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Chapter | Monetary Offices, Dept. of the Treas.

Appendix "payable at" a particular bank. The bank 4. A company wholly engaged in financing receives them and presents them to lis cus- inventories and retail installment sales of tomer who reviews them and pays for those automobile dealers which came within the It accepts. The majority of such items definition of a "bank" in 103.11(a) (7) reshould be eligible for exemption under quested and was granted an exemption from { 103.34(b) (3). Those which are not cligible the recordkeeping and reporting require. should be microlllmed or cupicd bcrorn, they mients of Part 103, Title 31, Code of Federal Are released to the customer.

Regulations. However, is said company is a 4. Section 103.34(b) (101 does not require a

"financial institution" within the meaning receiving bank to copy or be able to produce

of $103.11 (other than as a "bank") it an item drawn on another bank. Further.

would, of course, have to comply with those more, a bank need not be able lo supply a

provisions of this part relating to financial description of a deposited check ii it can

institutions other than banks. Irace a check through ils domestic process. ing system.

5. An exeniption from the requirements of Section 103.36 Interprelation. 1. A bank

§ 103.341a) is granted with respect to all ac. must retain for a period of 5 years checks

counts opened as part of a school savings drawn on itsell. However, the proof and

program for school savers up to 18 years of entry run tapes, which allow a bank to re

age, provided that the amount of interest construct an account, need only be relained earned on such accounts is $10 or less. Chil. for a period of 2 years.

dren over 18 years of age may apply for a Section 103.37 Inlerpretalion. 1. The term social security number without parental au. "lemporarily." lised in this section should be Thorization and payments of Interest aggreinterpreted as a vaculion or business assign- kaling $10 or nore: are required by section ment expected to last less than 6 months. 6049, internal Revenue Code of 1954, to be

Section 103.42 Interprelation. 1. T!lis sec. reported on Form 1099, together with the tion provides that nothing contained herein depositor's social security number. Banks shall require or authorize the microfilming having a school savings program should set or other reproduction of currency or obliga- up appropriate procedures to obtain numtion or security of the United States as de- bers for accounts held by persons aged 18 fined in 18 U.S.C. 8 or any obligation or se.

years or older and for all accounts earning curity of any foreign government. However,

interest of $10 or more annually. government checks may be microfilmed, but

6. An rxemption from the provisions of not copied. for the purpose of tracing or

Part 103. Title 31, Code of Federal Regula. identifying a transaction.

tions, is granted to those persons who are Section 103.45 Eremplions. I. A bank. whose employees physically transport cur.

registered with the Securities and Exchange

Conimission as broker-dealers solely in rency across The Canadian border on a weekly basis for deposit with a Canadian

order to offer and sell variable annuity conbank which is only a few hundred yards

tracis issued by life insurance companies. away, requested an exemplion from ihe re

However, if a person so registered at any quirements of $ 103.23. Due to thc special

time oilers and sells ither types of securicircumstances, the Depariment granted the

ties in addition to ariable annuity conrequest provided that an accurate record of

tracts, this exemption does not apply to any such transsers is maintained by the bank.

part of his business. This exemption will in 2. A bank in Maine, which for a period of

no way affect recordkeeping regulations or more than 20 years las lisod its personnel to

other requirements promulgated under the physically transpori suris or curren) and

Srcurities and Fixchange Act of 1934, as checks in excess of $5.000 10 ünú iro... a

amciided. bank in a contiguous Canadiaa tuwni se: c'ral 7. An exem;)!ion from the requirements of limes a month, requested and was granted $ 103.34(a) is granted with respect to Christan exemplion from the reporting require. mas Club accounts. provided the annual in. monls of g 103.23 due to the special circuin. terest is not aniicipated to exceed $10. stances involved. The Depa:tment. However, does require the bank to maintain an accu.

137 FR 24890. Nov. 23. 1972, as amended at rate record of such transfers.

+3 FR 27826. Joine 27, 1978) 3 An exemption is granted to any ini'r: cliant shipping company froin the require ment to report the transportation iniu or out of the United States of currency or berer 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 monles placed on board are to be inain. tained by the shipping companies.

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Form

(Rev. December 1982) Department of the Treasury Internal Revenue Service

4789

Currency Transaction Reports

File a separate report for each transaction

(Complete all applicable parts-see instructions) Part 1 Identity of individual who conducted this transaction with the financial institution

OMB Ne. 1545-0183
Expires 12-31-95

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Part II

Individual or organization for whom this transaction was completed (Complete only if different from Part 1)

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Part IV: Description of transaction. If more space is needed, attach a separate schedule and check this box o 1. Nature of transaction (check the applicable boxes)

Currency Exchange
Deposit
Check Cashed

Mail/Night Deposit

See item 6 below Withdrawal

Check Purchased

n Other (specity) 2. Total amount of currency transaction 3. Amount in denominations of $100 or 4. Date of transaction (Month, day, and (in U.S. dollars)

higher

year)

5. If other than U.S. currency is involved, please furnish the following information: Currency name

Country

Total amount of each foreign currency (in U.S. dollars)

6. If a check was involved in this transaction, please furnish the following information (See Instructions): Date of check

Amount of check (in U.S. dollars) Payee

Drawer of check

Drawee bank and City

Part V.

Financial institution reporting the financial transaction

Name and Address

Identifying number (EIN or SSN)

Business activity

Sign here

(Authorized Signature)

(Title)

(Date)

Type or print name of authorized signer
For Paperwork Reduction Act Notice, see the back of this page.

. Specific Instructions

General Instructions

Paperwork Reduction Act Notice. --The Paperwork Reduction Act of 1980 says we must tell you why we are collecting this in. formation, 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 informa. tion under 31 CFR 103.22, 103.25, and 103.26.

Who Must File.-Each financial institu. tion must file a Form 4789 for each de. Dosit, withdrawal, exchange of currency, 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 insti. tution is aware of them.

and address of the individual making
the transaction and (2) the identity. ac.
count number, and taxpayer identitying
number (if any) of the individual or orga.
nization for whose account the transaction
is being made. Use a passport or other of
ficial document showing nationality to veri.
ty the identity of an alien or nonresident of
the United States. Use a document like a
driver's license, etc., normally accepted
as a means of identification when cashing
checks, to verify the identity of anyone
else. In each case, record on this form the
method of identification used.

Penalties.-Civil and criminal penal-
ties (up to $500,000) are provided for
failure to file a report or to supply infor.
mation, and for filing a false or fraudulent
report. See 31 CFR, sections 103.47 and
103.49.

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 govern.

ment 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 be. cause 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 commer. cial 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 tocal 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 com. pleting a transaction, a financial institu. tion must verify and record (1) the name

Part 1.
(1) In the address section, enter the per-

manent street address of the individ.
val conducting the transaction. If the
currency was received or shipped
through the U.S. Postal Service, write
in "U.S. Mail." If the currency was
received in a night deposit box, write
in "Night Deposit." if the currency
was received or shipped through an
armored car service, licensed by a
state or local government, provide

only the service's name and address.
(2) In the social security block, enter the

social security number of the individ.
ual conducting the transaction. If the
individual has no number, write

".None" in this block.
(3) Check the appropriate box and enter

the number of the document used to
verify the identity of the individual
making the transaction. When the
name of an individual is not required
to be given, it is not necessary to de.
scribe the method of veritying identi.

fication.
Part 11.-
(1) For individuals, enter last name, first

name, and middle initial, if any, in the
name block in that order. For all
others, enter the complete organiza.

tion name.
(2) In the identifying number block, enter

the social security number or employ.

er identification number.
Part III.

Check the appropriate box and enter the
appropriate customer's account number.
If there is no account relationship, check
Other and write in "None."
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 cur.
rency
Part 1.-

Institutions may also enter in the name
and address block other identifying infor.
mation.

Signature.-This report must be signed by an authorized individual. Also type or print the name of the authorized signer. Definitions

Bank.-Each agent, agency, branch, or office in the United States of a foreign bank and 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 commercial bank or trust company

organized under the laws of any state

or of the United States; (2) a private bank; (3) a savings and loan association or a

building and loan association organized under the laws of any state or of

the United States; (4) an insured institution as defined in

section 401 of the National Housing

Act; (5) a savings bank, industrial bank, or

other thrift institution; (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

tered or required to be registered with SEC under the Securities Exchange

Act of 1934; (3) a person who engages as a business

in dealing in or exchanging currency (for example, a dealer in foreign exchange or a person engaged primarily

in the cashing of checks); (4) a person who engages as a business in

issuing, selling, or redeeming travel. er's checks, money orders, or similar instruments, except one who does so as a selling agent exclusively, or as an

incidental part of another business; (5) a licensed transmitter of funds, or

other person engaged in the business of transmitting funds abroad for

others. Person.-An individual, corporation, partnership. trust or estate, joint stock company, association, syndicate, joint ven. ture, 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 trans. fer of funds by means of bank check, bank draft, wire transfer, or other written order that does not include the physical trans. fer 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

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(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

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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, Secretary of the Treasury, Washington, DC.

DEAR MR. SECRETARY: 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. With best personal wishes, Sincerely,

WILLIAM J. HUGHES, Chairman, Subcommittee on Crime.

ATTACHMENT F

DEPARTMENT OF THE TREASURY,

Washington, DC, May 2, 1983. Hon. WILLIAM J. HUGHES, Chairman, Subcommittee on Crime, Committee on the Judiciary, House of Represent

atives, 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 de termine 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.

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