Chapter I-Monetary Offices, Dept. of the Treas. "payable at" a particular bank. The bank receives them and presents them to its customer who reviews them and pays for those It accepts. The majority of such items should be eligible for exemption under 103.34(b) (3), those which are not eligible should be microfilmed or copied before they are released to the customer. 4. Section 103,34(b) (10) does not require a receiving bank to copy or be able to produce an item drawn on another bank. Furthermore, a bank need not be able to supply a description of a deposited check if it can trace a check through its domestic processing system. Section 103.36 Interpretation. 1. A bank must retain for a period of 5 years checks drawn on itself. However, the proof and entry run tapes, which allow a bank to reconstruct an account, need only be retained for a period of 2 years. Section 103.37 Interpretation. 1. The term "temporarily” used in this section should be interpreted as a vacation or business assignment expected to last less than 6 months. Section 103.42 Interpretation. 1. This section provides that nothing contained herein shall require or authorize the microfilming or other reproduction of currency or obligation or security of the United States as defined in 18 U.S.C. 8 or any obligation or security of any foreign government. However, government checks may be microfilmed, but not copied, for the purpose of tracing or identifying a transaction. Section 103.45 Exemptions. 1. A bank. whose employees physically transport currency across the Canadian border on a weekly basis for deposit with a Canadian bank which is only a few hundred yards away, requested an exemption from the requirements of § 103.23. Due to the special circumstances, the Department granted the request provided that an accurate record of such transfers is maintained by the bank. 2. A bank in Maine, which for a period of more than 20 years has used its personnel to physically transport suns of currency and checks in excess of $5,000 to and fron a bank in a contiguous Canadian town seteral times a month, requested and was granted an exemption from the reporting require ments of 103.23 due to the special circumstances involved. The Department, however, does require the bank to maintain an accu rate record of such transfers. 3 An exemption is granted to any ner cliant shipping company from the requirement to report the transportation into or out of the United States of currency or bearer instruments in amounts in excess of $5,000 with respect to currency or bearer instruments placed on board ship by the owner or operator in order to provide for reasonable shipping needs. Records of such monies placed on board are to be maintained by the shipping companies. Appendix 4. A company wholly engaged in financing inventories and retail installment sales of automobile dealers which came within the definition of a "bank" in § 103.11(a) (7) requested and was granted an exemption from the recordkeeping and reporting require. ments of Part 103, Title 31, Code of Federal Regulations. However, if said company is a "financial institution" within the meaning of 103.11 (other than as a "bank") it would, of course, have to comply with those provisions of this part relating to financial institutions other than banks. 5. An exemption from the requirements of § 103.34(a) is granted with respect to all accounts opened as part of a school savings program for school savers up to 18 years of age, provided that the amount of interest earned on such accounts is $10 or less. Children over 18 years of age may apply for a social security number without parental authorization and payments of interest aggregating $10 or more are required by section 6049, internal Revenue Code of 1954, to be reported on Form 1099, together with the depositor's social security number. Banks having a school savings program should set up appropriate procedures to obtain numbers for accounts held by persons aged 18 years or older and for all accounts earning interest of $10 or more annually. 6. An exemption from the provisions of Part 103, Title 31, Code of Federal Regula. tions, is granted to those persons who are registered with the Securities and Exchange Commission as broker-dealers solely in order to offer and sell variable annuity contracts issued by life insurance companies. However, if a person so registered at any time offers and sells other types of securities in addition to variable annuity contracts, this exemption does not apply to any part of his business. This exemption will in no way affect recordkeeping regulations or other requirements promulgated under the Securities and Exchange Act of 1934, as amended. 7. An exemption from the requirements of $103.34(a) is granted with respect to Christmas Club accounts, provided the annual interest is not anticipated to exceed $10. 137 FR 24896, Nov. 23, 1972, as amended at 43 FR 27826, June 27, 1978) Form 4789 (Rev. December 1982) Department of the Treasury Part 1 Currency Transaction Report File a separate report for each transaction Identity of individual who conducted this transaction with the financial institution Name (Last) Number and Street City Method of verifying identification: Driver's permit Passport OMB No. 1545-0183 Part II: Individual or organization for whom this transaction was completed (Complete only if different from Part I) Part IV Description of transaction. If more space is needed, attach a separate schedule and check this box☐ 6. If a check was involved in this transaction, please furnish the following information (See Instructions): Drawer of check Payee Drawee bank and City General Instructions Paperwork Reduction Act Notice.-The Paperwork Reduction Act of 1980 says we must tell you why we are collecting this information, how we will use it, and whether you have to give it to us. The requested information is useful in criminal, tax, and regulatory investigations. In addition to directing the Federal Gov. ernment's attention to unusual or questionable transactions, the reporting re. quirement discourages the use of currency in illegal transactions. Financial institutions are required to provide the information under 31 CFR 103.22, 103.25, and 103.26. Who Must File.-Each financial institution must file a Form 4789 for each deposit, withdrawal, exchange of currency, and address of the individual making Penalties.-Civil and criminal penal- or other payment or transfer, by, through. Specific Instructions or to that financial institution, which in. volves a transaction in currency of more than $10,000. Multiple transactions by or for any person which in any one day total more than $10,000 should be treated as a single transaction, if the financial institution is aware of them. Exceptions.-Banks do not have to file Form 4789 for transactions with Federal Reserve Banks, Federal Home Loan Banks, or other domestic banks. Banks do not have to file Form 4789 for the following transactions if the amounts involved are reasonable and customary in the course of the customer's business or activities: (1) deposits or withdrawals of currency from an existing account by an estab lished depositor who is a U.S. resident and who (a) operates a retail business in the United States (except automobile, boat, or airplane dealerships), or (b) operates a sports arena, race track, amusement park, bar, res. taurant, hotel, licensed check cashing service, vending machine company, or theater; (2) deposits or withdrawals, exchanges of currency, or other payments and trans. fers by local, state, or Federal government agencies; (3) withdrawals for payroll purposes from an existing account by an established depositor who is a U.S. resident and who operates a firm that regularly withdraws more than $10,000 to pay employees in currency. Banks must keep a record of customers whose transactions are not reported because of exceptions (1) through (3) above. (See 31 CFR, section 103.22 for details about what to include in this record.) Nonbank financial institutions do not have to report transactions with commercial banks. When and Where to File.-File this form by the 15th day after the date of the transaction with the Internal Revenue Service, Odgen, UT 84201, or hand carry it to your local IRS office. Keep a copy of each Form 4789 for 5 years from the date you file it. Identifying Number.-Fo: individuals this is the social security number. For others it is the Federal employer identification number (9 digits). Identification Required.-Before completing a transaction, a financial institution must verify and record (1) the name Part 1. (1) In the address section, enter the per- Part II. no (1) For individuals, enter last name, first name block in that order. For all (2) In the identifying number block, enter Part III. Check the appropriate box and enter the Part IV, line 1.— If the transaction being reported was the sale or purchase of foreign currency, check Other and write in "sale of foreign currency" or "purchase of foreign cur rency," whichever applies. Part IV, line 6. Complete this line if a check is cashed or a bank check is purchased with currency. Part V. Institutions may also enter in the name and address block other identifying information. (6) a credit union organized under the laws of any state or of the United States; and (7) any other organization chartered under the banking laws of any state and subject to the supervision of the bank supervisory authorities of a state. Currency. The coin and currency of the United States or of any other country, which circulate in and are customarily used and accepted as money in the country in which issued. It includes United States silver certificates, United States notes, and Federal Reserve notes, but does not include bank checks or other negotiable instruments not customarily accepted as money. Financial Institution.-Each agency, branch, or office in the United States of any person doing business in one or more of the capacities listed below: (1) a bank; (2) a broker or dealer in securities, regis- (3) a person who engages as a business Person.-An individual, corporation, partnership, trust or estate, joint stock company, association, syndicate, joint venture, or other unincorporated organization or group, and all entities treated as legal personalities. Transaction in Currency.-A transaction involving the physical transfer of currency from one person to another. A transaction in currency does not include a transfer of funds by means of bank check, bank draft, wire transfer, or other written order that does not include the physical transfer of currency. ATTACHMENT D [From the Wall Street Journal, March 17, 1983] USING LOOPHOLE IN TREASURY RULE, CASINOS SAID TO HELP LAUNDER ILLEGAL DRUG MONEY (By Robert E. Taylor) WASHINGTON.-Federal officials have discovered that, aided by a loophole in Treasury Department regulations, drug traffickers have been laundering millions of dollars with the help of gambling casinos. Casinos aren't covered by the department's rule requiring banks and other financial institutions to report all transactions involving more than $10,000. The rule is aimed mainly at helping law enforcement agencies trace large flows of illicitly obtained cash. Richard C. Wassenaar, assistant commissioner for enforcement at the Internal Revenue Service, says the IRS recently found in a number of investigations a “substantial increase in the use of casinos to launder money." And this week in Tampa, Fla., the federal government obtained its first indictments charging that a casino was used in an illegal money-laundering operation. REQUIRING CASINOS TO REPORT John Walker, assistant Treasury secretary for enforcement, said officials are particularly concerned about the reporting loophole because organized crime "has ties to casinos." He said the department plans to draft new regulations soon that will require casinos to report transactions of more than $10,000. The indictments handed up in Tampa charge five men with conspiring to defraud the IRS on taxes by exchanging millions of dollars in small bills into $100 bills at a casino and then hiding the cash in bank accounts in the Cayman Islands, which have strict financial-secrecy laws. Often, such money is returned to the U.S. essentially untraceable. The govenment claimed in court papers that undercover agents posing as cocaine smugglers exchanged $390,000 at the Royal Casino in Las Vegas, Nev., with the assistance of the defendants, including the casino's owner, Joseph G. Slyman, and its general manager, Paul R. Dottore. Because of the lophole in the reporting rule, the casino executives couldn't be charged with failing to report the transaction. Instead, they were charged with being part of a conspiracy to defraud the IRS. The government claimed that Mr. Slyman was told the cash would go to offshore bank accounts and return to the U.S. in the form of phony, but untraceable loans. He also said he had helped friends hide money from the IRS, according to the government. And during the exchange of the money, the government alleged, the casinos gave the undercover agents a receipt for their money under a false name. TAKING ADVANTAGE OF LOOPHOLE After leaving the casino, part of this cash was smuggled to a Cayman Islands bank, the government claimed, where it was deposited in an account controlled by a Luxembourg trust company that one defendant had sold to the undercover agents. According to Mr. Wassenaar of the IRS, individuals seeking to launder money could take even greater advantage of the reporting loophole. He said a casino can accept a million-dollar deposit "and have it wired to an offshore bank, either directly or through a bank." Thus, money can be moved out of the country without any need to file a currency-transaction report or to smuggle the cash past customs agents, who require reports by persons leaving with more than $5,000. Court papers filed by the government suggested that the indictment doesn't deal with an isolated abuse of casinos. According to an affidavit by an IRS special agent, Mr. Slyman indicated that he "is handling cash for a lot of other people who are also hiding their money from the government." In a telephone interview from Las Vegas, Mr. Slyman of the Royal Casino said he and Mr. Dottore are "completely innocent of any wrongdoing." He said they have met with Nevada gaming regulators who said they intend to audit the casino's records. Mr. Slyman said he and Mr. Dottore were asked to stay out of "sensitive" areas of the casino, such as the cashier's cage and the gaming pit, but he said regulators have allowed the two to continue their managerial control. The IRS agent's statement also quotes another defendant, Charles W. Broun Jr. of Sarasota, Fla., as saying that he laundered narcotics-trafficking profits through sev eral Las Vegas casinos with the knowledge and consent of the casinos' owners and managers. The agent claims that Mr. Broun said another defendant, alleged drug trafficker Bruce J. Perlowin of Ukiah, Calif., avoided taxes on $16 million of profits obtained through narcotics transactions in 1980. Neither Mr. Broun nor Mr. Perlowin could be reached for comment. U.S. Attorney Robert W. Merkle in Tampa said the investigation is continuing, and a Treasury Department official said that the inquiry includes probing into whether other casinos are helping to launder cash. ATTACHMENT E MARCH 31, 1983. Hon. DONALD REGAN, DEAR MR. SECRETARY: A recent news account in the Wall Street Journal (enclosed) has highlighted the existence of a loophole in the enforcement of the Currency and Foreign Transactions Reporting Act (P.L. 91-508). The use of casinos, or any other financial institution, to "launder" the proceeds of crime is extremely disturbing since the act was designed to curb such conduct. The act has been a very useful tool in the prosecution of major drug traffickers and organized criminal enterprises. The Subcommittee on Crime, which I chair, has oversight of the nation's drug enforcement effort. In the last Congress, we processed the Comprehensive Drug Penalty Act (H.R. 7140) which would have facilitated the forfeiture of the assets of drug traffickers. The Currency and Foreign Transactions Reporting Act is an integral part of the identification process necessary to accomplish such forfeitures which are one of our most valuable enforcement tools. The existence of significant loopholes in the enforcement of the act undermines our entire drug enforcement effort. I understand that the Treasury Department for several months has been considering issuing regulations to correct this situation. Please advise me on the current status of that effort. Chairman, Subcommittee on Crime, Committee on the Judiciary, House of Representatives, Washington, DC. DEAR MR. CHAIRMAN: This is in response to your letter of March 31, 1983, concerning alleged loopholes in the enforcement of the Currency and Foreign Transactions Reporting Act (P.L. 91-508). The issue raised is whether gambling casinos should be treated as financial institutions and thus be subject to special recordkeeping and reporting requirements under the provisions of 31 CFR Part 103 in order to restrict the use of these casinos for the purpose of laundering illicit drug money. Earlier this year a Treasury Department working group undertook a study to determine whether there should be an amendment to existing regulations that would prevent the utilization of casinos for laundering the proceeds of illicit drug sales. During the week of March 28, members of the working group made a fact finding trip to Nevada to review the procedures followed in the cashiers' cages of several casinos and to obtain information concerning the number and type of large currency transactions handled by the casinos in Reno and Las Vegas. Subsequently, during the week of April 18, the New Jersey Division of Gaming Enforcement made arrangements for representatives of the group to visit three of the casinos in Atlantic City and obtain similar data. In addition, we intend to send the group to Puerto Rico in the near future to review the procedures of the casinos located there. At the conclusion of the Puerto Rican trip, we will conduct a comprehensive review of the group's findings in an effort to determine what action should be taken, including the possible amendment of regulations of the Bank Secrecy Act, so as to prevent the laundering of currency in gambling casinos by drug traffickers and persons acting on their behalf. |