The proposed revision is significant, but it does not change the basic concepts behind what are currently described as Phase I and Phase II exemptions.  What it actually does is eliminate some bureaucratic steps in the process - steps that probably were never of any real value, but certainly were a stumbling block for a number of financial institutions in their compliance efforts.  the revisions are offered as an inducement to get financial institutions to voluntarily use the exemption process.

 

The three major changes are:

1.  Eliminating the initial DOEP filing requirement and annual reviews are now required for financial institutions and government entities (those requirements would be still be applicable to companies listed on a major exchange and their subsidiaries).

2.  Eliminating the biennial DOEP filing requirement for exempt persons recognized under Phase II.  The result would be a one-time filing requirement, the same as it currently is for Phase I exempt persons.  Annual reviews would still be required for all exempt persons recognized under Phase II.

3.  Elimiating the 12 month waiting period necessary to qualify as an exempt person under Phase II.  Here, FinCEN is specifically asking for advice as to what should be used to replace this restriction.  There are two options given.

 

FinCEN's issuance is actually a "Notice of Proposed Rulemaking", not a proposed change in the regulation.  As such, it gives the industry a real chance to file comments and participate in the design process before an actual amendment of the regulation is proposed.