Do We Need to File a CTR for Nonmembers?
A nonmember walks into a credit union’s branch in location A and completes a wire transfer for $6,000 to John Smith. Later that day, the same nonmember visits a different branch – in location B – and requests another wire transfer to John Smith for $6,000. Both transactions involve cash. Neither branch is aware of the wire transfer made at the other location. Does this credit union need to file a currency transaction report (CTR)? Aggregating transactions for CTRs can be tricky, especially when nonmembers are involved.
Section 1010.311 of the FinCEN regulations requires financial institutions, including credit unions, to file a CTR for “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...”
Importantly, section 1010.313 requires a credit union to aggregate multiple currency transactions – and therefore treat them as one single transaction – if the credit union “has knowledge” the transactions:
- occur in a single business day;
- result in more than $10,000 of cash-in or cash-out; and
- are conducted by or on behalf of the same person.
The regulation requires aggregation when the credit union “has knowledge” of those circumstances. What does it mean for a credit union to “have knowledge” of those things? FinCEN discussed this matter in this FinCEN Ruling from 2003, which states:
“If a financial institution has knowledge that multiple transactions by or on behalf of any person result in either cash in or cash out totaling more than $10,000 during any one business day, the financial institution must file a CTR.  For purposes of the regulations implementing the Bank Secrecy Act, a financial institution includes all of its agents and branches.”
As the quote states, section 1010.100(t) of the FinCEN regulations defines “financial institution” to include “each agent, agency, branch or office” of the financial institution.
That particular ruling presented facts similar to the hypothetical posed at the beginning of this blog – although it involved two agents of a money transmitter, as opposed to branches of a credit union. FinCEN’s ruling reached the conclusion that the money transmitter “had knowledge” of both transactions, because the definition of “financial institution” includes agents and branches – meaning that the knowledge of each agent or branch will be imputed to the financial institution as a whole.
Given that “financial institution” is defined to include branches, FinCEN regulations would impute each branch’s knowledge to the credit union as a whole. The credit union is considered to “have knowledge” of everything each individual branch has knowledge of. If a credit union’s branches each have enough information that, when aggregated together, would require a CTR filing, then the FinCEN regulations will consider the credit union itself to have that knowledge and will require the credit union to file a CTR.
So, what about nonmembers? Is there an exception for transactions conducted by nonmembers, since credit unions have less information about them? Unfortunately, no. The regulation does not differentiate between credit union members and nonmembers. A credit union’s CTR obligations are the same even when the transaction is conducted “by or on behalf of” of a nonmember. Credit unions may want to collect enough information for each nonmember currency transaction that the credit union may need to fill out a CTR form, if needed.
Ultimately, how to comply with the CTR requirements will be a risk-based decision, and may be different for each credit union. Some of the issues around aggregating transactions, especially for nonmembers who do not have accounts with the credit union, could boil down to a matter of the software used by the credit union. Some credit unions use software that allows them to enter information for nonmember transactions, and which can alert the credit union when the software system recognizes multiple transactions involving the same person in a single business day. Credit unions that have experienced issues in this area may want to reach out to their vendors to discuss options for tracking nonmember transactions across multiple locations, and alert capabilities when aggregation and a CTR may be required.
About the Author
Nick St. John, was named regulatory compliance counsel in March 2020. In this role, Nick helps credit unions with a variety of compliance issues.