Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Rules and Regulations 30977 

unauthorized inspection or disclosure 

plus, in the case of a willful inspection 

or disclosure or an inspection or 

disclosure that is the result of gross 

negligence, punitive damages. In 

addition, costs and reasonable attorneys 

fees may be awarded; and 

(5) A conviction for an offense 

referenced in paragraph (d)(2) or (3) of 

this section shall, in addition to any 

other punishment, result in dismissal 

from office or discharge from 

employment if the person convicted is 

an officer or employee of the United 

States. 

(e) Safeguards. (1) Any person, or 

agent or subcontractor of the person, 

who may receive returns or return 

information under paragraph (a) of this 

section, shall agree, before disclosure of 

any returns or return information to the 

person, agent, or subcontractor, to 

permit an inspection by the IRS of his, 

her, or its site or facilities. 

(2) Any person, or officer, employee, 

agent or subcontractor of the person, or 

officer or employee of the agent or 

subcontractor, who receives returns or 

return information under paragraph (a) 

of this section, shall comply with all 

applicable conditions and requirements 

as the IRS may prescribe from time to 

time (prescribed requirements) for the 

purposes of protecting the 

confidentiality of returns and return 

information and preventing any 

disclosure or inspection of returns or 

return information in a manner not 

authorized by this section. 

(3) The terms of any written contract 

or agreement for the acquisition of 

property or services as described in 

paragraph (a) of this section shall 

provide, or shall be amended to provide, 

that any person, or officer, employee, 

agent or subcontractor of the person, or 

officer or employee of the agent or 

subcontractor, who receives returns or 

return information under paragraph (a) 

of this section, shall comply with the 

prescribed requirements. Any contract 

or agreement shall be made available to 

the IRS before execution of the contract 

or agreement. For purposes of this 

paragraph (e)(3), a written contract or 

agreement shall include any contract or 

agreement between a person and an 

agent or subcontractor of the person to 

provide the property or services 

described in paragraph (a) of this 

section. 

(4) If the IRS determines that any 

person, or officer, employee, agent or 

subcontractor of the person, or officer or 

employee of the agent or subcontractor, 

who receives returns or return 

information under paragraph (a) of this 

section, has failed to, or does not, satisfy 

the prescribed requirements, the IRS, 

consistent with the regulations under 

section 6103(p)(7), may take any actions 

it deems necessary to ensure that the 

prescribed requirements are or will be 

satisfied, including—

(i) Suspension of further disclosures 

of returns or return information by the 

IRS to the State tax agency, the Social 

Security Administration, or the 

Department of Justice, until the IRS 

determines that the conditions and 

requirements have been or will be 

satisfied; 

(ii) Suspension of further disclosures 

by the Treasury Department otherwise 

authorized by paragraph (a) of this 

section; and 

(iii) Suspension or termination of any 

duty or obligation arising under a 

contract or agreement with the Treasury 

Department. 

(f) Definitions. For purposes of this 

section—

(1) The term Treasury Department 

includes the IRS, the Office of the Chief 

Counsel for the IRS, and the Office of 

the Treasury Inspector General for Tax 

Administration; 

(2) The term State tax agency means 

an agency, body, or commission 

described in section 6103(d); and 

(3) The term Department of Justice 

includes offices of the United States 

Attorneys. 

(g) Effective date. This section is 

applicable on June 5, 2007. 

Kevin M. Brown, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: May 19, 2007. 

Eric Solomon, 

Assistant Secretary for Tax Policy. 

[FR Doc. E7–10798 Filed 6–4–07; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR Part 363 

Regulations Governing Securities Held 

in TreasuryDirect 

AGENCY: Bureau of the Public Debt, 

Fiscal Service, Treasury. 

ACTION: Final rule. 

SUMMARY: TreasuryDirect is an accountbased, book-entry, online system for 

purchasing, holding, and conducting 

transactions in Treasury securities. An 

account owner currently accesses his or 

her account using a password to 

authenticate the account owner’s 

identity. Treasury is now introducing 

additional customer-based 

authentication mechanisms for 

accessing accounts. This final rule 

provides Treasury the flexibility to 

require additional methods of 

authentication for the protection of 

customer accounts. Treasury is also 

strengthening its ability to respond to 

attempted fraud and abuse of 

TreasuryDirect. Currently, Treasury has 

the authority to close any account. This 

rule explicitly permits Treasury to 

liquidate the securities held in the 

account to be closed and pay the 

proceeds to the person entitled. 

DATES: Effective: June 5, 2007. 

ADDRESSES: You can download this final 

rule at the following Internet addresses: 

http://www.publicdebt.treas.gov or 

http://www.gpoaccess.gov/ecfr. 

FOR FURTHER INFORMATION CONTACT: 

Elisha Whipkey, Director, Division of 

Program Administration, Office of 

Securities Operations, Bureau of the 

Public Debt, at (304) 480–6319 or 

elisha.whipkey@bpd.treas.gov. 

Susan Sharp, Attorney-Adviser, Dean 

Adams, Assistant Chief Counsel, 

Edward Gronseth, Deputy Chief 

Counsel, Office of the Chief Counsel, 

Bureau of the Public Debt, at (304) 

480–8692 or 

susan.sharp@bpd.treas.gov. 

SUPPLEMENTARY INFORMATION: Treasury 

is committed to protecting its 

TreasuryDirect investors from potential 

losses through authentication of the 

investor at account access. 

Authentication is the process of 

ensuring that the person accessing his or 

her account is the same as the person 

whose identity was initially verified at 

account establishment. Authentication 

methods involve something that the 

user knows (such as a password), 

something that the user has (such as a 

gridcard), or something that the user is 

(such as a fingerprint). Multifactor 

authentication consists of requiring two 

or more methods of authentication to 

access an account. To date, Treasury has 

used single factor authentication, 

requiring passwords and other 

information that an account holder 

knows to conduct transactions in 

TreasuryDirect. Treasury now intends to 

introduce technology that uses 

multifactor authentication, which is 

more reliable and difficult to 

compromise than single factor 

authentication. Through this final rule, 

Treasury will have the flexibility to 

introduce additional methods of 

authentication for TreasuryDirect users 

to ensure that their accounts remain 

secure. 

In addition, Treasury is strengthening 

its ability to respond to attempted fraud 


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30978 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Rules and Regulations 

and abuse of TreasuryDirect. Treasury 

has the authority to refuse to open an 

account, to close any existing account, 

to suspend transactions in an account or 

any security held in an account, and to 

take any other action with regard to an 

account that we deem necessary, if it is 

not inconsistent with existing law and 

rights. This rule clarifies Treasury’s 

authority to close an account, by 

specifically including the authority to 

liquidate securities held in an account 

to be closed and pay the proceeds to the 

person entitled. 

This final rule also clarifies certain 

terms that we have used in the past. We 

have used the term ‘‘authentication 

service’’ to refer to the verification of the 

identity of the account owner at account 

establishment through a verification 

service; we have used the term 

‘‘authentication’’ to refer to the 

confirmation of the identity of an 

account owner when accessing his or 

her account. We will now use the term 

‘‘verification’’ to refer to confirmation of 

the identity of the account owner at 

account establishment; we will use the 

term ‘‘authentication’’ to refer to 

confirmation of the identity of the 

account owner when accessing his or 

her account after account establishment. 

Because it provides multifactor 

authentication for transactions in 

TreasuryDirect accounts, this 

authentication enhancement has 

significant benefits for both investors 

and the government. Increasing from 

single to multifactor authentication will 

help protect investors from losses in 

their TreasuryDirect accounts due to 

identity theft and fraud. This rule will 

benefit the government by increasing 

investor confidence in the security of 

online transactions in the 

TreasuryDirect system. 

Procedural Requirements 

This final rule does not meet the 

criteria for a ‘‘significant regulatory 

action’’ as defined in Executive Order 

12866. Therefore, a regulatory 

assessment is not required. 

Because this final rule relates to 

matters of public contract and 

procedures for United States securities, 

notice and public procedure and 

delayed effective date requirements are 

inapplicable, pursuant to 5 U.S.C. 

553(a)(2). 

As no notice of proposed rulemaking 

is required, the Regulatory Flexibility 

Act (5 U.S.C. 601 et seq.) does not 

apply. 

We ask for no new collections of 

information in this final rule. Therefore, 

the Paperwork Reduction Act (44 U.S.C. 

3507) does not apply. 

List of Subjects in 31 CFR Part 363 

Bonds, Electronic funds transfer, 

Federal Reserve system, Government 

securities, Securities. 

■ Accordingly, for the reasons set out in 

the preamble, 31 CFR Chapter II, 

Subchapter B, is amended as follows: 

PART 363—REGULATIONS 

GOVERNING SECURITIES HELD IN 

TREASURYDIRECT 

■ 1. The authority citation for part 363 

continues to read as follows: 

Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 

U.S.C. 3102, et seq.; 31 U.S.C. 3121, et seq. 

■ 2. Amend § 363.6 by: 

■ a. Removing the definition of 

‘‘Authentication service’’; 

■ b. adding the definitions of 

‘‘Authentication,’’ ‘‘Verification,’’ and 

‘‘Verification service’’ to read in 

alphabetical order as follows: 

§ 363.6 What special terms do I need to 

know to understand this part? 

Authentication means confirming that 

the person accessing a TreasuryDirect 

account is the same person whose 

identity was initially verified at account 

establishment. 

* * * * * 

Verification means confirming the 

identity of an online applicant for a 

TreasuryDirect account at account 

establishment using a verification 

service. 

Verification service means a public or 

private service that confirms the 

identity of an online applicant for a 

TreasuryDirect account at account 

establishment using information 

provided by the applicant. 

* * * * * 

■ 3. Amend § 363.13 by revising the 

final sentence and adding a sentence at 

the end of the section, to read as 

follows: 

§ 363.13 How can I open a 

TreasuryDirect  account? 

* * * We will verify your identity 

and send your account number to you 

by e-mail when your account 

application is approved. In addition to 

your password, we may require you to 

use any other form(s) of authentication 

that we consider necessary for the 

protection of your account. 

■ 4. Revise § 363.14 to read as follows: 

§ 363.14 How will you verify my identity? 

We may use a verification service to 

verify your identity using information 

you provide about yourself on the 

online application. At our option, we 

may require offline verification. 

■ 5. Amend § 363.15 by revising the 

heading and the first sentence to read as 

follows: 

§ 363.15 What is the procedure for offline 

verification? 

In the event we require offline 

verification, we will provide a printable 

verification form. * * * 

■ 6. Revise § 363.16 to read as follows: 

§ 363.16 How do I access my account? 

You may access your account online 

using your account number, password, 

and any other form(s) of authentication 

that we may require. 

■ 7. Revise § 363.17 to read as follows: 

§ 363.17 Who is liable if someone else 

accesses my TreasuryDirect  account 

using my password? 

You are solely responsible for the 

confidentiality and use of your account 

number, password, and any other 

form(s) of authentication we may 

require. We will treat any transactions 

conducted using your password as 

having been authorized by you. We are 

not liable for any loss, liability, cost, or 

expense that you may incur as a result 

of transactions made using your 

password. 

■ 8. Revise § 363.19 to read as follows: 

§ 363.19 What should I do if I become 

aware that my password or other form of 

authentication has become compromised? 

If you become aware that your 

password has become compromised, 

that any other form of authentication 

has been compromised, lost, stolen, or 

misused, or that there have been any 

unauthorized transactions in your 

account, you may place a hold on your 

account so that it cannot be accessed by 

anyone, and you should notify us 

immediately by e-mail or telephone. 

Contact information is available on the 

TreasuryDirect Web site. 

■ 9. Amend § 363.29 by revising 

paragraph (b) to read as follows: 

§ 363.29 May Treasury close an account, 

suspend transactions in an account, or 

refuse to open an account? 

* * * * * 

(b) Close any existing account, 

redeem, sell, or liquidate the securities 

held in the account, and pay the 

proceeds to the person entitled; 

* * * * * 

Kenneth E. Carfine, 

Fiscal Assistant Secretary. 

[FR Doc. 07–2744 Filed 6–4–07; 8:45 am] 

BILLING CODE 4810–39–P 


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