What to do when two financial institutions are involved

When someone conducts a currency transaction on behalf of someone else, Form 104 requires that you report certain information about the person on whose behalf the transaction was conducted. However, sometimes it is difficult to know whether a transaction is conducted on behalf of someone else. The Treasury Department has provided some guidance to financial institutions in deciding whether a transaction is being conducted on behalf of someone else and, if so, how to obtain the necessary information for the CTR.

The Treasury requires that tellers ask each customer conducting a reportable currency transaction whether the transaction is being conducted on someone else’s behalf. If the answer is “yes,” the teller must ask for the additional information required on Form 104 about that third person unless the necessary information is in the institution’s records, in which case the institution can rely on its records. As the Treasury puts it, “Only if as a result of strong ‘know your customer’ or other internal control policies, the financial institution is satisfied that its records contain the necessary information concerning the true identity of the person on whose behalf the transaction is being conducted, may the financial institution rely on those records in completing the CTR.” Administrative Ruling 89-5, from which this quote was taken, gives five hypothetical examples of situations where the financial institution does or does not need to ask for further information. You might want to read it to get a better feel for what the Treasury is requiring. It can be found in the January 11, 1990, Federal Register beginning on page 1021.

If the transaction is conducted through an automated teller machine, a night depository, or a courier, and information about the person conducting the transaction or on whose behalf the transaction is conducted is therefore not available, then you should complete the fields in the report as completely as possible.

The Federal Register issue just cited, January 23, 1989, beginning on page 3025, also contains a number of hypothetical situations that illustrate your obligation to obtain information about the person on whose behalf a currency transaction has been conducted. You might want to read them in addition to Administrative Ruling 89-5.

Also addressing this issue, FinCEN Ruling 2000-1 (August 31, 2000), dealt with what it referred to as “double-endorsed checks.” A seafood processing company would purchase seafood from a shrimp boat captain. The processing company would pay with a check payable to the boat captain, then have the boat captain endorse the check back to the processor, who would then send an employee to the bank on which the check was drawn to cash it. CTR information about the processing company was required if the total of all checks cashed this way on behalf of the processing company was greater than $10,000. But the real issue was whether the bank should also collect CTR information about the boat captain(s) if a single check payable to a particular captain was greater than $10,000, or the total of all captains’ checks cashed in a single day was greater than $10,000. The ruling was that captain information was required if one or more checks initially payable to a particular captain were each more than $10,000. Captain information was also required if the total in a single day of checks payable to a particular captain exceeded $10,000. [See FinCEN Ruling 2000-1 (August 31, 2000).]