Attorney Asks Treasury to Clarify Reporting Rules for Business Cash Receipts

Tiffany Smith in the IRS Chief Counsel's Office recommended that we contact you to formally request published guidance concerning IRS/FinCEN Form 8300 reporting issues. We represent a number of transfer agents involved in mutual fund transactions. These transfer agents are not defined as a "financial institution" under the Bank Secrecy Act but are often subject to certain anti-money laundering controls, such as suspicious activity reporting, because many transfer agents are subsidiaries of bank or thrift holding companies. Transfer agents generally perform the "back office functions" for mutual funds, including providing custodial services for shares owned by the fund's customers, processing purchases and redemptions of fund shares, and providing routine accounting and other administrative services.

With the implementation of mutual fund SAR due diligence requirements. See FinCEN/SEC, "Customer Identification Programs for Mutual Funds," 68 Fed. Reg. 25131, 25137 (May 9, 2003), codified at, 31 CFR § 103.131(b)(2)(ii)(B), and Suspicious Activity Report ("SAR") reporting requirements; see FinCEN, "Amendment to the Bank Secrecy Act Regulations -- Requirement that Mutual Funds Report Suspicious Transactions," 71 Fed. Reg. 26213, 26217 (May 4, 2006), codified at, 31 CFR § 103.15. Several of our transfer agent clients have agreed to act as an agent for mutual funds with respect to their anti-money laundering compliance requirements, including compliance with Form 8300 and SAR detection and reporting.

This anti-money laundering compliance undertaking will include filing, as appropriate, the IRS/FinCEN Form 8300. Mutual funds are permitted to identify their customers by way of using customer identification procedures under Section 326 of the USA PATRIOT Act which anticipates third party verification and does not require face- to-face meetings. The Form 8300 regulations under 26 U.S.C. § 6050I, and the Form 8300 itself, however, currently anticipate direct face-to-face contact with the individual providing the cash or cash equivalents and for whom the form is filed. See Form 8300, "Specific Instructions", Item 14; Treas. Reg. § 1.6050I-1(e)(3)(ii).

We respectfully suggest that in dealing with accounts opened by mutual funds which can occur by way of mail, telephone or through other financial intermediaries, that the current regulations do not provide sufficient guidance where face-to-face contact is rare, and where it is difficult to obtain some customer information for purposes of completing the Form 8300. We, therefore, request that guidance be undertaken to change the regulations and/or change the instructions to the Form to allow information required for the IRS/FinCEN Form 8300 to be obtained by non-face-to-face meetings or by other non-documentary methods of verification.¹

We look forward to discussing this with you further.