but that it be
able to obtain one in a reasonable period of time
(generally two weeks).
weeks). If the list is not available, the
examiner should determine whether or not such a list can be
generated from computer coded or manually flagged infor-
mation. An item by item search of the files is not acceptable.
COMPLETION OF THE COMPLIANCE REPORT
FDIC Form 6500/54 is designed in a such manner that an affir-
mative answer will reflect compliance, a negative answer indicates
a deficiency or violation of the regulations. In scheduling
apparent violations, it is not necessary to quote the regulation
verbatim; however, the apparent violation should be clearly
identified and several examples should be listed in the report.
All apparent violations should be presented on FDIC Form 6500/58
under an appropriate heading.
FDIC Form 6601/23 should be appropriately headed and used to
summarize, in narrative form, the procedures used by the bank to
insure compliance with the Regulations as well as the steps
used by the examiner to determine the banks level of compliance.
The suggested format for presenting the information is as follows:
Describe the bank's training program and communication
system used to insure that all tellers and other relevant
personnel are made aware and periodically reminded of the
requirements of the Regulation.
Describe the internal audit function. Indicate whether or not
audit procedures cover:
1. Periodic spot checks of deposit, cash, or withdrawal
tickets or comparable documents in use at the bank;
2. periodic verification that a record of exemption is
maintained and that exemptions are reasonable and up-
to-date; and
periodic review of cash control records and tracing of any apparently large or unusual cash movements to or from a department or branch.
Indicate whether procedures are adequate to insure that all covered transactions are properly reported; and
Indicate the scope of the examination and the extent of any reviews conducted by the examiner.
The examiner should comment on any inadequacies detected in the bank's system for insuring compliance.
The examiner's comments should, if applicable, include the following:
the apparent reasons for any violations;
promises to correct violations and for future compliance made by management;
a reference to any similar violations at previous examinations; and
- an estimate of the extent of noncompliance.
Violations of the regulations should be promptly brought to
the attention of the bank's management and correction of the vio-
lations should be sought. Where the examiner is unable to obtain
a commitment for compliance; or where flagrant violations of the
currency transaction reporting requirements have occurred, the
examiner should immediately report the patter to his supervisor.
Currency Transaction Reports provide a vital source of information
to the law enforcement authorities and close attention to this
matter is essential.
Major deficiencies or noncompliance with the Treasury regu-
lations should be commented on in the transmittal letter. In all
cases where noncompliance is discovered but not corrected during
the examination, the transmittal letter should request a response
to the Regional Director by the bank's Board of Directors regard-
ing any remedial action taken or to be taken by management.
The staff of the Regional Office is responsible for insuring
that effective follow-up procedures are pursued in all cases
where noncompliance is indicated.
WILLFUL OR DELIBERATE NONCOMPLIANCE
In cases of willful or deliberate violations of Treasury regu-
lations or whenever the bank appears to be deliberately or will-
fully disregarding regulatory provisions in an attempt to
conceal or abet the violations of some other law or regulation
or to conceal a customer's transaction, the examiner should
prepare a letter report to the Director, Division of Bank
Supervision, Washington, D.C. 20429.
NOTE: It is important to be able to distinguish between will-
ful and deliberate violations resulting from a total disregard
for the regulations and willful and deliberate violations in
furtherance of the commission of violations of federal law or
as part of a pattern of illegal activity. Noncompliance due to
disregard for the regulations would likely trigger civil penalties
whereas noncompliance contributing to the furtherance of the
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