First National Bank has several exempt customers. • Alpha is an exempt person because its stock is listed on a major stock exchange. • Beta is an exempt person because it meets the nonlisted customer requirements. • Zeta is exempt because it is a payroll customer. For which customer(s) must the bank conduct an annual review to determine its continuing eligibility to be exempt from CTR filings?

The Bank Secrecy Act (BSA) requires financial institutions to conduct an annual review for Phase II exempt customers to ensure they continue to meet the eligibility criteria. Phase II customers include non-listed businesses (like Beta) and payroll customers (like Zeta), whose eligibility is based on transactional behavior and risk. In contrast, Phase I exempt persons, such as companies whose stock is listed on a major exchange (like Alpha), do not require an annual review because their status is considered stable and publicly verifiable.

A. Alpha is a Phase I exempt person (a listed public company) and does not require an annual review per BSA regulations.
B. This is partially correct as Beta requires a review, but it is incomplete because Zeta, also a Phase II customer, requires one as well.
C. This is partially correct as Zeta requires a review, but it is incomplete because Beta, also a Phase II customer, requires one as well.

1. Financial Crimes Enforcement Network (FinCEN). (2020). FFIEC Bank Secrecy Act/Anti-Money Laundering Examination Manual. Section: "Currency Transaction Reporting Exemptions," pp. 148-149. The manual states, "For Phase II customers, the bank must document an annual review of each customer’s account activity to determine whether the customer continues to meet the exemption criteria." It clarifies Phase I customers do not require this review.

2. Code of Federal Regulations, 31 C.F.R. § 1020.315(e)(2). This section details the monitoring requirements for exempt persons, specifying the annual review for customers exempt under paragraph (b)(6) (non-listed business) and (b)(7) (payroll customers) of the same section.