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F ederal reserve Bank DALLAS. TEXAS of Dallas 75222 C i r c u l a r No. 78-79 J u n e 14, 1978 AMENDMENT TO BANK SECRECY ACT REGULATIONS TO ALL STATE MEMBER BANKS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: We h a v e b e en a d v i s e d t h a t t h e T r e a s u r y D e p artm en t r e c e n t l y i s s u e d an a m e nd m en t to its Financial R e c o rd k e e p in g a n d R e p o rtin g of C u r r e n c y a n d F o reig n T r a n s a c t i o n s R eg u latio n s (31 CFR 103), w h ic h r e q u i r e s a n y b a n k o r o t h e r financial in stitu tio n th a t s e ll s o r re d e e m s a c e r tific a te of d e p o s i t on o r a fte r J u n e 1, 1978, to maintain a r e c o r d of th e t r a n s a c tio n w h ic h s h all in c lu d e th e d a t e , th e n a m e , a d d r e s s , a n d t a x p a y e r identification n u m b e r of t h e p u r c h a s e r o r o w n e r th e re o f. P r in te d on t h e following p a g e s is a c o p y of t h e D e p artm en t of th e T r e a s u r y ' s notice of a m e n dm en t a s it a p p e a r e d in th e F e d e r a l R e g i s t e r . A ny q u e s ti o n s s h o u ld be d i r e c t e d to o u r B ank S u p e r v is i o n a n d R egu latio n s D e p a rt m en t, E x t. 6274. S in c e r e ly y o u r s , R o b e rt H . Boykin F i r s t V ice P r e s i d e n t Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank: 1-800 -492 -440 3 (intrastate) and 1 -8 00 -527 -497 0 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) E x tra c t From FEDERAL REGISTER, VOL. 43, NO. 98, F r i d a y , May 19, 1978 p p . 21671 - 21673 [4810-25] Title 31—Money and Finance: Treasury CHAPTER I—MONETARY OFFICES, DEPARTMENT OF THE TREASURY PART 103—FINANCIAL RECORDKEEP ING AND REPORTING OF CURREN CY AND FOREIGN TRANSACTIONS Recordkeeping Required AGENCY: Department of the Treas ury. ACTION: Pinal rule. S U M M A R Y : This amendment re quires any bank or other financial in stitution that sells or redeems a certif icate of deposit on or after June 1, 1978, to maintain a record of the transaction which shall include the date, name, address and the taxpayer identification number of the purchas er or owner thereof. The information is needed for law enforcement pur poses. EFFECTIVE DATE: June 1. 1978. FOR FURTHER INFORMATION CONTACT: Robert J. Stankey, Assistant to the Director, Office of Law Enforce ment, U.S. Department of the Treas ury, Room 1462, Washington, D.C. 20220, 202-566-5630. S U P P L E M E N T A R Y INFORMATION: The Treasury Department published a notice of proposed rulemaking in the F e d e r a l R e g i s t e r on March 16, 1978 [43 F R 10940], This notice proposed that banks and other financial institu tions be required to maintain a record of the date of redemption of each cer tificate of deposit sold or redeemed after May 15, 1978, including the above-described information, in order to impede the efforts of persons en gaged in illegal activities to conceal their financial transactions relating to those activities. The notice provided that comments received on or before April 17, 1978, would be considered before action is taken on the proposed rule. D iscussion of C o m m e n t s A total of 19 letters have been re ceived. They include 10 from banks and savings and loan associations, 3 from industry associations, 1 from a member of the general public, and 5 from State and Federal financial regu latory agencies. While a majority of the responses are in substantial agree ment with the proposal, some ex pressed general opposition and many contain technical suggestions for im proving the language. Four of the letters from financial in stitutions opposed the principal provi sions of the proposal. The following summary lists the reasons given as a basis for that opposition together with the Treasury Department's responses: 1. In the opinion of this group of re spondents, the amendment would be ineffective in impeding the conceal ment of financial transactions relating to Illegal activities. Although the pro posal would require a record of the identities of the purchaser and the person presenting a certificate for re demption, there is no provision for re cording the identity of any other person who may purchase it. R e s p o n s e : While the Department recognizes the fact that the proposal would not provide a complete record of the ownership of a negotiable cer tificate of deposit, the proposed amendment would assure the reten tion of records that would be highly useful in tracing the ownership of such a certificate. 2. The additional recordkeeping which would be required under the proposal would increase the operating costs of financial institutions that issue certificates of deposit. R e s p o n s e : It is our understanding that most financial institutions cur rently create records which would sat isfy the requirements of the proposal. It is recognized, however, that some institutions may not be retaining those records as long as the amend ment would require. Nevertheless, In our opinion, the added cost to some in stitutions, of longer record retention is counter balanced by the value of the requirement to law enforcement activi ties. 3. Adequate information is presently maintained for capital notes and regis tered certificates of deposit. R e s p o n s e : It is the Department's belief that, in most instances, financial institutions are maintaining adequate records. The proposal would merely ensure that the relatively small number which have not been keeping these records will do so in the future. 4. Certificates of deposit are often bought and sold through agents. Therefore, it would disrupt the invest ment and collection procedures of the financial community to require the is suing institution to identify the princi pal in each transaction. R e s p o n s e : The Department recog nizes the practical difficulties that this requirement would entail in cer tain instances and has modified the proposal to shift the responsibility for keeping records identifying the princi pal, when an agent acts as interme diary, to the agent. While two of the industry associ ations expressed their approval of the proposed amendment, a third opposed the inclusion of capital notes or deben tures. The opposition was based on the belief that (1) the Bank Secrecy Act does not authorize the Treasury De partment to require records of capital instruments of banks, and (2) the issu ance of capital notes or debentures currently is regulated by Federal bank supervisory agencies and adequate rec ords are maintained. Although the Department believes that it has the necessary authority to require recordkeeping of capital in struments, there does not appear to be sufficient justification for including capital instruments in the proposal. Consequently, the amendment has been modified accordingly. T ext of A me ndment Section 103.34 of Part 103, Title 31, Code of Federal Regulations, is amended by revising paragraphs (a) (1) and (3) and by adding paragraphs (b) (11) and (12) to read as follows: § 103.34 A d d itio n a l r e c o r d s a n d r e ta in e d b y b a n k s . to be m ade (a)(1) With respect to each certifi cate of deposit sold or redeemed after May 31, 1978, or each deposit or share account opened with a bank after June 30, 1972, a bank shall, within 45 days from the date such a transaction occurs or an account is opened, secure and maintain a record of the taxpayer identification number of the customer involved; or where the account or cer tificate is in the names of two or more persons, the bank shall secure the tax payer identification number of a person having a financial interest in the certificate or account. In the event that a bank has been unable to secure, within the 45-day period specified, the required identification, it shall never theless not be deemed to be in viola tion of this section if (i) it has made a reasonable effort to secure such iden tification, and (ii) it maintains a list containing the names, addresses, and account numbers of those persons from w h o m it has been unable to secure such identification, and makes the names, addresses, and account numbers of those persons available to the Secretary as directed by him. A bank acting as an agent for another person in the purchase or redemption of a certificate of deposit issued by an other bank is responsible for obtaining and recording the required taxpayer identification, as well as for maintain ing the records referred to in para graphs (b) (11) and (12) of this section. The issuing bank can satisfy the re cordkeeping requirement by recording the name and address of the agent to gether with a description of the in strument and the date of the transac tion. * • • • • (3) A taxpayer identification number required under paragraph (a)(1) of this section need not be secured for ac counts or transactions with the follow ing: (i) Agencies and instrumentalities of Federal, State, local or foreign gov ernments; (ii) judges, public officials, or clerks of courts of record as custo dians of funds in controversy or under the control of the court; (iii) aliens who are (A) ambassadors, ministers, career diplomatic or consular officers, or (B) naval, military or other atta ches of foreign embassies and lega tions, and for the members of their immediate families; (iv) aliens who are accredited representatives of interna tional organizations which are entitled to enjoy privileges, exemptions and immunities as an international organi zation under the International Organi zation Immunities Act of December 29, 1945 (22 U.S.C. sec. 288), and the m e m bers of their immediate families; (v) aliens temporarily residing in the United States for a period not to exceed 180 days; (vi) aliens not en gaged in a trade or business in the United States who are attending a rec ognized college or university or any training program, supervised or con ducted by any agency of the Federal Government; (vii) unincorporated sub ordinate units of a tax exempt central organization which are covered by a group exemption letter, (viii) a person under 18 years of age with respect to an account opened as a part of a school thrift savings program, pro vided the annual interest is less than $10; (ix) a person opening a Christmas club, vacation club and similar install ment savings programs provided the annual interest is less than $10; and (x) non-resident aliens who are not en gaged in a trade or business in the United States. In instances described in paragraphs (a)(3), (viii) and (ix) of this section, the bank shall, within 15 days following the end of any calendar year in which the interest accrued in that year is $10 or more use its best effort to secure and maintain the ap propriate taxpayer identification number or application form therefor. • * • * * (b) ♦ • • (11) A record containing the name, address, and taxpayer identification number, if available, of the purchaser of each certificate of deposit, as well as a description of the instrument, a notation of the method of payment, and the date of the transaction. (12) A record containing the name, address and taxpayer identification number, if available, of any person presenting a certificate of deposit for payment, as well as a description of the instrument and the date of the transaction. Dated: May 9. 1978. B ette B . A n d erso n , U n d e r S e c r e ta r y o f th e T r e a s u r y . [ P R D o c. 78-13623 P ile d 5-18-78 ; 8:45 a m ]
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