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Criminal Resource Manual

431. Non-Target Exception

12 U.S.C. § 3413(h)(1)(A) is a particularly significant provision from the standpoint of law enforcement access. The exception provides as follows:

Nothing in this title (except sections 3403, 3417, and 3418) shall apply when financial records are sought by a Government authority--

  1. in connection with a lawful proceeding, investigation, examination, or inspection directed at the financial institution in possession of such records or at a legal entity which is not a customer. (emphasis added.)

The first portion of this exception authorizes access, limited only by certification of compliance and potential civil liability, in connection with investigations targeted against custodian financial institutions. The second portion of the exception, however, disjunctively broadens its sweep to include a far greater range of "excepted" targets, there by permitting ready access to customer records in connection with embezzlement investigations directed against bank officers or employees, fraud investigations directed against outside swindlers, or any investigation requiring access to records of numerous customers and directed against an entity other than the customer whose records are sought.

The Department interprets the term "legal entity" as encompassing natural persons; this interpretation is grounded on three bases: (1) the term "entity" is sufficiently broad to encompass natural existence and is defined for general purposes as a "real being" [Black's Law Dictionary at 626 (4th ed. 1972)]; (2) the exception does not read ... or another legal entity" which would have been the logical phrasing had Congress intended to denote only non-natural entities such as financial institutions; and (3) a non-natural legal entity (other than a small partnership) could never be a "customer" under the restrictive definition of the Act so that if "legal entity" was not intended to encompass natural persons there would have been no need for the added qualification of ... which is not a customer." Moreover, the fact that such an investigative target (i.e., a teller) may coincidentally maintain an account of some sort at the financial institution in question does not render the target a "customer" within the meaning of section 3413(h)(1)(A). In an embezzlement case, therefore, the fact that the teller suspected of the embezzlement happens to maintain a checking account at that bank does not prevent the use of 12 U.S.C. §  3413(h)(1)(A) to obtain access to records of the victims of the embezzlement. Of course, if records pertaining to the teller's checking account are sought in connection with an embezzlement investigation, they could not properly be obtained under the exception.

Note: It is the position of the Department that the nontarget exception must be used if it is applicable. The Civil Division has in the past declined to defend challenge actions when this exception was applicable and should have been employed.