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In a memorandum of June 19, 1978, explaining the importance of the regulatory amendment that requires the maintenance of data with regard to the selling or redeeming of certificates of deposit, the Treasury Department stated that it had become:

evident that use of negotiable bearer certificates has not been confined to legitimate financial purposes. These certificates have been issued in small denominations and have been sold to the public in a manner suggesting that they could be used to evade taxes. In addition, there is some evidence that they are being purchased by drug traffickers.

For individuals, the taxpayer identification number is the social security number; corporations, trusts, partnerships, nonprofit organizations and other entities will be identified by the IRS employer identification number. If an account is opened in the names of more than one individual, the association is required to obtain and maintain a record of the social security number of at least one individual who has a financial interest in that account. In addition:

1. Financial institutions are required only (a) to make a reasonable effort to obtain a copy of a taxpayer's identification number and (b) to maintain a list of those persons who have failed to provide such a number after a 45-day period. (Section 103.34(a)(1)).

2. Taxpayer identification numbers need not be secured in every instance; most notably they are not needed with respect to accounts for (a) certain public funds, (b) certain aliens, including non-resident aliens who are not engaged in a trade or business in the United States, and (c) Christmas Club and school savings plans where annual interest does not exceed $10. (Section 103.34(a)(3)).

3. Financial institutions need not secure and maintain a record of the taxpayer identification number of savings accounts opened by judges, public officials and clerks of courts of record acting as custodians of funds in controversy or under the control of the court. "Funds in controversy" are of a nature of funds held by such officials for unknown heirs, minors without guardians, or estates without administrators or executors. (Section 103.34(a)(3).

4.

Where a financial institution acts as an intermediary in the purchase or redemption of a marketable certificate of deposit, the agent institution is required to maintain records on the purchaser and the person presenting the certificate for payment. The recordkeeping requirements of the issuing financial institution pertain only to recording the identity of the agent, a description of the instrument and the date of the transaction. (Section 103.34(a)(1)).

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Currency Transaction Reports

The Treasury regulations require that a financial institution generally must file a Currency Transaction Report (IRS Form 4789) for each deposit, withdrawal, exchange of currency or other payment or transfer by, through, or to the financial institution which involves a transaction in currency of more than $10,000. However, the regulations provide that a bank (defined to include S&Ls) need not prepare a Currency Transaction Report for currency transactions with certain types of established customers, including most retail businesses, operators of hotels and restaurants and certain types of amusements, when the transaction amounts are commensurate with the customary conduct of the business, industry or profession of the customer. The institution must make a record of each exemption and the reason for the exemption at the time it is granted. The regulations also require an institution (a) to maintain a centralized list of the exemptions, and (b) upon the request of the Secretary of the Treasury, to submit the list to the Secretary. In addition:

Section 103.22 further limits a financial institution's authority to exempt transactions from the reporting requirements. Also, paragraph (e) requires a financial institution to make and retain a record of the authorization of such exemptions.

Section 102.26(a) requires a financial institution to file the Currency Transaction Report within 15 days following the day on which a transaction occurs, and to retain a copy of the report for 5 years.

Section 103.27 requires a financial institution to verify and record the identity of the individual presenting the transaction, as well as the identity, account number, and the social security number or the taxpayer identification number, if any, of any person or entity for whose account the transaction is being made.

The Supreme Court of the United States has upheld as constitutional the domestic reporting requirements of the Currency and Foreign Transactions Reporting Act (Sections 103.22, 103.26(a) and 103.27 of the regulations).

International Transportation of Currency or Monetary Instruments

The regulations also require that any person, including a financial institution, who physically transports, mails, or ships (or causes or attempts to do so) currency or other monetary instruments in excess of $10,000 from the United States to any place outside the United States, or any person, including a financial institution, receiving from outside the United States currency or

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monetary instruments in excess of $5,000 for which such report has not been filed must file a Form 4790 with the United States Customs Service. The regulations define "monetary instruments" as:

Coin or currency of the United States or of any other country, travelers' checks, money orders, investment securities in bearer form or otherwise in such form that title thereto passes upon delivery, and negotiable instruments (except warehouse receipts or bills of lading) in bearer form or otherwise in such form that title thereto passes upon delivery. The term includes bank checks, travelers' checks and money orders which are signed but on which the name of the payee has been omitted, but does not include bank checks, travelers' checks or money orders made payable to the order of a named person which have not been endorsed or which bear restrictive endorsements.

As indicated above, bank checks, travelers' checks and money orders which are signed but on which the name of the payee has been omitted are specifically included in the revised definition. They are specifically excluded when not endorsed or when restrictively endorsed.

Attached for your information and guidance are the implementing regulations, which include amendments through October 22, 1985, Form 4789 and Form 4790. Copies of Form 4789 may be obtained from the Internal Revenue Service. Copies of Form 4790 may be obtained from the U.S. Customs Service.

Also attached for your information is a copy of a January 30, 1973 notice published by the Treasury Department. The notice describes the proper procedures for financial institutions to follow in obtaining tax identification numbers.

During each examination of an insured institution attention should be given to these requirements, and appropriate action should be taken by both the examining staff and the Board's Supervisory Agents whenever needed to assure compliance.