Legal Ease is the weekly Q&A from the IBAT Bottom Line. Go to the Legal Ease Archive.
Latest Additions to Legal Ease:
We have a customer with a convenience store, liquor store and sandwich shop. All three (different) accounts use his SSN and are set up as follows:
- Bob DBA Store
- Bob DBA Liquor Store
- Bob DBA Sandwich Shop
He frequently exceeds $10,000 in cash deposits. However, individually, each account rarely (if ever) exceeds $10,000 in cash deposits.
We cannot exempt him/them because each “entity” doesn’t individually meet the FREQUENT (5 times/year) requirement for exemptions, correct? Or can we??
The short answer is yes - provided each transaction account is eligible for an exemption. For example, if Bob operated those three transaction accounts and one other, Bob DBA Pawn Shop, the pawn shop activity could not be included because it is an ineligible business.
Question #13 - Is a bank required to treat all transaction accounts of a customer as a single account for purposes of determining the qualification of that customer as an exempt person?
Answer: No. A bank may, but is not required to, treat all transaction accounts of a customer as a single account for purposes of determining whether that customer qualifies as an exempt person, as defined by 31 CFR 103.22(d)(2). Treatment of multiple accounts as a single account must, if adopted, be continued. For example, a bank that chose to treat all of a customer’s transaction accounts as a single account would combine the transaction history of the accounts to apply the requirement that a business must frequently engage in transactions in currency in excess of $10,000 in order to be treated as non-listed business customer, but it would then be required to exempt all such accounts, not simply one of them. Whatever treatment a bank adopts for multiple accounts, the ineligible business activity rule described in Q&A #9 above applies on a customer-wide basis (gross revenues per year).
In granting exemptions, you may apply an exemption to one transaction account, a group of transaction accounts, or all of the transaction accounts of a customer. However, you must apply this rule consistently for each customer. For example, if you designate all of a particular customer's accounts as exempt, then you must monitor all accounts for suspicious activity and review all those accounts annually.
With the Servicemembers Civil Relief Act Notice from HUD expiring 11-30-14, what do we do?
You should continue to use the expired form. If you check the HUD web site, that is the current form provided. This has been a topic raised by ICBA a few months ago. Since there is no new form issued, there shouldn't be a problem using the current expired form in December because the info is still accurate.
The problem is on January 1st when the extension of the section that requires court orders before a bank can take action changes. However that could also be extended.
This extension ends December 31, 2014. Beginning January 1, 2015, there will be a period of 90 days after the end of the servicemember’s military service during which a foreclosure, sale, or seizure of the servicemember’s property based on a breach of a mortgage, trust deed, or other security, without a court order or waiver, will not be valid. During this period, a court may also stay proceedings enforcing such obligations.
On an existing loan, if we advance funds to pay delinquent property taxes, do we have to get an appraisal or evaluation before advancing for the taxes? We would be doing a modification to increase principal and interest payments but keeping the same maturity.
The short answer is no you would not need an appraisal. In addition, this would not be a refinancing but rather an advance under the existing obligation. In situations like this when you are making an advance purely for "collateral protection", for example to repair damaged property or protect a lien position, such an advance would not trigger the requirement for a new appraisal.
Below is from page 46 of the Interagency Appraisal and Evaluation Guidelines -
A subsequent transaction is exempt from the appraisal requirement if no new monies are advanced (other than funds necessary to cover reasonable closing costs) even when there has been an obvious and material change in market conditions or the physical aspects of the property that threatens the adequacy of the institutions real estate collateral protection. Conversely, when new monies are advanced (other than funds necessary to cover reasonable closing costs) and there has been an obvious and material change in market conditions or the physical aspects of the property that threaten the adequacy of the institutions real estate collateral protection, the institution must obtain an appraisal unless another exemption applies.
For the purposes of these Guidelines, an institution is considered to have advanced new monies (excluding reasonable closing costs) when there is an increase in the principal amount of the loan over the amount of principal outstanding before the renewal or refinancing. For example, an institution originated a 15-year term loan for $3 million and, in year 14, the outstanding principal is $2.5 million. In year 14, the borrower seeks to refinance the loan at a lower interest rate and requests a loan of $2.8 million. The $300,000 would be considered new monies. On the other hand, an institution has provided a $5 million revolving line of credit to a borrower for two years and, at the end of year two, renews the $5 million line for another two years. At the time of renewal, the borrower has drawn down $1 million. In this example, the amount of the line remains unchanged even though the amount available on the line is less than the line commitment. Renewing the line of credit at its original amount would not be considered an advancement of new monies. Further, when an institution advances funds to protect its interest in a property, such as to repair damaged property, a new appraisal or evaluation would not be required because these funds would be used to restore the damaged property to its original condition.
Box 24 when completing CTR’s is confusing us. We have tried to find a definite answer, but are even more confused. Here is our question - if a customer brings in cash and later leaves money in the night deposit, do we need to mark NIGHT DEPOSIT in #24? For example:
- Betty brings in $5,000 for ABC Company
- Later Betty makes a deposit of $6,000 for ABC Company in the night deposit
The same question applies for an ATM withdrawal. Do we mark the box in #24 that says ATM? For example:
- Joe withdraws $400 from an ATM
- Later Joe comes inside the bank and withdraws $10,000
The short answer is you would check all that apply. In your first example with Betty, you would check 24d. In your second example with Joe, you would check 24b.
See page 60 of the FinCEN Currency Transaction Report (FinCEN CTR) Electronic Filing Requirements - Release Date September 2014.
a. (Check if) Armored car (FI contract)
b. (Check if) ATM
c. (Check if) Mail Deposit or Shipment
d. (Check if) Night Deposit
e. (Check if) Aggregated transactions
Item 24: Indicate whether any of the following delivery/payment methods were involved in any part of the transaction(s). Check all that apply. Check box 24a “Armored Car” if a reported transaction involved a pick-up or delivery of currency by an armored car service under contract to the financial institution listed in Part III. Do not check box 24a if the armored car service was under contract to a person recorded in Part I. Check box 24b “ATM” if a reported transaction occurred at an automated teller machine (ATM). Check box 24c “Mail Deposit or Shipment” if a reported transaction was made by mail deposit or shipment. Check box 24d “Night Deposit” if a reported transaction involved a night deposit of cash. Check box 24e “Aggregated transactions” if the financial institution did not identify any of the transactor(s) because the FinCEN CTR reports aggregated transactions, all of which was below the reporting requirement, and at least one of the aggregated transactions was a teller transaction. The option “Aggregated transactions” is not the same as Item 3 “Multiple transactions,” which can involve transactions that are above the reporting requirement