$10,000 that are handled outside of an exempt account are considered reportable transactions. My question is whether these days, where total cash activity exceeds $10,000 by combining deposits and exchanges, count towards continued exemption. If not, I have only four qualifying days and will have to revoke the exemption. A: Currency exchanges are added to a day’s deposits (and withdrawals). However, the issue here is the fact that the currency exchange is outside of an exempt account. From FinCEN’s “Guidance on Determining Eligibility for Exemption from Currency Transaction Reporting Requirements” in section H. Exemptible transaction accounts: “Question: The definition of a Phase II ‘exempt person’ in 31 C.F.R. § 1020.315(b)(6) and (7) includes the phrase ‘only with respect to transactions conducted through its exemptible accounts.’ Does this mean that certain transactions of Phase II exempt customers require the filing of a CTR? Answer: Yes. The scope of the exemption for non-listed businesses and payroll customers is limited by several criteria. While the final rules reduced those criteria with respect to the number of transactions and the waiting period before a bank could treat those customers as exempt, they did not alter the remaining criteria for Phase II customers, including the provision that a Phase II customer is exempt ‘to the extent of its domestic operations and only with respect to transactions conducted through its exemptible accounts.’ For transactions conducted by the customer outside of the criteria for Phase II customers, the customers would not meet the definition of ‘exempt person’ and could not be treated as exempt by the bank.” That last sentence clearly applies to your situation. The days when the currency exchanges caused the daily total currency transactions to exceed $10,000 are not counted in the number of days for qualifying as an “exempt person.” Insider Credit. Q: Our chairman of the board wants to purchase a second/vacation home. He needs to borrow $1,000,000. Reading Regulation O, it states that a member bank is authorized to extend credit in any amount to finance or refinance the purchase, construction, maintenance or improvement of a residence of the executive officer (EO), provided the extension of credit is secured by a first lien on the residence and the residence is owned by the EO. Financing will be a first mortgage purchase transaction on a residence of the executive officer. He also owns his primary residence, but it is free and clear. My uncertainty is whether “a residence” includes a second/ vacation home or only the primary residence. It is also our understanding that he will not use the second/vacation as a rental; it will strictly be used for his family. A: Good news for your chairman. Since his primary residence is free and clear, the unlimited amount exception for a residence may be used for this second/vacation home. An executive officer may have multiple residences at any one time, and the unlimited amount exception does not apply just to their primary residence. However, they may have only one loan at any one time that is taking advantage of this exception. If your chairman had had an existing loan on his primary residence, it likely would have made this second/ vacation home ineligible (depending on the amount of the existing loan). Flood Insurance. Q: We have a question about flood rules. We are a Federal Reserve regulated bank, and we notify a borrower 10 days prior to closing when a property is in a flood zone. The question I was asked is if the borrower gets the flood insurance in place, can we close the loan before the 10 days expires? A: Yes, as long as the bank has received acceptable evidence of adequate flood insurance coverage. A declarations page will suffice; a binder will not. SAFE Act. Q: Is it a requirement of the regulation that a listing of all employees who have an NMLS number be listed on the bank’s website? If not a requirement, would it be a “best practice”? A: No, there is no requirement to post such a list on the bank’s website. A notice must be posted in the bank, but anything beyond that is pretty much up to the bank. As the regulators stated in the final rule release, lenders are free to go beyond the minimal requirements in the SAFE Act rule. Young & Associates provides banks and thrifts with support for their compliance programs, independent reviews and in‑bank training, as well as a full menu of management consulting, loan review, IT consulting and policy systems. Community Banker 23
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