416 U.S. 21 (1974), 72-985, California Bankers Assn. v. Shultz

Docket NºNo. 72-985
Citation416 U.S. 21, 94 S.Ct. 1494, 39 L.Ed.2d 812
Party NameCalifornia Bankers Assn. v. Shultz
Case DateApril 01, 1974
CourtUnited States Supreme Court

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416 U.S. 21 (1974)

94 S.Ct. 1494, 39 L.Ed.2d 812

California Bankers Assn.

v.

Shultz

No. 72-985

United States Supreme Court

April 1, 1974

Argued January 16, 1974

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

Syllabus

The Bank Secrecy Act of 1970, which was enacted following extensive hearings concerning the unavailability of foreign and domestic lank records of customers thought to be engaged in illegal activities, authorizes the Secretary of the Treasury to prescribe by regulation certain bank recordkeeping and reporting requirements, the Act's penalties attaching only upon violation of the regulations thus prescribed. (Unless otherwise indicated, references below to the Act also include the accompanying regulations.) The Act is designed to obtain financial information having "a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings." Title I of the Act requires financial institutions to maintain records of their customers' identities, to make microfilm copies of checks and similar instruments, and to keep records of certain other items. Title II requires the reporting to the Federal Government of certain foreign and domestic financial transactions. Title II, § 231, requires reports of the transportation of currency and specified instruments exceeding $5,000 into or out of the country, exception being made, inter alia, for banks and security dealers. Section 241 requires individuals with bank accounts or other relationships with foreign banks to provide specified information on a tax return form. Section 221 delegates to the Secretary of the Treasury [94 S.Ct. 1498] the authority to require reports of transactions "if they involve the payment, receipt, or transfer of United States currency, or such other monetary instruments as the Secretary may specify . . . ," § 222 providing that he may require such reports from the domestic financial institution involved, the parties to the transaction, or both, and § 223 providing that he may designate financial institutions

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to receive the reports. Under the implementing regulations, only financial institutions must file reports with the Internal Revenue Service (IRS), and then only where the transaction involves the deposit, withdrawal, exchange, or other payment of currency exceeding $10,000. The regulations provide that the Secretary may grant exemptions from the requirements of the regulations. Suits were brought by various plaintiffs challenging the constitutionality of the Act, principally on the ground that it violated the Fourth Amendment, because when the bank makes and keeps records under compulsion of the Secretary's regulations it acts as a Government agent, and thereby engages in a "seizure" of its customer's records. A three-judge District Court, though upholding the recordkeeping requirements of Title I of the Act and the foreign transaction reporting requirements of Title II, concluded that the domestic reporting provisions of Title II, §§ 221-223, contravened the Fourth Amendment, and enjoined their enforcement. Three separate appeals were taken. In No. 72-985, the California Bankers Association, a plaintiff below, asserts that Title I's recordkeeping provisions violate(1) due process, because there is no rational relationship between the Act's objectives and the required recordkeeping and because the Act is unduly burdensome, and (2) rights of privacy. In No. 72-1196, a bank plaintiff, certain plaintiff depositors, and the American Civil Liberties Union (ACLU), also a plaintiff, as a depositor in a bank subject to the recordkeeping requirements and as a representative of its bank customer members, attack both the Title I recordkeeping requirements and the Title II foreign financial transaction reporting requirements on Fourth Amendment grounds; on Fifth Amendment grounds, as violating the privilege against compulsory self-incrimination; and on First Amendment grounds, as violating free speech and free association rights. In No. 72-1073, the Secretary asserts that the District Court erred in holding Title II's domestic financial transaction reporting requirements facially invalid without considering the actual implementation of the statute by the regulations.

Held:

1. Title I's recordkeeping requirements, which are a proper exercise of Congress' power to deal with the problem of crime in interstate and foreign commerce, do not deprive the bank plaintiffs of due process of law. Pp. 45-52.

(a) There is a sufficient nexus between the evil Congress sought to address and the recordkeeping procedure to meet the requirements of the Due Process Clause of the Fifth Amendment,

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and the fact that banks are not mere bystanders in transactions involving negotiable instruments, but have a substantial stake in their availability and acceptance and are the most easily identifiable party to the instruments, makes it appropriate for the banks, rather than others, to do the recordkeeping. United States v. Darby, 312 U.S. 100; Shapiro v. United States, 335 U.S. 1. Pp. 45-49.

(b) The cost burdens on the banks of the recordkeeping requirements are not unreasonable. P. 50.

(c) The bank plaintiffs' claim that the recordkeeping requirements undermine the right of a depositor effectively to challenge an IRS third-party summons is premature, absent the issuance of such process involving a depositor's transactions. Pp. 51-52.

2. Title I's recordkeeping provisions do not violate the Fourth Amendment [94 S.Ct. 1499] rights of either the bank or depositor plaintiffs, the mere maintenance by the bank of records without any requirement that they be disclosed to the Government (which can secure access only by existing legal process) constituting no illegal search and seizure. Pp. 52-54.

3. Title I's recordkeeping provisions do not violate the Fifth Amendment rights of either the bank or depositor plaintiffs. P. 55.

(a) The bank plaintiffs, being corporations, have no constitutional privilege against compulsory self-incrimination by virtue of the Fifth Amendment. Hale v. Henkel, 201 U.S. 43, 74-75. P. 55.

(b) A depositor plaintiff incriminated by evidence produced by a third party sustains no violation of his own Fifth Amendment rights. Johnson v. United States, 228 U.S. 457, 458; Couch v. United States, 409 U.S. 322, 328. P. 55.

4. The ACLU's claim that Title I's recordkeeping requirements violate its members' First Amendment rights, since the challenged provisions could possibly be used to identify its members and contributors (cf. NAACP v. Alabama, 357 U.S. 449), is premature, the Government having sought no such disclosure here. Pp. 55-57.

5. The reporting requirements in Title II applicable to foreign financial dealings, which single out transactions with the greatest potential for avoiding enforcement of federal laws and which involve substantial sums, do not abridge plaintiffs' Fourth Amendment rights and are well within Congress' powers to legislate with respect to foreign commerce. Carroll v. United States, 267 U.S. 132, 154; Almeida-Sanchez v. United States, 413 U.S. 266, 272. Pp. 563.

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6. The regulations for the reporting by financial institutions of domestic financial transactions are reasonable, and abridge no Fourth Amendment rights of such institutions, which are themselves parties to the transactions involved, since neither "incorporated nor unincorporated associations [have] an unqualified right to conduct their affairs in secret," United States v. Morton Salt Co., 338 U.S. 632, 652. Pp. 63-67.

7. The depositor plaintiffs, who do not allege engaging in the type of $10,000 domestic currency transaction requiring reporting, lack standing to challenge the domestic reporting regulations. It is therefore unnecessary to consider contentions made by the bank and depositor plaintiffs that the regulations are constitutionally defective because they do not require the financial institution to notify the customer that a report will be filed concerning the domestic currency transaction. Pp. 67-70.

8. The depositor plaintiffs who are parties in this litigation are premature in challenging the foreign and domestic reporting provisions under the Fifth Amendment. Pp. 72-75.

(a) Since those plaintiffs merely allege that they intend to engage in foreign currency transactions with foreign banks, and make no additional allegation that any of the information required by the Secretary will tend to incriminate them, their challenge to the foreign reporting requirements cannot be considered at this time. Communist Party v. SACB, 367 U.S. 1, 105-110, followed; Albertson v. SACB, 382 U.S. 70, distinguished. Pp. 72-74.

(b) The depositor plaintiffs' challenge to the domestic reporting requirements are similarly premature, since there is no allegation that any depositor engaged in a $10,000 domestic transaction with a bank that the latter was required to report, and no allegation that [94 S.Ct. 1500] any bank report would contain information incriminating any depositor. Marchetti v. United States, 390 U.S. 39; Grosso v. United States, 390 U.S. 62; and Haynes v. United States, 390 U.S. 85, distinguished. P. 75.

9. The bank plaintiffs cannot vicariously assert Fifth Amendment claims on behalf of their depositors under the circumstances present here, since the depositors cannot assert those claims themselves at this time. See ¶ 8, supra. Pp. 71-72.

10. The contentions of the ACLU that the reporting requirements with respect to foreign and domestic transactions invade its First Amendment associational interests are too speculative and hypothetical to warrant consideration, in view of the fact that the ACLU alleged only that it maintains accounts at a San

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Francisco bank, but not that it regularly engages in abnormally large domestic currency transactions, transports or receives monetary instruments from foreign...

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537 practice notes
  • 225 B.R. 478 (Bkrtcy.C.D.Cal. 1998), 97-28379, In re Yassai
    • United States
    • Federal Cases United States Bankruptcy Courts Ninth Circuit
    • August 12, 1998
    ...v. United States, 413 F.2d 316, 317 (9th Cir.1969)); Stark v. Connally, 347 F.Supp. 1242, 1248 (N.D.Cal.1972),modified on other grounds, 416 U.S. 21, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974); Rosenblatt v. Northwest Airlines, Inc., 54 F.R.D. 21, 23 (S.D.N.Y.1971); Societe Internationale v. McGr......
  • 56 F.Supp.2d 1226 (N.D.Ala. 1999), CV-98-PT-1794, Made in the USA Foundation v. United States
    • United States
    • Federal Cases United States District Courts 11th Circuit Northern District of Alabama
    • July 23, 1999
    ...to this being another case where the Supreme Court undertook to decide an indefinite issue. [346] See California Bankers Ass'n v. Shultz, 416 U.S. 21, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974) (Congress has plenary authority to regulate foreign commerce); Board of Trustees of University of Illin......
  • 468 P.3d 1176 (Ariz. 2020), CV-19-0105-PR, Johnson Utilities v. Arizona Corp. Commission
    • United States
    • Arizona Supreme Court of Arizona
    • July 31, 2020
    ...404 n.24 (2016) (discussing the distinction between plenary and exclusive powers); see also Cal. Bankers Ass'n. v. Shultz, 416 U.S. 21, 59, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974) (stating that Congress' plenary power to regulate foreign commerce may be delegated). Spe......
  • Made in USA Foundation United Steel Workers of America v. United States, 072399 ALMDC, CV 98-PT-1794
    • United States
    • Federal Cases United States District Courts 11th Circuit Northern District of Alabama
    • July 23, 1999
    ...to this being another case where the Supreme Court undertook to decide an indefinite issue. [350] See California Bankers Ass'n v. Shultz, 416 U.S. 21 (1974) (Congress has plenary authority to regulate foreign commerce); Board of Trustees of University of Illinois v. U.S., 289 U.S. 48 (1933)......
  • Free signup to view additional results
481 cases
  • 225 B.R. 478 (Bkrtcy.C.D.Cal. 1998), 97-28379, In re Yassai
    • United States
    • Federal Cases United States Bankruptcy Courts Ninth Circuit
    • August 12, 1998
    ...v. United States, 413 F.2d 316, 317 (9th Cir.1969)); Stark v. Connally, 347 F.Supp. 1242, 1248 (N.D.Cal.1972),modified on other grounds, 416 U.S. 21, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974); Rosenblatt v. Northwest Airlines, Inc., 54 F.R.D. 21, 23 (S.D.N.Y.1971); Societe Internationale v. McGr......
  • 56 F.Supp.2d 1226 (N.D.Ala. 1999), CV-98-PT-1794, Made in the USA Foundation v. United States
    • United States
    • Federal Cases United States District Courts 11th Circuit Northern District of Alabama
    • July 23, 1999
    ...to this being another case where the Supreme Court undertook to decide an indefinite issue. [346] See California Bankers Ass'n v. Shultz, 416 U.S. 21, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974) (Congress has plenary authority to regulate foreign commerce); Board of Trustees of University of Illin......
  • 468 P.3d 1176 (Ariz. 2020), CV-19-0105-PR, Johnson Utilities v. Arizona Corp. Commission
    • United States
    • Arizona Supreme Court of Arizona
    • July 31, 2020
    ...404 n.24 (2016) (discussing the distinction between plenary and exclusive powers); see also Cal. Bankers Ass'n. v. Shultz, 416 U.S. 21, 59, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974) (stating that Congress' plenary power to regulate foreign commerce may be delegated). Spe......
  • Made in USA Foundation United Steel Workers of America v. United States, 072399 ALMDC, CV 98-PT-1794
    • United States
    • Federal Cases United States District Courts 11th Circuit Northern District of Alabama
    • July 23, 1999
    ...to this being another case where the Supreme Court undertook to decide an indefinite issue. [350] See California Bankers Ass'n v. Shultz, 416 U.S. 21 (1974) (Congress has plenary authority to regulate foreign commerce); Board of Trustees of University of Illinois v. U.S., 289 U.S. 48 (1933)......
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1 firm's commentaries
52 books & journal articles
  • Financial institutions fraud.
    • United States
    • American Criminal Law Review Vol. 42 Nbr. 2, March 2005
    • March 22, 2005
    ...31 U.S.C. [subsection] 321, 5311-14, 5316-5326 (2000); 31 U.S.C. [subsection] 5328-30 (2000). (189.) See Cal. Bankers Ass'n. v. Shultz, 416 U.S. 21, 26-30 (1974) (discussing major concerns Congress sought to address through enactment of BSA); Patrick T. O'Brien, Note, Tracking Narco-Dollars......
  • The desirability of punitive damages in securities arbitration: challenges facing the industry regulators in the wake of Mastrobuono.
    • United States
    • University of Pennsylvania Law Review Vol. 144 Nbr. 1, November 1995
    • November 1, 1995
    ...(finding that there is no Fourth Amendment interest in checks, deposits, and other bank records); California Bankers Ass'n v. Shultz, 416 U.S. 21, 69-70 (1974) (same). (263) See Francis S. Chlapowski, Note, The Constitutional Protection of Informational Privacy, 71 B.U. L. Rev. 133, 146 (19......
  • Financial institutions fraud.
    • United States
    • American Criminal Law Review Vol. 43 Nbr. 2, March 2006
    • March 22, 2006
    ...12 U.S.C. 1829b; 31 U.S.C. [subsection] 321, 5311-14, 5316-5326; 31 U.S.C. [subsection] 5328-30. (192.) See Cal. Bankers Ass'n. v. Shultz, 416 U.S. 21, 26-30 (1974) (discussing major concerns Congress sought to address through enactment of BSA); Patrick T. O'Brien, Note, Tracking Narco-Doll......
  • Crime, surveillance, and communities.
    • United States
    • Fordham Urban Law Journal Vol. 40 Nbr. 3, March 2013
    • March 1, 2013
    ...v. United States, 466 U.S. 170 (1984). (31.) United States v. Millet, 425 U.S. 435, 435 (1976). Butsee Cal. Bankers Ass'n v. Shultz, 416 U.S. 21, 87-90 (1974). (32.) Paul Ohm, The Fourth Amendment in a World Without Privacy, 81 MISS. L.J. 1309, 1315 (2012) (observing that "text-messagi......
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