Hillcrest Bank
May 4, 2005
Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th St., NW
Washington, DC 20429
RE: EGRPRA burden reduction comment
Dear Mr. Feldman,
Thank you for the opportunity to submit comment on the
regulatory burden of money laundering, safety and soundness,
and securities laws. Hillcrest Bank is a Kansas chartered
commercial bank with just over one billion dollars in
assets. We have branches in the Kansas City and Wichita
metropolitan areas. We have submitted comment on two
rules presented for review this period.
Bank Secrecy Act Compliance
First, we believe the $10,000 daily CTR reporting threshold
is outdated and should be increased to $25,000 to reflect
the affects of inflation. The current limit causes
reporting of transactions to the extent that they become
burdensome to both the banks that complete the form and
the agencies that review them. This excessive reporting
simply fills the IRS database with reports that may not
be useful to law enforcement. The time it takes to enter
the reports into the database and for someone to review
them must be growing longer. For example, if we filed
a CTR that contained an error, it now takes months to
receive correspondence from the IRS about that error.
It did not used to take that long and we believe this
is the result of the growing number of CTRs filed. It
stands to reason that if the number of reports received
is growing, then the threshold for reporting is now including
transactions that are normal, routine, transactions for
some customers and the threshold should be increased.
Secondly, the number of CTRs filed could be reduced by
alleviating some of the burden regarding Phase II exemptions.
We don’t believe it takes 12 months to determine
the normal routine activity of a business. We believe
six months would be more appropriate and less burdensome
for both the bank and those persons who enter and review
the CTRs.
Further, the exemption process has become more burdensome
for most banks than filing CTRs. To file a CTR for a
customer that routinely exceeds $10,000 in a cash transaction,
a photocopy template of a nearly completed CTR (needing
only the amount and date of the transaction to be filled
in) or using CTR preparation software takes less time
than setting up and maintaining the exemption. In order
to keep a Phase II exemption, annually we must monitor
the number of times the customer exceeded $10,000 over
the last 12 months to ensure at least eight large cash
transactions were performed, request a copy of the customer’s
financial statement, and upon receipt review the financial
statement to ensure no more than 50% of its gross revenues
are derived from ineligible activities. We record daily
the amount of cash deposited or withdrawn by our exempt
customers and review the data periodically in order to
detect any unusual ranges of cash activity. This process
proves to be more costly for us to have exemptions versus
simply filing CTRs for each reportable transaction. Additionally,
during our recent regulatory examination, we believe
our examiners spent more time reviewing our exemptions
than they did reviewing our CTRs filed. Naturally, then,
we also spent more time defending our exemptions than
it would have taken to simply file the CTRs. If the reasoning
behind offering Phase II exemptions is to alleviate the
reporting burden for legitimate transactions for which
law enforcement finds little value, it stands to reason
that the exemption process for such entities should be
less burdensome for banks than filing the otherwise required
CTRs.
Next, we recommend the biennial exemptions monitoring
requirement be removed as unnecessary. We already review
our exemptions on a daily basis, as described above,
and are further required to at least annually review
and verify a customer’s exempt status. We believe
it would be more prudent to only notify the IRS about
an initial exemption, a change in exemption status, and
when the bank has revoked the exemption.
Lastly, regarding sales of monetary instruments such
as official checks, traveler’s checks, or money
orders, we believe the reporting threshold should be
increased to $10,000 to reflect the affects of inflation
since this rule was implemented. Alternatively, perhaps
the current recordkeeping requirement should only affect
non-accountholders. Banks are already required to monitor
accounts for suspicious activity, and that would include
frequent purchases of monetary instruments for no apparent
legitimate purpose. Recording monetary instrument purchase
information for accountholders, whose identities have
been verified and whose transaction history is monitored,
appears to be unduly burdensome.
Reports of Crimes or Suspected Crimes
We believe the threshold for filing a SAR should be
increased to the same as the requirements for filing
CTRs, which we believe should be $25,000. This would
simplify compliance and may also reduce the number
of reports filed that are of little value to law enforcement.
We have filed numerous CTRs for which we have received
a response from the FBI that they will take no action
because the dollar amount of the suspicious activity
did not meet prosecutive guidelines. It seems unnecessary
to require filing of reports that will not be used.
Similarly, we recommend establishing a dollar threshold
for insider abuse that would eliminate SARs for small
dollar theft. Currently insider abuse involving any
amount must be documented and reported and that sometimes
proves more costly than the amount of the insider abuse.
Sincerely,
Brad Bischoff
Vice President/Compliance
Hillcrest Bank
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