What is a Currency Transaction Report (CTR)

What is a Currency Transaction Report?

In order to detect potential fraud and irregularities in the banking system, banks are required to electronically file Currency Transaction Reports (CTRs) for transactions that exceed $10,000. It is important to note that the term ‘transaction’ is very encompassing — and can include withdrawals, deposits, and even currency exchanges.  Moreover, the financial institution must be sure to obtain accurate identification of the individuals who are conducting the transaction, such as their name, Social Security number, driver’s license, or something similar — and other supplement forms of identification if necessary. In recent years, currency transaction reports have been actively used to identify potential crimes and break down would-be fraudsters. Let’s go through some of the basics of the Currency Transaction Report and how the IRS is entwined with the process.

What is FinCEN?

FinCEN is the Financial Crimes Enforcement Network — a bureau of the US Department of Treasury (just as the IRS is also a bureau of the Department of Treasury — and the CTR report is a FinCEN Form (aka FinCEN Form 104).

As provided by FinCEN:

• • • “FinCEN is a bureau of the U.S. Department of the Treasury. The Director of FinCEN is appointed by the Secretary of the Treasury and reports to the Treasury Under Secretary for Terrorism and Financial Intelligence. FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.

    • FinCEN carries out its mission by receiving and maintaining financial transactions data; analyzing and disseminating that data for law enforcement purposes; and building global cooperation with counterpart organizations in other countries and with international bodies.

    • FinCEN exercises regulatory functions primarily under the Currency and Financial Transactions Reporting Act of 1970, as amended by Title III of the USA PATRIOT Act of 2001 and other legislation, which legislative framework is commonly referred to as the “Bank Secrecy Act” (BSA). The BSA is the nation’s first and most comprehensive Federal anti-money laundering and counter-terrorism financing (AML/CFT) statute. In brief, the BSA authorizes the Secretary of the Treasury to issue regulations requiring banks and other financial institutions to take a number of precautions against financial crime, including the establishment of AML programs and the filing of reports that have been determined to have a high degree of usefulness in criminal, tax, and regulatory investigations and proceedings, and certain intelligence and counter-terrorism matters. The Secretary of the Treasury has delegated to the Director of FinCEN the authority to implement, administer, and enforce compliance with the BSA and associated regulations.”

31 CFR 1010.310 -1010.3.14

Here are the important code-section involving Currency Transaction Reports:

1010.310 Reports of transactions in currency.

• • • Sections 1010.310 through 1010.314 set forth the rules for the reporting by financial institutions of transactions in currency. Unless otherwise indicated, the transactions in currency reporting requirements in §§ 1010.310 through 1010.314 apply to all financial institutions. Each financial institution should refer to subpart C of its chapter X part for any additional transactions in currency reporting requirements.

1010.311 Filing obligations for reports of transactions in currency.

• • • Each financial institution other than a casino shall 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, except as otherwise provided in this section. In the case of the U.S. Postal Service, the obligation contained in the preceding sentence shall not apply to payments or transfers made solely in connection with the purchase of postage or philatelic products.

1010.312 Identification required.

• • • Before concluding any transaction with respect to which a report is required under § 1010.311, § 1010.313, § 1020.315, § 1021.311 or § 1021.313 of this chapter, a financial institution shall verify and record the name and address of the individual presenting a transaction, as well as record the identity, account number, and the social security or taxpayer identification number, if any, of any person or entity on whose behalf such transaction is to be effected. Verification of the identity of an individual who indicates that he or she is an alien or is not a resident of the United States must be made by passport, alien identification card, or other official document evidencing nationality or residence (e.g., a Provincial driver’s license with indication of home address). Verification of identity in any other case shall be made by examination of a document, other than a bank signature card, that is normally acceptable within the banking community as a means of identification when cashing checks for nondepositors (e.g., a driver’s license or credit card). A bank signature card may be relied upon only if it was issued after documents establishing the identity of the individual were examined and notation of the specific information was made on the signature card. In each instance, the specific identifying information (i.e., the account number of the credit card, the driver’s license number, etc.) used in verifying the identity of the customer shall be recorded on the report, and the mere notation of “known customer” or “bank signature card on file” on the report is prohibited.

1010.313 Aggregation.

• • •  (a) Multiple branches.

      • A financial institution includes all of its domestic branch offices, and any recordkeeping facility, wherever located, that contains records relating to the transactions of the institution’s domestic offices, for purposes of the transactions in currency reporting requirements in this chapter.

      • (b) Multiple transactions.

        • In the case of financial institutions other than casinos, for purposes of the transactions in currency reporting requirements in this chapter, multiple currency transactions shall be treated as a single transaction if the financial institution has knowledge that they are by or on behalf of any person and result in either cash in or cash out totaling more than $10,000 during any one business day (or in the case of the U.S. Postal Service, any one day). Deposits made at night or over a weekend or holiday shall be treated as if received on the next business day following the deposit.

1010.314 Structured transactions.

• • • No person shall for the purpose of evading the transactions in currency reporting requirements of this chapter with respect to such transaction: (a) Cause or attempt to cause a domestic financial institution to fail to file a report required under the transactions in currency reporting requirements of this chapter; (b) Cause or attempt to cause a domestic financial institution to file a report required under the transactions in currency reporting requirements of this chapter that contains a material omission or misstatement of fact; or (c) Structure (as that term is defined in § 1010.100(xx)) or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.

FinCEN Form 104 and the CTR

Here is a link to the FinCEN Form 114.

Which Transactions are Reportable?

As provided by the FDIC:

Aggregation of Currency Transactions

• • • For the purposes of currency reporting requirements, a bank includes all of its domestic branch offices and, therefore, branch office transactions must be aggregated. Multiple currency transactions resulting in either cash in or cash out totaling more than $10,000 during any one business day must be treated as a single transaction, if the bank has knowledge that they are conducted by or on behalf of any person. Deposits made at night or over a weekend or holiday must be treated as if received on the next business day following the deposit. To comply with regulatory requirements, management must ensure that systems or practices appropriately aggregate currency transactions throughout the bank and report currency transactions subject to the BSA requirement to file CTRs.

    • Types of currency transactions subject to reporting requirements individually or by aggregation include, but are not limited to: deposits and withdrawals, automated teller machine (ATM) transactions, denomination exchanges, loan payments, currency transactions used to fund individual retirement accounts (IRAs), purchases of certificates of deposit, funds transfers paid for in currency, monetary instrument purchases, certain transactions involving armored car services, and currency to or from prepaid access. In cases where multiple businesses share a common owner, FinCEN guidance states that the presumption is that separately incorporated entities are independent persons. This FinCEN guidance indicates that the currency transactions of separately incorporated businesses should not automatically be aggregated as being on behalf of any one person simply because those businesses are owned by the same person. It is up to the bank to determine, based on information obtained in the ordinary course of business, whether multiple businesses that share a common owner are, in fact, being operated independently depending on all the facts and circumstances. Consistent with this FinCEN guidance, if the bank determines that the businesses are independent, then the common ownership does not require aggregation of the separate transactions of these businesses.

    • However, if the bank determines that these businesses (or one or more of the businesses and the private accounts of the owner) are not operating separately or independently of one another or their common owner (e.g., the businesses are staffed by the same employees and are located at the same address, the bank accounts of one business are repeatedly used to pay the expenses of another business, or the business bank accounts are repeatedly used to pay the personal expenses

    • of the owner), the bank may determine that aggregating the businesses’ transactions is appropriate because the transactions were made on behalf of a single person. Consistent with this FinCEN guidance, once the bank determines that the businesses are not independent of each other or of their common owner, then the transactions of these businesses should be aggregated going forward. There are other BSA requirements that may aid banks in determining when transactions are “by or on behalf of” the same person, such as the requirement to identify the beneficial owners of legal entity customers. To the extent this beneficial ownership information helps the bank determine that certain transactions had no apparent purpose other than to avoid triggering a CTR filing, the bank would need to consider whether filing a suspicious activity report (SAR) would be appropriate.1Refer to the Beneficial Ownership Requirements for Legal Entity Customers section for more information.

Structured Transactions – CTR Requirements

• • • Structuring transactions occurs when a person, acting alone or in conjunction with, or on behalf of, other persons, conducts or attempts to conduct one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading the CTR requirements.

    • Under the BSA, no person shall, for the purpose of evading a CTR reporting requirement:

      • Cause or attempt to cause a bank to fail to file a CTR.

      • Cause or attempt to cause a bank to file a CTR that contains a material omission or misstatement of fact. •

      • Structure, assist in structuring, or attempt to structure any transaction with one or more domestic financial institutions.

        • Refer to Appendix G: Structuring for additional information. When a bank suspects that a person is structuring transactions to evade CTR filing, it must file a SAR.

        • Additionally, evading BSA reporting and recordkeeping requirements can result in civil and criminal penalties under the BSA.

What does the IRS Say about CTRs?

As provided by the IRS:

• • • FinCEN CTR, Currency Transaction Report, must be filed electronically for all currency transactions of more than $10,000 (31 CFR 1010.311). Currency received from the sender or paid to the receiver can cause the reporting requirement.

    • Multiple currency transactions must be aggregated, and a CTR is required, if the business knows or has reason to know that the multiple transactions are by or on behalf of any person and result in either cash-in or cash-out totaling more than $10,000 in one business day (31 CFR 1010.313(b)).

    • The CTR must be filed within 15 calendar days following the day the reportable transaction occurs 31 CFR 101.306(a)(1).

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