No Summons Or Subpoena? No Records!

No Summons Or Subpoena?No Records!

The president of the financial institution suspected that his customer was evading taxes. The customer had applied for a loan, and had furnished a loan application, a financial statement, and other documentation to the financial institution.

The banker, feeling that he was doing his duty, called the Internal Revenue Service (IRS), met with an agent, and handed over copies of the customer's records.

The customer sued, claiming a violation of the Right to Financial Privacy Act.

The financial institution claimed an exemption from liability of disclosure of records to the IRS.

The U.S. Circuit Court of Appeals found the financial institution guilty.

The production of records to any government agency, unless required by procedure (for instance the copies of records accompanying a Criminal Referral Form) should be limited to cases in which the financial institution receives an official summons. In this case, if the IRS had issued an administrative summons, the institution would have been justified in producing the records.

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 3, 4/91