I. INTRODUCTION
The Financial Crimes Enforcement Network (FinCEN) has issued a guidance to clarify, for currency transaction reporting purposes, the aggregation of multiple transactions conducted by businesses with common ownership. The Guidance addresses common ownership aggregation issues beyond the limited set of circumstances described in FinCEN Ruling 2001-2. That ruling was specific to an individual who owned three incorporated businesses with separate tax identification numbers and accounts, and who made a practice of using funds from one account to pay for the expenses associated with the other businesses. FinCEN has supplemented that ruling with the following additional guidance.
A. Did the Same Person Conduct the Transactions?
FinCEN’s regulations implementing the Bank Secrecy Act (BSA) require financial institutions to aggregate multiple currency transactions “if the financial institution has knowledge 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 during any one business day.” Accordingly, the financial institution must file a currency transaction report (CTR) when it has knowledge that the same person has conducted multiple transactions that total more than $10,000 in currency in one business day or when it has knowledge that multiple transactions that total more than $10,000 in currency in one business day are on behalf of the same person.
The Guidance reiterates the requirement to aggregate transactions that are conducted by the same person. For example, a financial institution is considered to have knowledge that the same person deposited $11,000 in cash transactions in a single business day if it is aware that the same individual made both a $5,000 cash deposit into his personal account and, later that same business day, a $6,000 cash deposit into his employer’s business account. Accordingly, the financial institution is required to file a CTR. Specifically, the financial institution is expected to complete two sections identifying the persons on whose behalf the transactions were conducted. The remaining parts of the CTR should be filled out according to the form instructions. (NOTE: If a customer owns several businesses that are not incorporated, the account or accounts of the customer and the transactions must be aggregated.)
The new Guidance also addresses an issue raised when a corporation owned by a customer pays a significant number of personal expenses of the customer. In cases in which a corporation pays some of the customer’s personal expenses, the customer and the corporation may not be operating separately and independently and the customer’s cash transactions may need to be aggregated with that of the corporation.
B. On Whose Behalf Were the Transactions Conducted?
Although multiple businesses may share a common owner, the presumption is that separately incorporated entities are independent persons. Therefore, 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. The presumption that the entities are separate, however, is rebuttable. It is ultimately up to a financial institution 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. The results of this determination affect whether the businesses' currency transactions should be aggregated for purposes of complying with currency transaction reporting obligations.
C. Factors to be Considered
In determining whether two or more separately incorporated entities are being operated in a manner that makes them something other than separate and independent businesses, no single issue is controlling. The following factors should be considered in making a determination:
Since these determinations are subjective in nature, financial institutions may want to be aggressive in making aggregation determinations to avoid supervisory criticism.