Source: https://verafin.com/2020/02/deconstructing-the-currency-transaction-report/
Timestamp: 2020-07-09 07:59:07
Document Index: 427039533

Matched Legal Cases: ['art 102', 'art 102', 'art 102', 'art 102', 'art 102', '§ 1010', '§ 4301', '§ 1701']

Deconstructing the Currency Transaction Report | Verafin
Deconstructing the Curren...
How, when and why was the $10,000 threshold established?
With FinCEN reporting increases in BSA report filings year over year, it is likely that over 16 million Currency Transaction Reports, or CTRs, were filed in 2019, each one reporting one or more cash transactions made by or on behalf of any person aggregating more than $10,000.
The $10,000 cash transaction threshold, first established in 1972, is still in place today, almost fifty years later. But how and why was this transaction reporting threshold created? How did the Treasury Department first settle on $10,000 as the reporting threshold?
Let’s explore the timeline of events that led to the CTR threshold, and the impact each event had on that threshold. Those events start over 100 years ago …
1917 – Trading with the Enemy Act (TWEA) Introduced
The Trading with the Enemy Act (TWEA) of 1917 was passed to prevent and restrict trade with American enemies at times of war.
Notwithstanding its original, limited purpose, TWEA remains in force today and, with the International Emergency Economic Powers Act (IEEPA), forms the backbone for OFAC’s economic sanctions programs.
1945 – A Discretionary Reporting Threshold of $10,000 is Established
On June 5, 1945, as World War II was drawing to a close, the Trading With the Enemy Act was used as the statutory authority for a regulation that required financial institutions to report single cash transactions of $1,000 or more, in denominations of $50 or higher, or transactions involving $10,000 or more, in any denomination—sort of. While the regulation – Part 102 of Title 31 – required financial institutions to file monthly reports concerning these deposits and withdrawals, it was at the discretion of institutions to judge if the activity was unusual for their customer, and to file, or not file, the transaction report accordingly.
The result of the 1945 TWEA regulation was that financial institutions had to file a monthly report of any cash transaction over $1,000 in denominations of $50 or higher, or any cash transaction over $10,000, unless the institution deemed the transactions as commensurate with the expected, legitimate conduct of that customer.
1952 – A Mandatory Reporting Threshold of $10,000 is Instituted
In 1952, the large cash transaction reporting regulation – still under the authority of the TWEA and still in Part 102 of Title 31 – was amended so that the $10,000 threshold reporting was mandatory, rather than discretionary. Monthly reports were now required for “transactions involving $2,500 or more of United States currency in denominations of $100 or higher” and “transactions involving $10,000 or more of United States currency in any denominations” with the interesting addition of required reporting of “transactions involving any amount in any denominations, which in the judgment of the financial institution exceed those commensurate with customary conduct of the business, industry, or profession of the person or organization concerned.”
The result was mandatory reporting of all single cash transactions of $2,500 or more in denominations of $100 or higher, or $10,000 or more in any denominations, and discretionary reporting of unusual cash transactions in any amount.
1959 – Treasury “Reintroduced” the Mandatory Reporting Threshold of $10,000?
In an odd, inexplicable twist, there was a notice of an “amendment” to the Title 31, Part 102 regulation published in the Federal Register on August 4, 1959.
This “new” Part 102, however, was exactly the same as the 1952 Title 31, Part 102 regulation—nothing changed!
1970 – Currency and Foreign Transactions Reporting Act
The Currency and Foreign Transactions Reporting Act of 1970, commonly known as the Bank Secrecy Act, introduced the modern CTR (check out my last blog post to explore how the “BSA” got its name). However, the Act simply delegated to the Secretary of the Treasury the authority for specifying the currency transactions which should be reported, “if they involve the payment, receipt, or transfer of United States currency, or such other monetary instruments as the Secretary may specify” (Pub. L. No. 91-508, 84 Stat. 1114 to 1124).
There is nothing in the 1970 statute that set the dollar amount for the large currency reports — that was left to the regulations.
1971 – Proposed Rule to Report Any Cash Transaction of More Than $5,000
A Notice of Proposed Rule Making for Financial Recordkeeping and Reporting of Currency and Foreign Transactions was published in the Federal Register on June 10, 1971. The proposed rule was to require reports for domestic “transactions in currency of more than $5,000,” while “each person, other than a domestic bank, who transports, mails or ships, or causes to be transported, mailed or shipped, currency or other monetary instruments in amounts exceeding $5,000 on any one occasion from the United States to or through any place outside the United States, or into the United States from or through any place outside the United States, shall make a report thereof,” with exceptions for “established customers.”
In my research, I could not locate information on how the proposed amount of $5,000 was established, or what comments were received, so I submitted a Freedom of Information Act request to the Treasury, seeking any related documentation.
The Treasury didn’t have any information and directed me to the National Archives. The National Archives didn’t have any information and directed me to the Treasury.
My quest for this documentation continues, but, somehow, the proposed $5,000 threshold became $10,000 in the final rule.
1972 – Final Rule to Report Any Cash Transaction of More than $10,000
The original CTR regulations, published in 1972, required financial institutions to “file a report of each deposit, withdrawal, exchange of currency or other payment or transfer, by, through, or to such financial institution, which involves a transaction in currency of more than $10,000.” This is now codified in 31 CFR § 1010.310.
During my research, I found references in the Congressional Record to a series of December 1968 hearings by the House Committee on Banking and Currency on the use of secret foreign bank accounts for illegal purposes, titled “Legal and Economic Impact of Foreign Banking Procedures on the United States” (if you visit the Library of Congress in Washington, D.C., you can find this microfiche—look for page H16953 of the Congressional Record). The Record explains that while there are “a set of regulations issued by the Treasury Department requiring the reports of unusual cash transactions over specified amounts…the Treasury Department has never felt fully confident that these regulations had a sufficient statutory basis for full and complete enforcement.” Likewise, while “there is a procedure under the Trading With the Enemy Act authorizing the Secretary to call for reports of unusual currency transactions” the “procedure has proved to be inadequate.”
It appears that the Currency and Foreign Transactions Reporting Act of 1970, and the Final Rule of 1972, were enacted to compel the Treasury Department to enforce a twenty-five-year-old requirement under the TWEA. While requirements have continued to evolve, from the Money Laundering Control Act of 1986 to the Money Laundering and Financial Crimes Strategy Act of 1998, the CTR is rooted in over 100 years of AML history.
Trading with the Enemy Act of 1917; 50 U.S.C. § 4301
International Emergency Economic Powers Act (IEEPA); 50 U.S.C. § 1701
10 Fed. Reg. 6547 (June 5, 1945)
17 Fed. Reg. 1822 (February 29, 1952)
24 Fed. Reg. 6223 (Aug. 4, 1959).
36 Fed. Reg. 11175. (June 10, 1971).
37 Fed. Reg. 6819 (Apr. 5, 1972).
Next up? How the CTR went from single cash transactions of more than $10,000 to one or more cash transactions aggregating more than $10,000 … and the multiple attempts to get an efficient and effective way to exempt certain businesses from the CTR reporting requirements.
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