regulations under the Financial Recordkeeping and Currency and

Foreign Transactions Reporting Act of 1970 (Public Law 91-508,

approved October 26, 1970), more commonly referred to as the Bank Secrecy Act.

It is the question of too facile access by third parties to records required to be kept and reports required to be made under

that Act that has been the occasion for introduction of the two bills

Department in the National League's June 24, 1971 letter of comment

on the first set of proposed regulations that appeared in the Federal

Register for June 10, 1971.

We respectfully invite the attention of the Subcommittee to

those objections, none of which was remedied in the regulations as

promulgated.

Inappropriate Format of Regulations

Our June 24, 1971 letter urged that the regulations include

savings and loan associations only with respect to the particular functions they perform that are covered by the spirit of the statute, rather than lumping such associations indiscriminately with "banks" by definition as the regulations do. Our letter stated in part:

"The role played by savings and loan associations in
situations that apparently led to enactment of Public
Law 91-508 was peripheral. Even the style of the statute
carries out that theme. For while going into detail about
record retention requirements for FDIC-insured banks in
a new section 21 added to the Federal Deposit Insurance
Act by section 101 of P. L. 91-508, almost as an afterthought,
the provisions of new section 21 are incorporated by reference
into the field of savings and loan legislation by the addition of
short section 411 to the National Housing Act by section 102

of P. L. 91-508.

"Speaking of section 411 and FSLIC-insured institutions,

the report of the House Committee on Banking and

Currency on H. R. 15073 (House Report No. 91-975,
March 28, 1970, page 18) acknowledges that the

'recordkeeping requirements with respect to

demand deposit account activity would have
little or no application to such institutions, as
they do not offer demand deposit services. To
the extent, however, that such services might
be or become available, they should be covered.
Also, records of the identity of customers of
these institutions are desirable to virtually the

same extent as records of the identity of bank

customers.'

As far as we are aware, no savings and loan association
offers demand deposit services, although many would like to
have authority to do so. Unless and until they do, however, it
seems inappropriate to draft regulations that speak as if savings
and loan associations have authority to handle demand deposits.

Unwarranted Penalties

The National Leagues June 24, 1971 letter of comment also urged

the Treasury Department to state separately in the regulations those

provisions intended to implement Chapter 1, Title I of the Act dealing with recordkeeping by FDIC-insured banks and FSLIC-insured savings and loan associations, because different enforcement sanctions apply to that Chapter 1 than apply to the rest of Title I dealing with recordkeeping and to Title II dealing with reports.

Chapter 2 of Title I deals with "uninsured banks" and

"uninsured institutions" of any type. Civil and criminal penalties in sections 125, 126 and 127 of Chapter 2 apply only to Chapter 2, not to insured banks or insured savings and loan associations that are covered by Chapter 1 of Title I. Injunctive remedies under section 124 of Chapter 2 are likewise restricted to violations of regulations under Chapter 2.

As our letter stated in part:

"Again, as noted in the House Report, supra, page 19:

'No specific provision is made in the bill for
the enforcement of its requirements with respect
to insured banks and insured institutions. This

is because the necessary legal and administrative
machinery is already in existence. Such is not
the case, however, with respect to other institu-
tions. For that reason, Chapter 2 contains such
provisions. Section 124 authorizes injunctive

relief, and section 125 permits the imposition

of a civil penalty not exceeding $1,000 for each

violation. '

Despite this fact, the proposed regulation would have both civil penalties and criminal penalties apply equally to FSLIC-insured institutions with reference to the provisions of Chapter 1, Title I of the statute, as well as to all other entities subject to the regulation in its tentative form. We respectfully submit that such a treatment of sanctions exceeds the Secretary's authority under

the statute. "

Unfortunately, the final regulations were not brought into line with

this National League suggestion. Therefore the Secretary of the Treasury has subjected himself to a charge of acting ultra vires on this issue.

Availability of Records
to Other Federal Agencies

The National League's June 24, 1971 letter of comment further

expressed concern that under the proposed regulations, the Treasury Department could make available to other Federal departments or agencies records required to be sent to it by financial institutions, without affording any opportunity to the persons mentioned in those records to present their views of the matter in an administrative proceeding.

The National League's letter of comment stated in part:
"Proposed section 103.42 is so broad as to place in jeopardy
the confidential relationship of a financial institution to its