Q: What is the exempt status of a Phase II customer who reorganizes his business? For example, what is the recourse for an exempt customer with a doing business as ("DBA") account who forms a limited liability corporation as his business grows.
A: Since the restructuring of a business may cause that business to become ineligible for exemption or otherwise make the original DOEP filing inaccurate or incomplete with respect to the newly restructured business, banks should consider evidence of a business restructuring as part of their annual review or ongoing customer due diligence. Potential evidence of such restructuring could include changes in the customer's management, business purpose, operations, customers, ownership, or account relationship with the bank. More specifically, changes to a customer's account relationship with the bank could include the issuance of a new taxpayer identification number,13 modifications to the names on the account, changes in account activity, or the addition or removal of signors or controllers of an account.
Banks should use a risk-based approach when determining which factors to consider to ensure that a customer remains eligible for exemption and that the original DOEP filing continues to identify that customer accurately and completely. To the extent that such changes make the original DOEP filing inaccurate or incomplete with respect to the newly restructured business, a bank should reevaluate the business for exemption. In such cases, the bank may consider using the risk-based approach for exempting the newly restructured business prior to the two month waiting period. If the restructured business is eligible for exemption and the bank wishes to treat them as such, a new DOEP report must be filed with FinCEN.
In the example used in the question, an unincorporated business that incorporates would likely need reevaluation for the purposes of CTR exemption eligibility.14 Accordingly, after verifying that the newly restructured business was eligible for exemption, a bank wishing to treat that customer as exempt would need to file a new DOEP report.
This FAQ was obtained from FinCEN’s issuance FIN-2012-G003 – Guidance on Determining Eligibility for Exemption from Currency Transaction Reporting Requirements, which may be found here: