BSA ALERT! Update to CTR FAQ 16?
In this Compliance Clip (video) Adam talks about a whirlwind in the BSA world that took place over the last few weeks. FinCEN apparently made an update to CTR FAQ 16 (without any notification or clarification) that would change how CTRs are reported when a person conducting a transaction has multiple “roles,” such as would be the case if an individual made deposits on both their personal account and the account for a business. Adam explains what happened with FAQ 16 and what we need to look for going forward. For those who enjoy a bit of excitement in the BSA world, the change to FAQ 16 has definitely given something to think about (and to share with your BSA officer if they aren’t aware of this).
CLARIFICATION: As we state in this video, FinCEN removed the new answer to FAQ 16 that was temporarily available on their website, but ultimately released a final version of FAQ 16 that is slightly different than the original version. Therefore, please refer to the FinCEN FAQs for the current answer to Question 16. Questions regarding these changes should be addressed to FinCEN.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about an update to the CTR Frequently Asked Question Number 16, which is going to change how we report CTRs, at least one portion of it. This is a BSA topic.
What has happened is FinCEN in recent weeks has changed the answer to the CTR Frequently Asked Question Number 16. What they did is they just changed the answer on their website and then they got some feedback from people asking questions,”Wait a second, this doesn't align with your CTR instructions. What do we do?” And what FinCEN has done apparently is rescinded that answer, so they've reverted back to the original answer.
What I'm about to show you is the original answer and then the new answer that was on FinCEN's website for a little while but was removed, which we fully expect to come back at some point. So this is a pretty exciting topic for BSA because we kind of had a foreshadow of a change that looks like it is going to come.
I wanna talk to you a little bit about this Frequently Asked Question Number 16. So the Frequently Asked Question Number 16 relates to how to complete CTRs. And the question is, “What if more than one role (Item 2) applies to the person being listed in Part I?” So we know on a CTR form, Part I is a person that's involved in the CTR transaction and what Item 2 is it's the role of that person that's being listed. And Item 2a says that the role is they conducted it on their own behalf. Item 2b says they conducted it on behalf of somebody. Item 2c says it was done for their benefits. So these are the role options that we have on the CTR form.
Now, the longstanding answer to this question, that says, “What if more than one role applies to the person listed in Part I?” The longstanding answer that we've had, which is what I'll refer to as the original answer, which is the answer as of today, it says that if more than one Item 2 option applies to a person involved in the transaction, filers should complete only one Part I on that person with only one entry in Item 2, pursuant to the following construct.Basically, you're only supposed to complete one Part I, so you have the name of the person that completed it. List one Part I, and then check one single box. You're either gonna check box 2a, 2b, 2c and then of course 2d applies to courier services. But you're gonna check 2a, 2b, or 2c based on this hierarchy that's spelled out here in the answer to Frequently Asked Question Number 16.
For example, if in addition to conducting a transaction on their own behalf, if a person also is conducting a transaction on behalf of somebody else and is the beneficiary, what we select is option 2a. So you can see that in the first bullet point here, if multiple rules apply, then 2a takes precedent. Now if 2a doesn't apply, but both 2b and 2c apply, then we select 2b. If just 2c applies, then we select just 2c. So it's this hierarchy of how we check these boxes. But the bottom line here, what's important to understand, is we're only completing one Part I for this individual.
Now, what FinCEN had done with their new answer that they put out as they made some changes to this where they said that we are now going to complete two Part I’s for the same individual if they have multiple roles. Now, let's explain this by actually reading the answer that was on FinCEN's website for a brief period of time. But again, it has been removed so at this point, it's important to follow the original CTR Frequently Asked Question Number 16 answer that is still on FinCEN’s website. But I point this out because this will be a change that will be coming down the pipe.
The new answer that was on FinCEN's website said this. It said, “If more than one Item 2 option applies to a Part I person, a separate Part I section will be prepared on that person for each Item 2 option. For example, if the Part I person conducted a $5,000 deposit in his or her personal account and then a separate $7,000 deposit into the account of an incorporated business on the same business day,” so in other words, they've aggregated more than $10,000 by having part for themselves and part for a business, but the aggregates over $10,000, then what we're supposed to do is now have a Part I on that person for their $5,000 deposit. And what we're going to do is report option 2a on the personal deposit. Then there will be a second Part I on that same person reporting option 2b, which is on behalf of the other person, which is the business, for the transaction that was $7,000. So you have one Part I which is for the $5,000 where you check box 2a, a second Part I, where you check box 2b for the $7,000 on behalf of the business. Then you're going to proceed with creating a Part I for all other persons involved in the transaction, which in this example of course would be the incorporated business where you're gonna report option 2c with the amount of $7,000. And Then what you do in all of these is list the account number in Item 21, which is the cash and amount.
So as you can see the original answer, which is still there on FinCEN’s website for CTR Frequently Asked Question Number 16 said that we were to create just one Part I and check the box based on a hierarchy. But what they're doing is changing this to now have us create two Part I’s for an individual that has multiple roles and have a separate part, one for each role for each person. So it is a change, and this is something coming down the pipe. Again, the original answer has been reverted on FinCEN's website as of the time of this recording. So if you are somebody who's responsible for filing CTRs, you may wanna take a look at FinCEN's website and look at the CTR frequently asked questions, and specifically number 16 to see what it says.
I'm hoping that FinCEN will officially and formally announce this because when they first released this, they didn't say anything. They just put it out there. But I'm hoping they will formally announce this. But this is something to pay attention to because we fully expect this change to occur here within the next several weeks or months or whenever FinCEN gets around to changing this frequently asked question.
So that's all I have for you today on this Compliance Clip.