C/A Commercials

Compliance Alliance Question of the Week

What constitutes “demonstrable consent” when meeting ESign requirements? Are banks required to collect information that the consumer actually read the disclosure apart from just acknowledgement?

 The statutory requirement can be found in 15 USC §7001, and reads as follows:

"[T]he consumer—

(i) prior to consenting, is provided with a statement of the hardware and software requirements for access to and retention of the electronic records; and

(ii) consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent[.]"



Technically, the statute does not require that the consumer actually read the statement of hardware and software requirements--the consumer just needs to be presented with them.

As for "demonstrable consent," typically the consumer must either first consent, or later confirm any prior consent they gave, using the same method of delivery by which they'll be receiving the disclosures. C/A considers that to be a manner that "reasonably demonstrates" a consumer’s ability to access electronic information, in accordance with the statutory requirement above. Best practice would be for the consumer to show some evidence that they viewed the actual e-SIGN disclosure (such as by including a numeric code in the document and then asking them to enter that code when providing consent), but it is not absolutely required to do that as long as the process meets the bare minimum statutory requirements.

Bank XYZ has a Phase II Exemption customer that is no longer eligible for the CTR Exemption since they haven't had 5 or more transactions over the CTR threshold in 2020. What do they need to do?

Bank XYZ would need to start filing CTRs as appropriate and cease treating them as exempt. There is no need to backfile CTRs.

“Customers no longer eligible for exemption
Question: What should a bank do if, during its annual review of a listed business or Phase II customer, it discovers that the customer no longer meets all the criteria for exemption?
Answer: During the annual review of a Phase II exempt customer, a bank may conclude that a customer is no longer eligible for exemption (for example, if an exempt non-listed business customer conducted only four reportable currency transactions during the year under review). At the time the customer's ineligibility is discovered, the bank should document its determination of ineligibility and cease to treat the customer as exempt. The bank is not required to back file CTRs with respect to a designated Phase II customer that had met the eligibility requirements in a preceding year but was subsequently found to be ineligible during the bank's timely completion of its annual review.”

Guidance on Determining Eligibility for Exemption from Currency Transaction Reporting Requirements:


Bank ABC has a new business customer that will require flood insurance. Their insurance agent just sent over what they are saying is their flood policy. However, it looks like it is just an endorsement under their business policy. Is that acceptable or should Bank ABC request a separate policy?

The bank would want to review it and determine whether to accept this under the private flood insurance policy. The only time the Bank would "have" to accept it is if it meets the mandatory acceptance requirements as set out below:

“Mandatory Acceptance

·       Under the regulation, “private flood insurance” means an insurance policy that: is issued by an insurance company that is licensed, admitted or otherwise approved to engage in the business of insurance by the insurance regulator of the State or jurisdiction in which the property to be insured is located, or

·       is recognized, or not disapproved as a surplus lines insurer by the insurance regulator of the State or jurisdiction in which the property to be insured is located in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property;

·       provides flood insurance coverage that is at least as broad as the coverage provided under the NFIP’s Standard Flood Insurance Policy (SFIP) for the same type of property, including when considering deductibles, exclusions and conditions offered by the insurer; to be at least as broad as the coverage provided under an SFIP, the policy must at a minimum:

If it does not meet that, then the Bank won't be required to accept it. The Bank can require a separate flood policy in this case if it requires it for its internal underwriting standards, or as a part of secondary market investor requirements.

C/A has a checklist to help for private flood insurance here: https://www.compliancealliance.com/find-a-tool/tool/private-flood-insurance-policy-checklist