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CUNA Regulatory Comment Call

August 1, 2000

EXECUTIVE SUMMARY

• Transactions by certain consumers are exempt from the Bank Secrecy Act (BSA) reporting requirements. The interim rule now includes transactions involving money market deposit accounts (MMDAs) among the transactions that these exempted consumers may conduct. Previously, these transactions were limited to share draft accounts, demand deposits, negotiable order of withdrawal (NOW) accounts, and savings deposits subject to automatic transfers.
• The interim rule was effective as of July 31, 2000, but comments are being solicited for possible future changes.
• The Financial Crimes Enforcement Network has requested that comments include as much statistical and other information as possible about the uses of the types of accounts that are discussed in the comments. The comments should also explain the reasons that any proposed changes are appropriate and do not extend the exemptions beyond their intended scope.

Comments on the interim rule are due by September 26, 2000. Please submit your comments to CUNA by September 20, 2000. Please feel free to fax your responses to CUNA at 202-371-8240; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com or to Assistant General Counsel Jeffrey Bloch at jbloch@cuna.com; or mail them to Mary or Jeff in c/o CUNA's Regulatory Advocacy Department, 805 15th Street, NW, Suite 300, Washington, DC 20005. You may click here or contact us if you would like a copy of the interim rule.

BACKGROUND

The BSA rules require financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters. These requirements also help to implement efforts to eliminate money laundering and to assist other compliance programs.

DESCRIPTION OF THE INTERIM RULE

The BSA statute was amended in 1994 to exempt transactions by certain consumers that use depository institutions. The rules issued under these amendments apply to a variety of consumers. These include other financial institutions, government agencies, and publicly traded companies. The following are the two other types of consumers that are the subject of the interim rule:

• Non-listed businesses - This is any commercial business that is not already specifically exempted and that meets the following criteria:
• Has maintained a "transaction account" at the institution for at least 12 months;
• Frequently engages in transactions in currency with the institution in excess of $10,000; and
• Is incorporated, organized, registered, or otherwise eligible to conduct business in the United States or a specific State.
• Payroll Customer - This exemption applies solely to withdrawals for payroll purposes. It includes other entities not already exempted that meet the following criteria:
• Has maintained a "transaction account" at the institution for at least 12 months;
• Operates a firm that regularly withdraws more that $10,000 in order to pay employees in currency; and
• Is incorporated, organized, registered, or otherwise eligible to conduct business in the United States or a specific State.

The term "transaction account" used to describe the above exemptions includes share draft accounts, demand deposits, NOW accounts, and savings deposits subject to automatic transfers. These rules did not include transactions involving MMDAs.

The interim rule now includes transactions involving MMDAs. This change recognizes that smaller businesses often place money in MMDAs to earn interest and there is no reason for limiting the exemption with regard to small businesses that operate in this manner. This change also recognizes that computerized systems for tracking these currency transactions cannot often distinguish between transaction accounts and MMDAs, unless there is an expensive system change or time- intensive manual review process. This often results in institutions deciding not to use these exemptions at all.

Although this rule includes transactions involving MMDAs, it does not relieve these consumers from the requirement that they maintain a "transaction account" at the institution for at least 12 months. The exemption, therefore, does not apply to consumers whose only relationship with the institution is the maintenance of an MMDA.

A new form, Treasury Form TD F 90-22.53, has been recently designated for use when filing both the initial and biennial renewal of the designation of exempt persons. The interim rule will now require the use of this new form.

• To qualify for the exemption, consumers will still need to maintain a "transaction account" for at least 12 months. Should the exemption include consumers whose only relationship is the maintenance of a money market deposit account?
  
  

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• Are there other types of savings accounts that should be treated the same way that money market deposit accounts will be treated under the interim rule?
  
  

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• Other comments?
  
  

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