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Treasury is not seeking summons authority to obtain a bank

customer's records, but rather to obtain records and testimony

relating to the Bank Secrecy Act compliance of the financial institution itself. The summons authority proposed in H.R. 2785

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As we testifed, this authority is especially needed with respect

to the 3000 miscellaneous non-bank financial institutions such

as casinos, foreign currency brokers, transmitters of funds and sellers of travelers checks for which examination responsibility

has been delegated to the Internal Revenue Service.

IRS now

depends on the voluntary cooperation of these institutions in the

examination process and has no means

to compel cooperation.


In the case of a non-bank institution, the summons

would be used when Treasury had information regarding

non-compliance or when cooperation was inadequate in the

examination process.

with respect to banks, we expect that

we would most frequently use


summons when a bank was



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being uncooperative or unforthcoming in a civil penalty case

to follow up on information regarding noncompliance developed in a bank examination. We have not drafted any

specific written criteria for use in advance of the



As set forth above, the focus of the summons is not

the bank customer.

We do not believe that there is undue

potential for abuse of the legitimate customer's privacy rights any more than is the case with any bank examination


2. Since June of last year, we have assessed civil penalties against sixteen banks or bank holding companies. A number of other cases are under review and should be announced over the course of the next several months. The nature and extent of the

violations var ied, as is reflected in the dollar range of the


$4.75 million in the case of Bank of America to

$112,000 in the case of Barnett Banks of Florida.

The violations

for which penalties have been assessed are of three general

types: 1) failure to report currency transactions with foreign correspondent banks and domestic foreign currency brokers,

2) improper exemption of customers, and 3) general non-reporting

of currency transactions unrelated to exemption list problems.

Some of the banks had all three types of violations, some only one

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The violations of some of the banks have been found

throughout the banks unit or branches.

In others, the violations


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were limited to one unit or department.


Treasury takes many factors into consideration in assessing

civil penalties, including the nature and number of the viola

tions, the degree of cooperation Treasury has received from the

bank in developing the scope of the bank's liability, the size of

the bank, the adequacy of the bank's past compliance program and

to a lesser extent, the financial condition of the bank.

We make

every effort to treat similarly situated banks in a similar

manner, but have no set formula.

The dollar amount of the penalty

is generally keyed to the number of non-filings.


As we have testified and reported to the Committee earlier,

after a series of meetings with the supervisory agencies, Treasury

has developed standard Bank Secrecy Act examination procedures and

disseminated those procedures to the supervisory agencies.


attached). Common past compliance problems such as the failure to

report currency transactions with foreign banks were also



By the end of this month, we hope to disseminate exemption

guidelines to the bank regulatory agencies.

This should be very

helpful, not only in the examiner's identification of exempt list

violations, but in assisting the examiners to explain proper

exemption procedures to the institutions they examine.


The new IRS Form 4789 will not be in use until July 1, 1986.



The form will improve financial institutions accountability by requiring two signatures--one of the financial institution employee who prepares the form and one by a reviewing official.

(A copy of the new form is attached.)

The form also has been revised in many ways to improve the quality

and use of the information received.

For instance:

o The new revised form provides more complete line-by-line

instructions for the financial institution to use in

completing the form.

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The new form provides a space (line item 13) for the financial

institution to indicate why an individual is not identified in

Part I.

The new form will contain a space (line item 19.b. of

Part II) to indicate whether the organization for whom the

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Part IV has been changed to provide for more types of cash

transactions and to indicate if a transaction is "cash in" or


This will provide for better analysis of the data

for targeting purposes. It will especially provide a basis for monitor ing cash transactions with foreign financial


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Part v of the form provides a better way for a financial



institution to indicate what type of institution it is.


this information, summary reports of Bank Secrecy Act information can be provided to the supervisory agency that regulates the specific type of financial institution. A special code number (in box 36a.) will indicate who the

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The IRS has been delegated authority to examine compliance by

casinos and to monitor the agreement with the State of Nevada

whereby Nevada casinos report currency transactions to the State

which in turn reports the information to Treasury.

IRS has not

advised Treasury of any major problems with respect to casino

compliance with the Bank Secrecy Act.


We receive and review excerpts of the examination reports

relating to Bank Secrecy Act compliance that the supervisory

agencies give to the examined institutions. We can review the underlying wor kpapers on request. We have not had an occasion to evaluate how the examiners document the examination process.


The model examination procedures direct examiners to review

activities of all bank cash areas, not just teller transactions.

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