05-916. Privacy Act of 1974; Implementation

AGENCY:

Internal Revenue Service, Treasury.

ACTION:

Final rule.

SUMMARY:

In accordance with the requirements of the Privacy Act of 1974, as amended, the Department of the Treasury exempts a new Internal Revenue Service (IRS) system of records entitled “IRS 42.031—Anti-Money Laundering/Bank Secrecy Act (BSA) and Form 8300 Records” from certain provisions of the Privacy Act.

EFFECTIVE DATE:

January 18, 2005.

FOR FURTHER INFORMATION CONTACT:

IRS National Anti-Money Laundering Program Manager, S: C: CP: RE: AML, 19th Floor, 1601 Market Street, Philadelphia, PA 19106, phone [phone].

SUPPLEMENTARY INFORMATION:

The IRS published a notice of proposed rulemaking on April 30, 2004 at 69 FR 23705-23706 exempting the new system of records from certain provisions of the Privacy Act of 1974, as amended. The IRS published the proposed system notice in its entirety at 69 FR 23854 on April 30, 2004. No comments were received by the IRS.

Under 5 U.S.C. 552a(k)(2), the head of an agency may promulgate rules to exempt any system of records within the agency from certain provisions of the Privacy Act if the system is investigatory material compiled for law enforcement purposes. The exemption is from provisions 552a(c)(3), (d), (e)(1), (e)(4)(G), (e)(4)(H), (e)(4)(I), and (f) because the system contains investigatory material compiled for law enforcement purposes. The following are the reasons why this system of records maintained by the IRS is exempt pursuant to 5 U.S.C. 552a(k)(2) of the Privacy Act of 1974.

(1) 5 U.S.C. 552a(c)(3). This provision of the Privacy Act provides for the release of the disclosure accounting required by 5 U.S.C. 552a(c) (1) and (2) to the individual named in the record at his/her request. The reasons for exempting this system of records from the foregoing provision is:

(i) The release of disclosure accounting would put the subject of an investigation on notice that an investigation exists and that such person is the subject of that investigation.

(ii) Such release would provide the subject of an investigation with an accurate accounting of the date, nature, and purpose of each disclosure and the name and address of the person or agency to which disclosure was made. The release of such information to the subject of an investigation would provide the subject with significant information concerning the nature of the investigation and could result in the altering or destruction of documentary evidence, the improper influencing of witnesses, and other activities that could impede or compromise the investigation.

(iii) Release to the individual of the disclosure accounting would alert the individual as to which agencies were investigating the subject and the scope of the investigation and could aid the individual in impeding or compromising investigations by those agencies.

(2) 5 U.S.C. 552a(d), (e)(4)(G), (e)(4)(H), and (f). These provisions of the Privacy Act relate to an individual's right to be notified of the existence of records pertaining to such individual; requirements for identifying an individual who requested access to records, the agency procedures relating to access to records and the content of the information contained in such records and the civil remedies available to the individual in the event of adverse determinations by an agency concerning access to or amendment of information contained in record systems. The reasons for exempting this system of records from the foregoing provisions are as follows: To notify an individual at the individual's request of the existence of an investigative file pertaining to such individual or to grant access to an investigative file pertaining to such individual could interfere with investigative and enforcement proceedings; deprive co-defendants of a right to a fair trial or an impartial adjudication; constitute an unwarranted invasion of the personal privacy of others; disclose the identity of confidential sources and reveal confidential information supplied by such sources; and, disclose investigative techniques and procedures.

(3) 5 U.S.C. 552a(e)(1). This provision of the Privacy Act requires each agency to maintain in its records only such information about an individual as is relevant and necessary to accomplish a purpose of the agency required to be accomplished by statute or executive order. The reasons for exempting this system of records from the foregoing are as follows:

(i) The IRS will limit the Anti-Money Laundering/Bank Secrecy Act (BSA) and Form 8300 Records to those relevant and necessary for identifying, monitoring, and responding to complaints, allegations and other information received concerning violations or potential violations of the anti-money laundering provisions of Title 31 and Title 26 laws. However, an exemption from the foregoing is needed because, particularly in the early stages of an investigation, it is not possible to determine the relevance or necessity of specific information.

(ii) Relevance and necessity are questions of judgment and timing. What appears relevant and necessary when first received may subsequently be determined to be irrelevant or unnecessary. It is only after the information is evaluated that the relevance and necessity of such information can be established with certainty.

(4) 5 U.S.C. 552a(e)(4)(I). This provision of the Privacy Act requires the publication of the categories of sources of records in each system of records. The reasons an exemption from this provision has been claimed are as follows:

(i) Revealing categories of sources of information could disclose investigative techniques and procedures;

(ii) Revealing categories of sources of information could cause sources that supply information to investigators to refrain from giving such information because of fear of reprisal, or fear of breach of promises of anonymity and confidentiality.

As required by Executive Order 12866, it has been determined that this rule is not a significant regulatory action, and therefore, does not require a regulatory impact analysis.

The regulation will not have a substantial direct effect on the States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this rule does not have federalism implications under Executive Order 13132.

Pursuant to the requirements of the Regulatory Flexibility Act, 5 U.S.C. 601-612, it is hereby certified that these regulations will not significantly affect a substantial number of small entities. The rule imposes no duties or obligations on small entities.

In accordance with the provisions of the Paperwork Reduction Act of 1995, the Department of the Treasury has determined that this rule would not impose new recordkeeping, application, reporting, or other types of information collection requirements.

List of Subjects in 31 CFR Part 1

• Privacy

Part 1, subpart C of title 31 of the Code of Federal Regulations is amended as follows:

PART 1—[AMENDED]

1. The authority citation for part 1 continues to read as follows:

Authority: 5 U.S.C. 301 and 31 U.S.C. 321. Subpart A also issued under 5 U.S.C. 552 as amended. Subpart C also issued under 5 U.S.C. 552a.

2. Section 1.36 paragraph (g)(1)(viii) is amended by adding the following text to the table in numerical order.

§ 1.36

Systems exempt in whole or in part from provisions of 5 U.S.C. 522a and this subpart.

* * * * *

(g) * * *

(1) * * *

(viii) * * *

Number	Name of system
*    *    *    *    *
IRS 42.031	Anti-Money Laundering/Bank Secrecy Act BSA) and Form 8300 Records.
*    *    *    *    *

* * * * *

Dated: December 22, 2004.

Arnold I. Havens,

General Counsel.