June 16, 2008

Financial Crimes Enforcement Network

Department of the Treasury

P.O. Boxes 39, Vienna, VA 22183

Attention: Currency Transaction Report Exemptions Rule and Form
Amendments

This comment letter is submitted by the BSA (Bank Secrecy Act) Officer
of Central Progressive Bank, a 17-branch community bank located in
Louisiana, concerning FinCEN's Notice of Proposed Rulemaking regarding
the Currency Transaction Report (CTR) Exemption regulations at
103.22(d). The opportunity to comment on these proposed rules is
appreciated.

**Overview**

The "risk-based" aspects of the proposed rules regarding Phase II
exemptions would impose on institutions some significant obligations
that would outweigh the benefits of filing CTR exemptions. The stated
intention of the proposal, in line with the recommendations of the
Government Accountability Office (GAO) report, is to encourage
depository institutions to make full use of CTR exemptions. This can
best be done by reducing the compliance obligations associated with
exemptions. These new risk-related obligations for institutions are
likely to achieve the *opposite* of the stated intention, further
reducing the number of institutions willing to file CTR exemptions.

**Proposed "Risk-Based Assessment" of Transactional Activity**

A massive overhaul of the CTR exemption process is implied by the
proposed creation of "Special Procedures" that would require a
"risk-based assessment of the transactional activity" of customers being
considered for Phase II exemption. Even though this appears to be the
most radical of the proposed changes, FinCEN's proposal curiously does
not specifically request comments on this section. The GAO report
recommended simplifying the exemption process; in response, FinCEN's
proposal would dramatically increase the complexity of the exemption
process.

Being obligated to perform a "risk-based assessment" concerning the
"legitimacy" of the customer's transactions would place a significant
and untenable regulatory burden on institutions, and would have the
reverse of the effect intended by the GAO report. There is currently no
other FinCEN form that requires depository institutions to do what is
proposed, making this proposed change a significant departure from the
traditional way of determining a customer's eligibility for exemption.

Rather than requiring institutions to implement processes to certify the
legitimacy of their exempt customers' transactions, FinCEN is already
able to infer the conclusions of the institutions by a review of any
Suspicious Activity Reports (SARs) filed on exempt customers. The
proposal could lead to institutions facing a paradox when considering
filing a SAR on a CTR-exempt customer: Either the activity is not really
suspicious, or, the CTR exemption was erroneously filed.

The proposed "reasonable belief" that the exempt customer has a
legitimate business purpose for currency transactions can be construed
as an institution literally *certifying* the legitimacy of its
customers' transactions, merely by filing exemptions under the proposed
rules. It is likely that the legal departments and BSA compliance staff
of many institutions will advise against specifically asserting or
certifying the legitimacy of any particular customer's transactions. The
risk to the institution of filing an exemption under these proposed
rules would outweigh the benefits of filing fewer CTRs.

**Notice of Revocation**

The proposal of requiring filers to notify FinCEN within 30 days of
revoking an exemption will also have the reverse of the effect intended
by the GAO report. Currently, it is widely understood that the filing of
a CTR "effectively revokes" an exemption. If additional notice of
revocation is made mandatory, the rule should specify that the bank
should file a revocation no later than during the next annual or
biennial review that occurs subsequent to the customer's change in
status. Should a customer a) cease having a sufficient number of
reportable transactions but continue to be a customer, or b) change
depository institutions, or c) close its business, there should be no
reason that a bank is required to both *notice* this change and report
it to FinCEN within 30 days of its occurrence. Notification during the
next review period should be sufficient in these or similar situations.
The proposed rule would change the annual review process into a monthly
review process, significantly increasing the obligations of institutions
and leading to fewer exemptions.

**Changing Rules for *Some* Phase I Exemptions**

A potential issue with the proposal for Phase I exemptions is its
exclusion of Phase I exempt businesses that are publicly traded, and
their subsidiaries. This alteration of a *portion* of the Phase I rules
will cloud bankers' understanding of the two exemption phases by
effectively changing it from a dual system of Phase I and Phase II
exemptions to a three-part system (type A Phase I exemptions requiring
no filings or annual reviews, type B Phase I exemptions requiring
filings and annual reviews, plus Phase II exemptions requiring filings
and annual reviews). Does law enforcement really want to know how much
cash is being deposited by major national retailers and other publicly
traded companies? FinCEN's proposal would have greater effect if any
changes being applied to Phase I exempt entities would be applicable to
*all* Phase I exempt entities. Any additional complexity added to the
differences between Phase I and Phase II exemptions will pose further
compliance risks to institutions, leading to fewer exemptions.

**Risk-Based Timing**

In response to the GAO's recommendation that FinCEN allow exemptions to
be filed in a shorter period of time than twelve months after account
opening, FinCEN proposes to remove any prescribed amount of time that
must pass before an institution can file an exemption. FinCEN instead
proposes a requirement of a "risk-based" approach to be used when
determining *when* to file an exemption. Institutions will be further
discouraged from filing exemptions because of the compliance risks
associated with potentially making the wrong decision about the timing
of the filing. The clearest path is to use an objective time
measurement, be it two, six, or twelve months, rather than passing the
obligation of the decision (and inherent risk associated with the
decision) to the institutions.

Any aspects of the proposed rules that impose additional obligations and
compliance risks to institutions will accomplish the opposite of the
goal shared by the GAO and FinCEN. The "risk-based" aspects of the
proposal could cause institutions to further shun CTR exemptions because
of the increase in associated compliance risks, thus reducing the
utility of the BSA system to law enforcement. If FinCEN will issue
objective measurements rather than subjective requirements, institutions
will be encouraged to make full use of the exemption process.

I appreciate the opportunity to comment on FinCEN's proposed changes and
sincerely hope that these comments will be useful to FinCEN as it
considers revisions of the proposed rules.

Jason Lamb, CAMS, CBAP

Assistant Vice President

BSA/AML/OFAC Officer

Central Progressive Bank

CC: Louisiana Bankers Association CC: Independent Community Bankers of
America

5555 Bankers Avenue 1615 L Street NW Suite 900

Baton Rouge, LA 70808 Washington, DC 20036