Seasoned Customer CTR Exemption Act of 2007

Madam Speaker, I yield 3 minutes to the gentleman from Texas (Mr. Hensarling).

Madam Speaker, I yield 2 minutes to the gentleman from Ohio (Mr. Gillmor).

Madam Speaker, I yield 2 minutes to the gentleman from New Jersey.

Madam Speaker, I yield 2 minutes to the gentleman from Texas (Mr. Neugebauer).

Madam Speaker, I yield to myself such time as I may consume.

I want to take this occasion to first thank Mr. Frank and congratulate him. I think this is the first piece of legislation that he is bringing to the floor in his capacity as the new chairman of the Financial Services Committee. I congratulate you on your appointment to that important position, Mr. Frank.

Yes, I would yield.

That sounds very good to me.

I do want to thank you for this piece of legislation because I think it is both a predictor of the past in that this committee has worked in a bipartisan way to do the right thing for both the customers of financial services and for the financial services institutions. And I am very optimistic that we will continue to work together.

I am going to yield back the balance of my time. I have about a five- page statement that I will spare the body having to listen to.

I do want to say this: last year this legislation came up, a similar legislation to this, both in March and July of last year; so this is basically our third shot in less than a year. It amends the Bank Secrecy Act; it amends specifically the part of that act dealing with currency transaction reports. It does not amend the part dealing with suspicious activity reports. They will continue to report to the different law enforcement agencies. What this will affect is your drug stores, your grocery stores, your retail outlets, who every day are filing these reports.

It is estimated by the Financial Crimes Enforcement Network that the cost of these alone is 25 minutes spent filing each one of these reports. So this is going to be a tremendous burden taken away from them. The American Banking Association said that it will result in a savings of $187 million annually.

I rise in strong support of H.R. 323, The Seasoned Customer CTR Exemption Act of 2007.

H.R. 323, which I introduced with Chairman Frank, simplifies the process by which financial institutions may be exempted from filing currency transaction reports, CTRs, for seasoned customers while still ensuring valuable information is passed on to law enforcement.

Twice last year, legislation similar to H.R. 323 passed the House overwhelmingly: H.R. 5341, the Seasoned Customer CTR Exemption Act of 2006 passed the House by voice vote last July. In addition, the language was included in the House-passed version of regulatory relief legislation--H.R. 3505--which passed the House last March by a vote of 415-2.

H.R. 323 seeks to reduce regulatory burden caused by the Bank Secrecy Act. Specifically, the legislation requires regulators to promulgate new regulations and streamline the process by which financial institutions may be exempted from filing CTRs for seasoned customers. CTRs are required to be filed for cash transactions of $10,000 and above. This filing is required even in the case of seasoned customers-- long-time bank customers that routinely deal in large volumes of cash, but whose business dealings are well-enough understood to rule out the possibility of money laundering or the financing of terror.

The Financial Crimes Enforcement Network, FinCEN, which administers the Bank Secrecy Act, received over 12 million CTRs in 2005. According to a survey conducted by the Treasury Department, more than 30 percent of

these CTRs were on recurring customer transactions that were eligible for exemption for filing under existing rules.

Unfortunately, the current process by which a financial institution can exempt seasoned customers is rarely invoked because it is difficult to understand, needlessly cumbersome, and subject to redundant renewals.

The filing of these superfluous forms imposes an unnecessary cost on both the financial services industry and the law enforcement community.

With respect to the financial services industry, according to data released last year the number of CTRs filed on an annual basis now tops 13.1 million. Even FinCEN's conservative estimate of around 25 minutes per report for filing and recordkeeping indicates the banking industry as a whole devoted about 5.5 million staff hours to handling CTRs in 2005.

Based on a survey by the American Bankers Association, the industry paid around $187 million in wages for this staff time.

A typical bank with $2 billion of assets filed 1,400 CTRs in 2005. These filings took 583 staff-hours, with 438 of the staffhours simply to report on long-standing customers.

With respect to the law enforcement community, not only do these superfluous reports add nothing to its efforts, they actually make it more difficult for the law enforcement community to track suspicious activity by requiring it to wade through millions of pages of unnecessary paperwork.

The Government Accountability Office, GAO, the Internal Revenue Service, IRS, and FinCEN have all recommended that the number of CTRs be reduced by 30 to 40 percent by simply exempting large well- established customers or so-called seasoned customers.

In 1994, the GAO published a report which concluded, based upon an extensive analysis of CTRs, that the volume of reports could be substantially reduced without jeopardizing law enforcement priorities. According to that report, in 1993 the IRS, which administers the CTR program, stated that 30 to 40 percent of these reports of routine deposits by large, well-established retail businesses have no likelihood of identifying potential money laundering or other currency violations.

William Fox, who headed up FinCEN from 2003 to 2006, testified as follows before our Committee:

We know that some of the currency transaction reports filed

by financial institutions are of little relevance in the

investigation of financial crimes. We also know that

depository institutions, especially our community banks,

identify the time and expense of filing CTRs as the number

one regulatory expense. It is clear that our efforts to

encourage the exemption of routine filings on certain

customers has not brought about the reductions of filings

that were sought.

H.R. 323 will reduce the number of CTRs by clarifying the exemption process, thereby freeing financial institutions from having to file CTRs for routine cash transactions with their long- time customers, i.e. supermarkets, fast food restaurants or warehouse stores. This will enable law enforcement to target its resources on CTRs where criminal or terrorist activity is suspected. Moreover, under the legislation, banks will still be required to report suspicious transactions engaged in by exempted businesses pursuant to the Suspicious Activity Reporting regime administered by FinCEN.

Let me close by thanking Chairman Frank, Congressman Hensarling, Congressman Moore, Congressman Renzi, Congresswoman Hooley, and Congresswoman Maloney for all of their work on this legislation. Since this is the first bill that the gentleman from Massachusetts has brought to the floor in his capacity as Chairman of the Financial Services Committee, I want to congratulate him on his appointment, and tell him that I look forward to working with him to build on the record of bipartisan legislative accomplishments that our Committee has compiled over the past several Congresses.

Finally, let me also thank Former FinCEN Director Fox, who deserves a lot of credit for his work on this issue. I look forward to working with the Senate and the new FinCEN Director to ensure that this important legislation is signed into law.

Madam Speaker, I yield back the balance of my time.

Madam Speaker, I move to suspend the rules and pass the bill (H.R. 323) to amend section 5313 of title 31, United States Code, to reform certain requirements for reporting cash transactions, and for other purposes.

Madam Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to express themselves on this and to include therein extraneous material.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, this is an example of sensible regulation because sensible regulation includes deregulation when that is appropriate.

The Committee on Financial Services reported this bill out last year. It passed the House. Surprisingly it managed not to make it through the Senate. The efficiency of that body failed us on this occasion apparently, but we are going to try again.

We believe in regulation, and this is an important area where we provide information to our financial detectives, and it is especially important with regard to terrorist financing.

But too much regulation can defeat the purpose for which regulation is intended, and we have a situation now where the banks are required to report every year on customers' transactions of $10,000 or more. Now, one of the things this bill would do is give the Secretary of the Treasury the authority to increase a dollar figure that has been left unadjusted for inflation for too long.

More importantly, we are talking now about the exemption that is given to what we call seasoned customers of the bank. When the banks are dealing, and this is particularly important for our community bankers, when they are dealing with people whom they know, with whom they have had regular and continuing relationships, having to report every time they do a transaction of $10,000 or more generates extra work for the bank, and I believe, if anything, interferes with the ability of the regulators to find what they should be looking for.

If we are telling people to find needles, we should not set about building them bigger haystacks. What this bill says is that where we are talking about regular customers, regular seasoned customers, they can apply for the exemption, which is in the control of the Secretary of the Treasury, with careful criteria.

And having received that exemption, as long as they remain seasoned customers of the same bank, that process does not have to be repeated every 2 years. It reduces the regulatory burden on banks, and it is particularly important to small banks.

I would ask at this point, Madam Speaker, under my general leave to include a letter to myself and the gentleman from Alabama from America's Community Bankers strongly endorsing this bill.

America's Community Bankers

Washington, DC, January 22, 2007.

Hon. Barney Frank,

Chairman, Financial Services Committee, House of

Representatives Washington, DC.

Hon. Spencer Bachus

Ranking Member, Financial Services Committee, House of

Representatives Washington, DC.

Dear Chairman Frank and Ranking Member Bachus: America's

Community Bankers is pleased to support H.R. 323, the

Seasoned Customer CTR Exemption Act of 2007. The legislation

would make important improvements to the current exemption

system for cash transaction reports (CTRs) by making it

easier to exempt the routine transactions of certain seasoned

business customers. H.R. 323 would more appropriately balance

the cost and benefits of the Bank Secrecy Act's CTR reporting

requirements. The legislation would also reduce the number of

CTRs filed on routine transactions of well-known, law abiding

customers.

We urge the full House of Representatives to adopt H.R. 323

and look forward to working with you to enact this important

legislation.

While we fully support H.R. 323, we urge the Committee to

modernize the Bank Secrecy Act further by increasing the

$10,000 threshold that triggers CTR filing. This threshold

has not been updated since 1970. Increasing the $10,000

trigger would more appropriately balance the reporting

obligations of depository institutions and the information

needs of law enforcement agencies.

Sincerely,

Robert R. Davis,

Executive Vice President and Managing

Director, Government Relations.

What this will do is to reduce the paperwork burden on the banks; it will ease the burden on the regulators. It will not diminish in any way the flow of information that is needed for those whose job it is to keep us safe.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, I reserve the balance of my time.

I thank the gentleman, and if the gentleman would yield.

I would certainly recommend the way this bill is being treated and received on both sides as a precedent that I hope will be followed.

Madam Speaker, I yield back the balance of my time.

Madam Speaker, I rise in strong support of H.R. 323, the Seasoned Customer CTR Exemption Act. This bill eliminates a no-longer- necessary regulatory requirement which increases the costs of doing business for hundreds of financial institutions and their customers who ultimately bear the cost of this regulation.

H.R. 323 provides long overdue relief for our financial institutions from the requirement of keeping records and filing reports called Currency Transaction Reports (CTRs) to the Treasury Department for any financial transaction valued in excess of $10,000.00.

While the original purpose of the regulation, to identify suspected money laundering activities, was a commendable tool for Federal prosecutors, its utility has been adequately replaced since 1996 by the filing of Suspicious Activity Reports required by Treasury Department's Financial Crimes Enforcement Network. The CTRs are no longer the primary tool to identify suspected money laundering activities but banks must still file these reports, unless an exemption is given by the Department to certain ``qualified business customers.'' The exemption procedures, however, have been found to be difficult to understand, cumbersome and still required the banks to obtain annual renewals.

This legislation will allow by statute the Treasury Department to issue regulations that would permit depository institutions to apply for an exemption from the requirement to file CTRs on a ``qualified customer.'' The bill defines a qualified customer as any business organized or incorporated under state or federal law that has maintained a deposit account with the institution for at least twelve months and engaged in multiple currency transactions otherwise subject to the reporting requirement.

An estimated 30 percent of the 12 million CTRs received by the Treasury Department were filed on recurring customer transactions that were eligible for exemption under the current law. This bill will relieve financial institutions of the costly and unnecessary requirement to file CTRs in those instances and allow them to file a one-time notice of exemption for each qualified customer.

The Department will still be permitted where justified to suspend, reject or revoke such exemption notices to assure that it performs its legal duties. It also requires the department to report back within 3 years of enactment on the effects of the bill.

This bill is an example of Congress taking appropriate action after reviewing a regulatory requirement that made sense when first enacted but which no longer is needed. Too often, these burdensome requirements continue on the books to the detriment of our business community. Congress should continue to work with our business community to identity other instances of unnecessary regulations and requirements so that appropriate action can be taken.

Madam Speaker, I thank the gentleman for yielding. I certainly thank him for his leadership in this area to remove some unneeded regulation on our financial institutions. I also want to thank our new chairman, the gentleman from Massachusetts, for his steadfast support on this issue as well.

Madam Speaker, current Federal regulations require financial institutions to file a currency transaction report with the IRS for any customer transaction over $10,000 during a business day.

We all know that these CTRs, as they are called, are designed to help our Federal law enforcement thwart money laundering and other illegal activities; but the problem is that this $10,000 threshold which was set in 1970 is so low in the existing exemption process, so cumbersome and costly that it is causing banks to repeatedly file CTRs for many of their known and expected regular business transactions for their well- known customers.

And it doesn't matter if that business has been a so-called ``seasoned customer'' for the financial institution for 5, 10, 15 or even 20 years. Right now it is simply too difficult for our financial institutions to apply for exemptions for our customers that they know are not a risk. So this forces, Madam Speaker, our financial institutions to file CTRs when they know the customer is not a risk just to protect themselves from legal liability or potential large fines.

And so when law enforcement is looking for a needle in a haystack, our financial institutions are being asked to put more hay on the stack and they are being told to pay for it by taking money away from their local communities that otherwise could be used for local lending. If the financial institutions passed these CTR compliance costs on to customers, through higher fees or higher interest rates, it makes it more difficult for American citizens to save for retirement, finance a child's college education, or launch a small business that creates jobs.

This bill, which I have long supported, will fix this problem by clarifying the existing CTRs filing exemption for seasoned customers. And as a result of this legislation, when passed, a number of the 13 million-plus CTRs filed annually would stop, allowing banks to devote more of their resources to improving other suspicious activity reporting.

The fact remains, Madam Speaker, when we come across a regulation like this, if we cannot determine a compelling reason for it to exist in the modern marketplace, we have a duty to either modify it or eliminate it, and that is what we are doing today.

Congress today can help reduce the cost of banking for customers without jeopardizing critical law enforcement goals. I urge all of my colleagues to support this important bill.

Madam Speaker, I rise today in support of H.R. 323, the Seasoned Customer CTR Exemption Act.

I appreciate the work of Chairman Frank and Ranking Member Bachus to introduce this legislation and get it on the floor quickly in this Congress.

The last Congress succeeded in passing some much-needed and long overdue regulatory relief for some of our financial institutions. Unfortunately, the provisions that originally were passed in this body as related to the CTR exemption were not included in that very important legislation.

In passing H.R. 323 today, the House is saying once more that we believe financial institutions, their customers and national security will be better served by exempting institutions from filing CTRs for their very qualified and seasoned customers.

Banks in my district have been telling me for the past few years that this legislation is needed. They tell us about the countless staff hours that it takes to file reports for customers that they have had relationships with for 20, 30 and 40 years just to be in compliance with the current regulation.

Under H.R. 323, instead of filing a form every time one of their long-standing seasoned customers comes in with a transaction over $10,000, they will file a one-time exemption for that customer to be recognized as a seasoned and qualified customer. I think that makes more sense for the American people. I think it makes more sense to use common sense.

Someone told me recently that the District of Columbia geographically is a 10-square-mile area, some have said it is a 10-square-mile logic- free environment. Well, we have an opportunity to overcome that feeling today by bringing some logic to the way we handle these cash transactions.

I urge my colleagues to support H.R. 323. Let's bring some common sense and logic back into the way government handles national security and recognize that banks and their seasoned customers, those relationships are long-standing and that time would be better served in looking at other opportunities.