Treasury Announces Changes In CTR Exemptions & Wire Transfer Regulations

by Sarah N. Welling

Wendell H. Ford Professor of Law, University of Kentucky. She writes widely on money laundering and serves on the Department of the Treasury's BSA Advisory Committee.

At the meeting of the Bank Secrecy Act Advisory Group on December 8, 1995, the Treasury department announced two major regulatory changes. The changes are in exemptions from Currency Transaction Report (CTR) filings and wire transfers.

Exemptions
Treasury plans to change exemptions from CTR filings dramatically. Governments and depository institutions will continue to be exempt from filing as they are now. The change is that private companies will be exempt if they are listed by one of the three national stock exchanges (NYSE, AMEX and NASDAQ). This exemption will apply as well to wholly-owned subsidiaries of listed companies. These companies will have to make a cursory one-time filing to trigger the exemption, but once that is done, the exemption is automatic and continues indefinitely.

In addition, to streamline the process for companies not listed on a national exchange, Treasury plans a temporary rule ("temporary" only in the legal sense that it has to go through the Administrative Procedure Act proposed-rule-and-comment process before it can be called "final"). This rule will exempt companies which have an established history of CTR filings. Right now Treasury is thinking of requiring a history of two years of filings, but it is not settled. So unlisted companies with a CTR filing history for some period of years could earn an exemption from filing CTRs. Treasury's theory for these exemptions is that the filing history will establish a baseline from which the financial institution can judge unusual (a/k/a anomalous or suspicious) transactions. Those would then be the topic of a Suspicious Activity Report (SAR).

These changes in exemptions were greeted enthusiastically by private sector representatives in the BSA Group. The implementation date is not yet set.

Wire Transfers
First, some history. The wire transfer regulations were proposed on January 3, 1995. There were two rules. The "joint rule" (so named because it was proposed jointly by the Federal Reserve and the Treasury Department) requires that certain data be collected. The "travel rule" (so named because of its content) requires that some data travel with the wire transfer so law enforcement can collect the data from one source.

In September of 1995, Treasury made some minor technical corrections in the language of the rules so they dovetailed more perfectly with the Uniform Commercial Code, and pushed the effective date for the regulation off from January 1 to April 1, 1996.

Now the changes.

Around October, 1995, Treasury began to hear from banks that information required under the travel rule on the originator of the wire transfer would not fit in the current Fedwire format. The Fedwire format is due to be changed so all the information will fit, but not until January 1, 1998. So Treasury decided to postpone the effective date of the originator part of the travel rule until that time.

Substantial parts of the wire transfer regulations are not affected and will be implemented as scheduled on April 1, 1996. This is true for the entire joint rule and the part of the travel rule relating to information on the beneficiary of the wire transfer. However, as to travel rule information on the wire transfer originator, the effective date of the regulation is delayed until January 1, 1998.

This delay in the effective date is conditioned on banks agreeing to make this information on the wire transfer originator available to the government if it has a subpoena or court order. Since banks must do this anyway, they assume no new obligation by agreeing. (In view of this, it is unclear why the government characterized such agreement as a condition that banks must accept. Probably the purpose is merely to emphasize that law enforcement will have access to this information during the delay in the regulation, although collection of the information will not be as convenient.)

So, at the end of the day (the lawyers' equivalent of the bottom line) the projected implementation dates are as follows:
Joint rule: April 1, 1996
Travel rule, information on beneficiary: April 1, 1996
Travel rule, information on originator: January 1, 1998

Treasury representatives joked that they no longer answer questions that begin with "When??" They also say they want the news of these changes to "filter out"-so tell a friend today!

Copyright © 1996 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 6, No. 3, 1/96