Examiners are suggesting we exempt an MSB because we file a "quite a few CTR's" on them. I have been in the frame of mind that even though you can exempt MSB's it is not good practice to do so. AND I dont feel comfortable doing so. Would someone comment on this and give me your opinions?

I would say thank you for the recommendation and that you will take it under advisement. Examiners - as in Federal?

Yes FRS.

We went ahead and exempted an MSB (it's an ancillary activity, accounting for a small fraction of their income). It doesn't really change anything about our monitoring procedures for suspicious activity and MSB documentation; all it does is remove the unnecessarily filed CTRs. Whether an FI files a CTR Exemption has nothing to do with whether the bank is "comfortable" with the customer. I would argue that if you decline exempting someone who meets all the requirements solely because of your level of comfort with that customer, then there should be SARs on that customer, and that the customer could still be exempted regardless. If the proposed rules on CTR Exemptions become final, then all that will change.