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$103.45 Exceptions, exemptions, and reports.

(a) The Secretary, in his sole discretion, may by written order or authorization make exceptions to or grant exemptions from the requirements of this part. Such exceptions or exemptions may be conditional or unconditional, may apply to particular persons or to classes of persons, and may apply to particular transactions or classes of transactions. They shall, however, be applicable only as expressly stated in the order of authorization, and they shall be revocable in the sole discretion of the Secretary.

(b) The Secretary shall have authority to further define all terms used herein.

(38 FR 2176, Jan. 22, 1973)

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(a) Responsibility for assuring compliance with the requirements of this part is delegated as follows:

(1) To the Comptroller of the Cur. rency, with respect to national banks and banks in the District of Columbia;

(2) To the Board of Governors of the Federal Reserve System, with respect to State bank members of the Federal Reserve System;

(3) To the Federal Home Loan Bank Board, with respect to insured building and loan associations, insured savings and loan associations, and insured institutions as defined in section 401 of the National Housing Act:

(4) To the Administrator of the National Credit Union Administration, with respect to Federal credit unions:

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(5) To the Federal Deposit Insurance Corporation, with respect to all other banks except agents of foreign banks which agents are not supervised by State or Federal bank supervisory authorities;

(6) To the Securities and Exchange Commission, with respect to brokers and dealers in securities;

(7) To the Commissioner of Customs with respect to §§ 103.23 and 103.48;

(8) To the Commissioner of Internal Revenue except as otherwise specified in this section.

(b) Overall responsibility for coordi nating the procedures and efforts of the agencies listed herein and assuring compliance with this part is delegated to the Assistant Secretary (Enforcement and Operations). Periodic reports shall be made by each such agency to the Assistant. Secretary (Enforcement and Operations), with copies to the General Counsel of the Treasury and to the Commissioner of Internal Revenue.

(Sec. 21 of the Federal Deposit Insurance Act, 84 Stat. 1114, 12 U.S.C. 1829b; 84 Stat. 1116, 12 U.S.C. 1951-1959; and the Currency and Foreign Transactions Reporting Act, 84 Stat. 1118, 31 U.S.C. 1051-1122)

(37 FR 6912, Apr. 5. 1972, as amended at 42 FR 33033, June 29, 1977; 44 FR 13478. Mar. 12, 1979)

$103.17 Civil penalty.

(a) For any willful violation of any requirement of this part, the Secretary may assess upon any domestic financial institution, and upon any partner, director, officer or employee thereof, who willfully participates in the violation, a civil penalty not exceeding $1,000.

(b) For any failure to file a report required under § 103.23 or for filing such a report containing any material omission or misstatement, the Secretary may assess a civil penalty up to the amount of the currency or monetary instruments transported, mailed or shipped, less any amount forfeited under § 103.48.

§ 103.48 Forfeiture of currency or monetary instruments.

Any currency or other monetary instruments which are in the process of

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any transportation with respect to which a report is required under §103.23 are subject to seizure and forfeiture to the United States if such report has not been filed as required in 103.25, or contains material omissions or nisstatements. The Secretary may, in his sole discretion, remit or mitigate any such forfeiture in whole or in part upon such terms and conditions as he deems reasonable.

$103.49 Criminal penalty.

(a) Any person who willfully violates any provision of this part may, upon conviction thereof, be fined not more than $1,000 or be imprisoned not tore than 1 year, or both. Such person may in addition, if the violation is of any provision authorized by title I of Pub. L. 91-508 and if the violation is committed in furtherance of the commission of any violation of Federal law punishable by imprisonment for more than 1 year, be fined not more than $10,000 or be imprisoned not more than 5 years, or both.

(b) Any person who willfully violates any provision of title II of Pub. L. 91508, or of this part authorized thereby, where the violation is either

(1) Committed in furtherance of the commission of any other violation of Federal law, or

(2) Committed as part of a pattern of illegal activity involving transac tions exceeding $100,000 in any 12month period. may, upon conviction thereof, be fined not more than $500,000 or be imprisoned not more than 5 years. or both.

(c) Any person who knowingly makes any false, fictitious or fraudu lent statement or representation in any report required by this part may, upon conviction thereof, be fined not more than $10,000 or be imprisoned not more than 5 years, or both!

$103.50 Enforcement authority with respect to transportation of currency or monetary instruments.

(a) If the Secretary has reason to belleve that currency or monetary instruments are in the process of transportation and with respect to which a report required under § 103.23 has not been filed or contains material omissions or misstatements, he may apply

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to any court of competent jurisdiction for a search warrant. Upon a showing of probable cause, the court may issue a warrant authorizing the search of any or all of the following:

(1) One or more designated persons. (2) One or more designated or described places or premises.

(3) One or more designated or described letters, parcels, packages, or other physical objects.

(4) One or more designated or described vehicles. Any application for a search warrant pursuant to this section shall be accompanied by allegations of fact supporting the application.

(b) This section is not in derogation of the authority of the Secretary under any other law or regulation.

§ 103.51 Access to records.

Except as provided in §§ 103.34(a)(1) and 103.35(a)(1), and except for the purpose of assuring compliance with the recordkeeping and reporting requirements of this part, this part does not authorize the Secretary or any other person to inspect or review the records required to be maintained by Subpart C of this part. Other inspection, review or access to such records is governed by other applicable law.

138 FR 2176, Jan. 22, 1973]

APPENDIX interpretaTIONS AND EXEMPTIONS

The following interpretations and exemptions were compiled in response to requests by persons subject to the regulations of Part 103. Additional interpretations and exen:ptions will appear from time to time as the occasion warrants. Identifying detalis and confidential information have been deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements concerning disclosure of information obtained from members of the public.

Section 103.11 Exemption from. 1. The definition of a bank as appears in § 103.11 (a)(7) was not intended to include a company which is whoily engaged in financing inventories and retall installment sales of automobile dealers. Such a company requested and was granted an exemption from the recordkeeping and reporting requirements of Part 103, Title 31, Code of Federal Regulations. However, if sald company is a

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"financial institution" within the meaning off 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.

Section 103.23 Interpretations. 1. Unless a transaction in foreign currency for clients who are nonresidents of the United States and performed through brokers outside the United States involves the physical transportation, mailing, or shipment of currency. bearer investment securities or negotiable instruments in bearer form into or out of the United States in amounts exceeding $5,000 on any one occasion, there is no duty to report the transfer. A transfer of funds by means of bank check, bank draft, or wire transfer need not be reported.

2. A bank is not required to prepare Form 4790 if the bank receives such items over the counter from a person who may have transported them into the United States or if the bank delivers such items over the counter to a person who may transport them out of the United States. However, if a bank knows that such items have been transported into the country, it must file a report on Form 4790 if a complete and truthful report has not been filed by the customer.

3. Section 103.23(c) provides that a bank is not required to report currency or other monetary instruments mailed or shipped through the postal service or by common carrier. When a trust company is acting as a corporate executor or corporate trustee, no report need be filed with respect to currency or bearer monetary instruments mailed or shipped through the postal service.

4. In the case where a trust company arts as custodian for individual executors and trustees who maintain custody accounts for those estates and trusts where they are named fiduciary, it will be necessary to file a Form 4790, Report of International Transportation of Currency or Monetary Instru ments, under the circumstances described in § 103.23(a).

5. A private courier service does not quali fy as a "commor. carrier" under the regula:ions.

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Section 103.23 Exemp!.ons from. 1. A bank whose employees physically transport cur rency across the Canadian border on weekly basis for deposit with a Canasiian bank which is only a few hundred yards Away requested an exemption from the re quirements 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 sums of currency and checks in excess of $5,000 to and from a bank in a contiguous Canadian town several times a month, requested and was granted

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an exemption from the reporting requirements of 103.23 due to the special circumstances involved. The Department, however, docs require the bank to maintain an accurate account of such transfers.

3. An exemption is granted to any mer chant shipping company from the require. ment 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 in. struments placed on board ship by the owner or operator in order to provide for reasonable shipping needs. Records of such moneys placed on board are to be naintained by the shipping companies.

4. A company that transports sealed packages containing money and valuables under written bilateral contracts for banks, brokerage houses, and security dealers requested an exemption from the requirements of this section. Under the provisions of $103.23(c)(7), such companies are exempt from reporting the transportation of cur rency or monetary instruments overland between established offices of banks or brokers or dealers in securities and foreign banks. The company in question is further granted an exemption from reporting overiand shipments between domestic banks, brokers, or security dealers and foreign persons. However, all firms engaged in international carriage of valuables by air must continue to file with the Bureau of Customs reports of international air shipments.

SECTION 103.24 Interpretation. Treasury announced on March 20, 1978, that an offirey or employee of a domestic corporation. which has securities listed on national secu rities exchanges or which has assets exceed ing $1 million in:! 500 or more shareholders of record. need not report that he has signature authority over a foreign financial account of the corporation, provided he has no personal financial interest in the account and has been advised in writing by the chief financial officer of the corporation that the corporation has filed a current report which includes that acecunt.

Treasury subsequently received a request for an interpretation regarding the ruling's applicability to officers and employees of domestic subsidiaries of such corporations.

Since the March 20 notice permits a parent corporation to file a consolidated report of foreign financial accounts on behalf of itself and any other entity in which it owns directly or indirectly more than a 50 percent interest, we see no reason to discriminate between employees of the parent and those of its subsidiaries.

Accordingly, an officer or employee of a domestic subsidiary of a domestic corporation which has securities listed on national securities exchanges or which has assets exreeding $1 million and 500 or more share.

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holders of record, need not report that he has signature authority over a foreign financial account of the subsidiary, if he has no personal financial interest in the account and has been advised in writing by the chief financial officer of the parent corporation that the subsidiary corporation has filed :: current report which includes that accoum. Section 103.33(a) Interpretation. 1. This regulation requires the keeping of records, the majority of which are already kept by financial institutions. The typical loan ap plication form asks the applicant to state the purpose of the loan, so it would seem normal in the case of each extension of credit in an amount in excess of $5,000 for the record to contain a reference to the nature or the purpose of the loan. However, if it is a passbook loan, for example, the entry "passbook loan" would suffice.

Section 103.34(a) Interpretations. 1. Any citizen residing or doing business in the United States and any citizen of the United States who opens an account with a finan cial institution after June 30, 1972, must provide that institution with his taxpayer identification number at the time the ac count is opened. For individuals, the taxpayer identification number is his social security number; for corporations, partnerships, and other entities, it is the IRS employer identification number.

Banks, savings and loan association... building and loan associations, savings banks, credit unions, and brokers and dealers in securities are included in this require. ment. If an account is opened in more than one individual's name, the financial instirution is required to secure and maintain the social security number of at least one individual having a financial interest in that account.

If the customer does not have a taxpayer identification number or has lost his card and is unaware of his number, the account may be opened provized the customer vor si under 18 years of age, his guardian) author Izes the Social Security Administration to fumish his social security number to both the customer and the inancia! institution. or the customer, regardless of age, authorizes the Internal Revenue Service to furnish his employer Identification number to both the customer and the financial institution.

With respect to accounts opened for trusts, charitable organizations, clubs, and similar entities the financial institution should secure the employer identification number of the entity. An employer identification number must be obtained for this purpose even though an organization might not otherwise require one. See Instructions published July 6, 1972 (37 FR 13279).

2. This requirement of a taxpayer Identification number does not apply to aliens who are ambassadors, ministers, career diplomatle or consular officers, or to naval, military

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and other attachés of foreign embassies and legations, and the members of their immediate families, nor to aliens who are accredited representatives to international organizations entitled to enjoy privileges, exemptions, and immunities as an international organization under the International Organizations Immunities Act of December 29, 1945 (22 U.S.C. 288), and the members of their immediate families.

3. In regard to determining the proper identifying number to be furnished by ac counts opened in more than one name, the bank should follow the regulations and rulings issued by the Internal Revenue Service under section 6109 of the Internal Revenue Code. These rules are outlined on the back of IRS Form 3435. However, the bank should not use Form 3435 to apply for a taxpayer identification number for a new account, but should instead use Form SS-4 or SS-5.

4. The bankruptcy estate of an individual or partnership is considered as a separate entity from the individual or partnership. However, the Treasury Department does not regard the estate of a corporation in bankruptcy is an entity separate from the corporation. Accordingly, the trustee of a corporation in bankruptcy should use the identification number of the corporation. Upon completion of the IRS Form SS 4 with an appropriate authorization to furnish the employer identification number to the institution, a trustee will be permitted to make deposits. He need not wait until the employer identification number is obtained.

5. All accounts that are primarily savings or checking accounts, with the exception of mortgage escrow accounts, are deposit accounts and are subject to the requirements of this section.

6. Where a person purchases a money order directly from the bank or through an agent of the bank and the bank maintains only a consolidated account with no separate record by customer, no deposit account has been opened by the customer and only those recordkeeping requirements normally applicable to cashier's checks would apply.

7. Where a person reopens a checking account after June 30, 1972, the bank is required to secure the social security number just as with a new account, and the same would apply to the automatic extension of a certificate of deposit.

8. [Reserved]

9. A credit card program operated by a bank does not involve a deposit account and is not, therefore, subject to the requirements of this section.

10. Section 103.34(a) exempts nonresident alteris not doing business in the United States from the requirement to furnish the bank with a taxpayer identification number. If an alien asserts that he is neither residing

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nor doing business in the United States a bank therefor may open the account without obtaining a taxpayer Identification number, provided that it secures a statement from the person to that effect and provided the bank is unaware of any facts inconsistent with that statement. Normal banking practices for ascertaining identity and location of customers should be fol lowed. All nonresident aliens in the United States should have one of the following U.S. Immigration and Naturalization Service forms:

1. Form I-151 (Alien Registration Receipt Card).

2. Form I-185 (Nonresident Alien Canadian Border Crossing Card).

3. Form I-186 (Nonresident Alien Mexican Border Crossing Card).

4. Form I-94 (Arrival-Departure Record). 5. Form I-95A (Alien Crewman's Landing Permit).

6. Form I-184 (Alien Crewman's Landing Permit and Identification Card).

The bank should maintain a record of the applicant's country of citizenship and the number assigned him on his INS form or other official document issued by the appli cant's government.

11. In regard to a business firm opening an account in the name of employees who are foreign nationals not residing in the United States, the bank may open the account for them without securing a taxpayer identifi cation number pursuant to this section provided that the bank is satisfied that the persons are nonresident aliens not doing busi ness in the United States. The bank should verify the identity and whereabouts of such persons and require the business firm: to supply for each such account statement to the effect that the employee is a nonresident alien not doing business in the United States.

12. It is acknowledged that the "Old Order Amish" people do not accept social security benefits or pay self-employment tax. In 1965, the Internal Revenue Code was amended to provide an exemption from selfemployment tax if a person can shown that he is a member of a recognized religious sect which follows the practice of making rea sonable provisions for its dependent members. While the Amish people are opposed to and exempted from the social security program, they do pay their Federal taxes. A bank should explain to its Amish customers that the number required to open any ac count is merely a taxpayer identification number and in no way obligates such person to the social security system. However, if a depositor still objects on religious grounds to applying for a social security number. Form SS-4. Application for an Employer Identification Number, can be used instead.

13. If a new business has applied for an employer Identification number, bui has not

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yet received it when it seeks to open a bank account, the bank may open the account if it secures a completed Form SS-4 in accordance with the instructions issued by Treas ury. The completed Form should not be sent to IRS but simply retained as evidence that an application for a number is pending. Since in the above instance the bank will not automatically receive the number, it must follow up with the customer to insure that the number is furnished within a reasonable time. Generally speaking, the Internal Revenue Service furnishes an employer identification number to an applicant

within 45 days.

Section 103.34(a) Exemptions from. 1. An exemption from the requirements of this subsection 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 au thorization and payments of interest aggregating $10 or more are required by section 5049, 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 num bers for account heid by persons aged 18 years or older and for all accounts earning interest of $10 or more annually. 2 An exemption from the requirements of this subsection is granted with respect to Christmas Club accounts, provided the annual interest is not anticipated to exceed $10.

Section 103.34(b) Interpretations. 1. If there is no check or draft corresponding to a preauthorized paper entry, it will be sufficient to maintain the customer's authoriza tion to charge his account and the memorandum list of entries for a period of 5 years.

2. Insurance companies commonly issue drafts in settlement of claims or for other purposes which are payable through a particular bank, but which are drawn on the company itself and not on a deposit account. However, drafts which are issued by insurance companies are treated as checks throughout the financial system, despite the fact that they are not drawn on a deposit account, and are, therefore, subject to the requirements of $103.34(b) (3). If these drafts meet the volume and purpose requirements of this section, no copy need be retained. If they do not meet these standards. it will be necessary for the bank to retain a copy of the draft as required by this section and to retain the records required by 103.34(b) (10) for a period of 2 years.

3. Clean drafts, including "cash item. drafts", are drawn payable through" or

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