Full text of Federal Reserve Bank of New York Circulars : Financial Recordkeeping by Banks

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FED ER A L RESERVE BANK
OF NEW YORK

FINANCIAL RECORDKEEPING BY BANKS
Identity of Persons Who Purchase or Redeem Certificates of Deposit
T o A ll S ta te M e m b e r B a n k s
in th e S e c o n d F e d e r a l R e s e r v e D i s t r i c t :

The Department of the Treasury recently issued an amendment to its Financial Recordkeeping
and Reporting of Currency and Foreign Transactions Regulation that requires banks and other
financial institutions to maintain records of the identities of persons who buy or redeem certificates
of deposit, effective June 1, 1978.
Printed below is the text of the amendment. Any questions regarding this matter may be
directed to our Consumer Affairs Division (Tel. No. 212-791-5919).
P aul A. V olcker,

President.
notice of proposed rulem aking in th e
F ederal R egister on March 16, 1978
Title 31— M oney and Finance:
[43 FR 10940]. T h is notice proposed
th a t banks and other financial in stitu ­
Treasury
tions be required to m aintain a record
of th e date of redem ption of each cer­
CHAPTER I— MONETARY OFFICES,
tificate of deposit sold or redeem ed
DEPARTMENT OF THE TREASURY
after May 15, 1978, including th e
above-described inform ation, in order
PART 103— FINANCIAL RECORDKEEP­ to im pede th e efforts of persons en ­
IN G A N D REPORTING OF CURREN­ gaged in illegal activities to conceal
CY A ND FOREIGN TRANSACTIONS th eir financial transactions relating to
th ose activities. T h e notice provided
th a t com m ents received on or before
Recordkeeping Required
April 17, 1978, would be considered
AGENCY: D epartm ent of th e T reas­ before action is taken on th e proposed
ury.
rule.
ACTION: Final rule.
D iscussion of Comments
[4 8 1 0 -2 5 ]

SUM MARY: T h is am endm ent re­
quires any bank or other financial in­
stitu tion th a t sells or redeem s a certif­
icate of deposit on or after Ju ne 1,
1978, to m aintain a record of th e
transaction w hich sh all include th e
date, nam e, address and th e taxpayer
id en tification num ber o f the purchas­
er or owner thereof. T h e inform ation
is needed for law en forcem en t pur­
poses.
EFFECTIVE DATE: Ju ne 1, 1978.

A total of 19 letters have been re­
ceived. T h ey include 10 from banks
and savings and loan associations, 3
from industry associations, 1 from a
m em ber of th e general public, and 5
from S tate and Federal financial regu­
latory agencies. W hile a m ajority of
th e responses are in substantial agree­
m ent w ith th e proposal, som e e x ­
pressed general opposition and m any
contain techn ical suggestions for im ­
proving th e language.
Four of th e letters from financial in­
FO R
FU R T H E R
INFORM ATION
stitu tion s opposed th e principal provi­
CONTACT:
sions of th e proposal. T h e follow ing
R obert J. Stankey, A ssistant to th e sum m ary lists th e reasons given as a
D irector, O ffice of Law E nforce­ basis for th a t opposition togeth er w ith
m ent, U.S. D epartm ent of th e Treas­ th e Treasury D ep artm ent’s responses:
ury, R oom 1462, W ashington, D.C.
1. In th e opinion of th is group of re­
20220, 202-566-5630.
spondents, th e am endm ent would be
SU PPLEM EN TA R Y INFORM ATION: in effective in im peding th e conceal­
T h e Treasury D ep artm ent published a m ent of financial transactions relating




to illegal activities. A lthough th e pro­
posal would require a record of the
id en tities of th e purchaser and th e
person presenting a certificate for re­
dem ption, there is no provision for re­
cording th e id en tity of any other
person w ho m ay purchase it.
R e s p o n s e : W hile th e D epartm ent
recognizes th e fact th at th e proposal
would not provide a com plete record
o f th e ow nership of a negotiable cer­
tificate of deposit, th e proposed
am endm ent would assure th e reten ­
tion of records th a t would be h ighly
useful in tracing th e ow nership of
such a certificate.
2. T h e additional recordkeeping
w hich would be required under th e
proposal would increase th e operating
costs of financial in stitu tions that
issue certificates of deposit.
R e s p o n s e : It is our understanding
th a t m ost financial in stitu tions cur­
rently create records w hich would sat­
isfy th e requirem ents of th e proposal.
It is recognized, however, th a t som e
in stitu tion s m ay not be retaining
th ose records as long as th e am end­
m ent would require. N evertheless, in
our opinion, th e added cost to som e in­
stitution s, of longer record retention is
counter-balanced by th e value of th e
requirem ent to law enforcem ent activi­
ties.
3. A dequate inform ation is presently
m aintained for capital notes and regis­
tered certificates of deposit.
R e s p o n s e : It is th e D ep artm ent’s
b elief that, in m ost instances, financial
in stitu tion s are m aintaining adequate
records. T h e proposal would m erely

( over)

ensure th a t th e relatively sm all
num ber w hich have n ot been keeping
th ese records will do so in th e future.
4.
C ertificates of deposit are often
bought and sold through agents.
T h erefore, it would disrupt th e in vest­
m ent and collection procedures of th e
financial com m unity to require th e is­
suing in stitu tion to id en tify th e princi­
pal in each transaction.
R e s p o n s e : T h e D epartm ent recog­
nizes th e practical d ifficulties th a t
th is requirem ent would en tail in cer­
tain instances and has m odified th e
proposal te sh ift th e responsibility for
keeping records id en tifyin g th e princi­
pal, w hen an agent acts as in term e­
diary, to th e agent.
W hile two of th e industry associ­
ations expressed th eir approval of th e
proposed am endm ent, a third opposed
th e inclusion of capital n otes or deben­
tures. T h e opposition was based on th e
b elief th a t (1) th e Bank Secrecy Act
does n ot authorize th e Treasury D e­
partm ent to require records of capital
instrum ents of banks, and (2) th e issu­
ance of capital n otes or debentures
currently is regulated by Federal bank
supervisory agencies and adequate rec­
ords are m aintained.
A lthou gh th e D ep artm ent believes
th a t it has th e necessary au th ority to
require recordkeeping o f capital in ­
strum ents, there does n ot appear to be
su fficien t justification for including
capital in strum ents in th e proposal.
C onsequently, th e am endm ent has
been m odified accordingly.

T ext of Amendment
S ection 103.34 of Part 103, T itle 31,
Code of F ederal R egulations, is
am ended by revising paragraphs (a)
(1) and (3) and by adding paragraphs
(b) (11) and (12) to read as follows:
§ 103.34 Additional records to be made
and retained by banks.
(a)(1) W ith respect to each certifi­
cate of deposit sold or redeem ed after
May 31, 1978, or each deposit or share
account opened w ith a bank after
June 30, 1972, a bank sh all, w ithin 45
days from th e date su ch a transaction
occurs or an account is opened, secure
and m aintain a record of th e taxpayer
identification num ber of th e custom er
involved; or w here th e account or cer­
tificate is in th e nam es of two or m ore
persons, th e bank sh all secure th e ta x ­
payer id en tification num ber of a
person having a financial in terest in
th e certificate or account. In th e event
th a t a bank has been unable to secure,
w ithin th e 45-day period specified, th e
required identification, it sh a ll n ever­




th eless not be deem ed to be in viola­
tion of th is section if (i) it has m ade a
reasonable effort to secure such iden­
tification, and (ii) it m aintains a list
containing th e nam es, addresses, and
account num bers o f th o se persons
from w hom it has been unable to
secure such identification, and m akes
th e nam es, addresses, and account
num bers of th ose persons available to
th e Secretary as directed by him . A
bank acting as an agent for another
person in th e purchase or redem ption
of a certificate of deposit issued by an­
other bank is responsible for obtaining
and recording th e required taxpayer
identification, as w ell as for m aintain­
ing th e records referred to in para­
graphs (b) (11) and (12) of th is section.
T h e issuing bank can satisfy th e re­
cordkeeping requirem ent by recording
th e nam e and address of th e agent to ­
geth er w ith a description o f th e in ­
strum ent and th e date of th e transac­
tion.

$10; (ix) a person opening a C hristm as
club, vacation club and sim ilar in sta ll­
m ent savings programs provided th e
annual in terest is less th a n $10; and
(x ) non-resident aliens w ho are n o t en ­
gaged in a trade or business in th e
U nited S tates. In instances described
in paragraphs (a)(3), (viii) and (ix) of
th is section, th e bank shall, w ithin 15
days follow ing th e end of any calendar
year in w hich th e interest accrued in
th a t year is $10 or more use its best
effort to secure and m aintain th e ap­
propriate
taxpayer
identification
num ber or application form therefor.

•

•

•

•

•

(b) * • •
(11) A record containing th e name,
address, and taxpayer identification
number, if available, of th e purchaser
of each certificate of deposit, as well
as a description of th e instrum ent, a
notation of th e m ethod of paym ent,
and th e date of th e transaction.
(12) A record containing th e name,
address and taxpayer identification
*
*
•
•
•
number, if available, of any person
presenting a certificate of deposit for
(3)
A taxpayer identification num ber
required under paragraph (a)(1) of paym ent, as w ell as a description of
th is section need n ot be secured for ac­ th e instrum ent and th e date of th e
counts or transactions w ith th e follow ­ transaction.
ing: (i) A gencies and in strum entalities
Dated: May 9, 1978.
of Federal, S tate, local or foreign gov­
B ette B. A n d e r so n ,
ernm ents; (ii) judges, public officials,
U n d e r S e c r e ta r y o f th e T re a su r y .
or clerks of courts of record as custo­
1FR Doc. 78-13623 F iled 5-18-78; 8:45 am ]
dians of funds in controversy or under
th e control of th e court; (iii) aliens
w ho are (A) ambassadors, m inisters,
career diplom atic or consular officers,
or (B) naval, m ilitary or other a tta ­
ch es o f foreign em bassies and lega­
tions, and for th e m em bers o f th eir
im m ediate families; (iv) aliens w ho are
accredited representatives of interna­
tional organizations w hich are en titled
to enjoy privileges, exem ptions and
im m unities as an international organi­
zation under th e International O rgani­
zation Im m unities Act of D ecem ber 29,
1945 (22 U.S.C. sec. 288), and th e m em ­
bers of th eir im m ediate families; (v)
aliens tem porarily residing in th e
U nited S ta tes for a period not to
exceed 180 days; (vi) aliens n ot en ­
gaged in a trade or business in th e
U nited S ta tes w ho are attending a rec­
ognized college or university or any
training program, supervised or con­
ducted by any agency of th e Federal
Governm ent; (vii) unincorporated sub­
ordinate units of a tax exem pt central
organization w hich are covered by a
group exem ption letter, (viii) a person
under 18 years of age w ith respect to
an account opened as a part o f a
school th rift savings program, pro­
vided th e annual in terest is less than

FEDERAL REGISTER, V O L 43, NO. 98— FRIDAY, M AY 19, 1978