MONEY ORDER AMOUNT SURVEY

Conducted during the week of May 5, 1986

Five Federal Home Loan Banks each contacted five member institutions and asked: (1) do they have a limit on the size of a money order they will sell, and if there is a limit, what is the maximum dollar amount, and (2) what is the typical size, or range of amounts, of money orders sold.

The Subcommittee appreciates your appearance at our hearings last Thursday. Your testimony is of great assistance in our review of the Bank Secrecy Act and other pertinent issues.

There are several questions which the Subcommittee would like to have you answer and which will be submitted for the record. They are as follows:

1.

2.

Both you and Mr. Serino, of the office of the
Comptroller of the Currency, in your testimony,
express support for amending Title 31 of the Bank
Secrecy Act via the Administration's Bill (H.R.
2785) to permit the issuance of a summons to a
bank, or its employees, for a bank customer's
records. This raises some questions about
balancing the need for effective investigations of
BSA non-compliance with a bank customer's right to
privacy.

a) What criteria do you propose for use of the
summons?

b) How do you intend to prevent this power from abusing the privacy rights of the legitimate customer?

Concerning names and businesses which may inappropriately appear on a financial institution's exempt list, presently, how does your agency ensure that appropriate entities are on such lists? Assuming there is an unqualified name or business

3.

4.

5.

on such a list, what types of enforcement action would your agency pursue? At present, would civil or criminal liability be possible against either the financial institution or its exempted customer for inappropriately appearing on such a list?

Should the term "monetary instruments" in the Bank Secrecy Act and its regulations be amended to include "postal money orders" in order to include them under the requirements of the Act and its regulations?

Has any thought been given to the use of the civil
money penalty provisions of the Financial
Institution Regulatory and Interest Rate Control
Act, with appropriate amendments, in connection
with violations of the Bank Secrecy Act by
financial institutions and their employees?
Present delays caused by extended negotiations and
record review to determine "willfulness" possibly
could be minimized.

In your testimony, you explained what financial
institutions were under the Internal Revenue
Service's (Examination) jurisdiction for Bank
Secrecy Act purposes. You included in your list,
"Licensed entities that send or transmit funds
abroad for others". Please describe these
"licensed entities", including examples and an
explanation of who licenses these entities.

Again, the Subcommittee is appreciative of your efforts in this area. Please submit your responses to the Subcommittee no later than May 7, 1986.

Sincerely,

Удивитель

Fernand J. St Germain
Chairman

FSTG:sTf

Examination;

Vashington, DC 20224

The Honorable Fernand J. St Germain
Chairman, Subcommittee on Financial Institutions
Supervision, Regulation and Insurance of the
Committee on Banking, Finance, and Urban Affairs
Rayburn House Office Building, Room B-303
Washington, DC 20515-6051

Dear Mr. Chairman:

JUN 17 1986

In your letter to Mr. Percy Woodard, Jr. of April 25, 1984, you presented five questions in connection with h iSubcorantes indiaperal, institutions April 17, 1986. The following is our response to your questions.

Question 1.

Both you and Mr. Serino, of the Office of the Comptroller of
the Currency, in your testimony, express support for amending
Title 31 of the Bank Secrecy Act via the Administration's Bill
(H.R. 2785) to permit the issuance of a summons to a bank, or
its employees, for a bank customer's records. This raises some
questions about balancing the need for effective investigations
of BSA non-compliance with a bank customer's right to privacy.
a) What criteria do you propose for use of the summons?
b) How do you intend to prevent this power from abusing
the privacy rights of the legitimate customer?

Response:

The Internal Revenue Service does not have authority under the Bank Secrecy Act (BSA) to issue a summons to those financial institutions under its jurisdiction. Summons authority is necessary for two situations. The most common is the instance where a financial institution is cooperative, but requests a summons as a means of protecting itself from possible suits by its customers. The other type of situation is where an institution declines to cooperate by providing us with access to the appropriate books and records in order to determine if it is complying with the reporting and recordkeeping requirements of the BSA. These situations would be corrected by providing the summons authority proposed in H. R. 2785 and 2786.

The summons authority would permit the examination of records and testimony for the purposes of investigating BSA violations. The records of the customers would be accessible solely for the purposes of determining the institution's compliance with the BSA. The incidental review of individual customers would be analogous to the review of such records by bank examiners; the focus is on the actions of the institution, not the customer.

-2

The Honorable Fernand J. St Germain

While we have not drafted specific written criteria, income tax compliance activities would have to be generated from filed CTRs. If a financial institution's records were then desired for a tax investigation relating to a particular customer, a summons would have to be served under the provision of Title 26 to gain access to the records.

Question 2.

Concerning names and businesses which may inappropriately
appear on a financial institution's exempt list, presently,
how does your agency ensure that appropriate entities are on
such lists? Assuming there is an unqualified name or business
on such a list, what types of enforcement action would your
agency pursue? At present, would civil or criminal liability
be possible against either the financial institution or its
exempted customer for inappropriately appearing on such a
list.

Response:

The IRS monitors the propriety of exemptions by requesting and reviewing exemption lists from financial institutions (some unsolicited lists are also received). We are also assisted by the review functions performed by other regulatory federal agencies that conduct compliance checks. The following is a summary of what the Service does in the way of ensuring that listed exemptions are proper.

The Service has the authority to direct banks to remove entities from the list and to file CTRS for the preceding 5-year statutory period. Where an unqualified business is found on an exemption list, we would direct removal and, if useful, require the filing of delinquent CTRs. If warranted, a referral to our Criminal Investigation function would be made. Our Criminal Investigation function has the authority to conduct investigations of criminal violation(s) of any bank.

Also, other supervisory agencies in conjunction with their compliance checks can direct a bank to remove an entity from the exemption list. In these situations, the bank is usually directed to apply for a special exemption and request the Service's advice on the need to file delinquent CTRs.