During independent audits, TCA tests for initial and annual due diligence reviews of exempt customers. There are four requirements for a Phase II exemption.
- Five transactions that exceed reporting thresholds in a 12-month period.
- The customer has a transaction account for at least 2 months.
- The customer is organized in a U.S. State.
- The customer doesn’t derive more than 50% of its revenue from illegible activity.
In recent audits, TCA notes the institutions are not retaining evidence of Secretary of State website searches to verify that the business is organized in a State and is still in good standing. A screen print from the website demonstrating that the business is still in good standing satisfies the requirement and should be included in the annual due diligence documentation.