visions of the Act concerning domestic financial transactions-but in no other respect. This Memorandum constitutes the findings and conclusions of the Court within the meaning of Rules 52 and 65 of Federal Rules of Civil Procedure. Dated: August 4th, 1972 O. D. HAMLIN, Circuit Judge. STARK, ET AL. v. CONNALLY, ET AL.-No. 72-1045 CALIFORNIA BANKERS ASSOCIATION V. CONNALLY, ET AL.-No. 72-1157 Hamlin, Circuit Judge, dissenting and concurring : I concur in that portion of the majority opinion in the above case which upholds the constitutionality of 31 U.S.C. §§ 1101, 1121 and 1122, and the Treasury regulations implementing said sections. I respectfully dissent, however, from that portion of said opinion which holds that 31 U.S.C. §§ 1081, 1082 and 1083 relating to domestic banking transactions are unconstitutional. As I see it, there is no essential difference between the statutes covering domestic and those covering foreign banking requirements. The majority opinion refers to no authority which is directly on point. The references therein to cases involving conversational privacy are to me inapposite. Any person or organization using banks for their own purposes does so knowing that the Code sections in question permit access to bank records by the Government and reports by the banks concerning those records. Courts should be slow in finding a Congressional enactment unconstitutional. In this case, if any hardships result by reason of these statutes, application can be made to Congress for relief. O. D. HAMLIN. STATEMENT OF STEPHEN SLIPHER, LEGISLATIVE DIRECTOR, UNITED STATES SAVINGS AND LOAN LEAGUE The United States Savings and Loan League1 would like to call to the attention of the Subcommittee several problems with respect to the Foreign Bank Secrecy Act and urge consideration of certain changes in the law and regulations. We recognize that the thrust of the current hearings is with respect to the issue of investigative procedures, privacy of records, and certain constitutional questions. However, there are no other hearings scheduled at this time, so we consider it appropriate to report our position on other phases of the Bank Secrecy Act. Specifically, we would like to call attention to the lack of flexibility in the requirement that financial institutions obtain a taxpayer identification number, or institute a request for such number, prior to opening any savings account. This subject is discussed in the attached letter submitted to the Treasury on July 26. In it, we point out the unnecessary burden of collecting taxpayer numbers which have no real connection with fighting crime. We further point out that the Treasury rule is self-defeating. When a savings account is turned away, there is not even available a record of the name and address of the holder of the funds. We would like to supplement that letter by pointing out two areas in which it is especially onerous and nonproductive to require taxpayer numbers. We refer to programs in school savings and Christmas Club accounts. A number of our 1 The U.S. Savings and Loan League has a membership of 4,800 savings and loan associations, representing over 95 percent of the assets of the savings and loan business. League membership includes all types of associations-Federal and state-chartered, insured and uninsured, stock and mutual. The principal officers are: John P. Farry, President, Albert Lea, Minnesota; Richard G. Gilbert, Vice President, Canton, Ohio; Tom B. Scott, Jr., Legislative Chairman, Jackson, Mississippi; Norman Strunk, Execu tive Vice President, Chicago, Illinois; and Stephen Slipher, Legislative Director, Washington, D.C. League' headquarters is at 111 East Wacker Drive, Chicago, Illinois (60601); and the Washington Office is located at 425 13th Street, N.W., Washington, D.C.; Telephone: 638-6334. members have complained that the absolute requirement for obtaining a taxpayer number plays complete havic with school savings programs. Obviously, the time and effort of compliance acts as a major deterrent and yet the use of school savings as a hideaway for huge amounts of criminal cash is an absurdity. By the same token, it appears unnecessary and even frivolous to require taxpayer numbers on Christmas Club accounts, with $1 to $10 a week payments, that will be withdrawn at Christmas time. We hope that in any revision of the legislation, the Subcommittee will give consideration to these issues. UNITED STATES SAVINGS AND LOAN LEAGUE, Chicago, Ill., July 26, 1972. Hon. WILLIAM L. DICKEY, Deputy Assistant Secretary for Enforcement, Tariff and Trade Affairs and Operations, Treasury Department, Washington, D.C. DEAR SIR: The United States Savings and Loan League represents more than 4,800 savings and loan associations. Our member associations, together with other financial institutions, are greatly concerned by the notice of the Treasury Department, dated June 30, 1972, setting forth the Treasury instructions relating to taxpayer identification numbers under 31 CFR, Part 103. The instructions prohibit the acceptance of an account after June 30, 1972, unless the saver furnishes his Social Security or taxpayer identification number at the time the account is opened or signs an authorization to the Social Security Administration to furnish such number to the financial institution. We believe the prohibition is not authorized by Congress and, if enforced, will discourage thrift and the opening of savings accounts in many cases. While many savers will have no objection to giving their Social Security or taxpayer identification numbers, others refuse as a matter of principle to disclose such numbers. Moreover, all financial institutions will be put to additional processing costs, especially with respect to small accounts, which will not justify the acceptance and maintenance of such account. Yet it is highly desirable, and Congress has recognized this in many ways, to promote and encourage thrift in all segments of our society, particularly among the young and the disadvantaged who are likely to open and maintain small accounts. We should like to suggest that in lieu of the flat prohibition against the opening of accounts where savers do not furnish Social Security numbers and refuse to authorize the Social Security Administration to furnish such numbers, the Treasury Department should permit financial institutions to accept all accounts offered and require them to maintain a list of accounts opened without a Social Security number or a request to the Social Security Administration to furnish such a number. A separate listing would enable the Treasury Department to trace back to all such accounts, if need be. Refusal to open the account would mean the absence of any record to trace in the case of suspected wrong doing. In the alternative, we recommend that rejection of savings accounts of savers who refuse to furnish their Social Security numbers or to authorize the Social Security Administration to furnish such numbers, be limited to those involving deposits of more than $10,000. The reasons which have been persuasive in exempting all transactions of $10,000 or less from "currency transaction reporting" apply equally to the requirement of Social Security or taxpayer identification numbers. This is a matter of great importance to the savings and loan industry as well as to other financial institutions. We would greatly appreciate the opportunity of discussing this further with you at your early convenience. Respectfully submitted. WILLIAM C. PRATHER, General Counsel. STATEMENT OF THE INDEPENDENT BANKERS ASSOCIATION OF AMERICA Mr. Chairman and Members of the Subcommittee on Financial Institutions, the Independent Bankers Association of America is an Association representing approximately 6850 member banks in 41 States. The corner-stone of our Association is the preservation of independent-unit banking in this country. We, like wise have a continuing interest in the perpetuation of good banking and good banking practices-not only among our membership, but throughout all facets of the financial industry. Along with the vast majority of our business counterparts in the American financial community, we understand the philosophy behind the Bank Secrecy Act of 1970. In fact, it seems imperative that as a matter of public policy the government should have (and effectively employ) legisaltive and regulatory authority to combat illegal transfer of funds, underworld financial transactions, tax evasion and the illegal transportation of currency. These worthy objectives would hardly be denied by any right-thinking banker, bank customer or citizen-nor are they. Certain proivsions of the Bank Secrecy Act of 1970, however, concern many bankers who have by custom and usage always treated customer relationships (in all phases of banking) with the utmost confidentiality. The public in general has come to acknowledge and expect this unquestioned degree of privacy through the years. The customer's banking habits, financial condition and objects of his support or generosity have all been protected from unwarranted or improper instrusion from any outside source-governmental or private. This is a serious and important right which should be preserved under the Bank Secrecy Act, even if certain minor abuses infrequently occur because of the actions of a few. The measures now under consideration by your Sub-committee, i.e., S. 3828 and S. 3814, both seek to preserve the well established right of privacy within the framework of the Bank Secrecy Act (Public Law 91-508, approved October 6, 1970). Our Association supports the principle of both the foregoing measures which would require banks to disclose customer information only with the customer's consent or upon presetnation of a duly obtained subpoena or other court order. Record keeping under the Bank Secrecy Act would be made less onerous if restricted to "activities directly related to international financial transactions" where the great majority of the abuses unquestionably occur. This provision is a part of S. 3828 and we support it. The scope of the Treasury Department's regulations promulgated on April 5, 1972, give far too much authority for the dissemination of customer information once it is in the hands of the Treasury. Adequate safeguards for its subsequent use are vitally necessary but totally lacking. It is inconceivable that Congress intended the Bank Secrecy Act to become the tool for almost any governmental agency to engage in massive fishing expeditions of incredible proportions. For these reasons we urge the Committee to give serious consideration to the measures now before it in the hope that Congress will amend the Bank Secrecy Act of 1970 so as to preserve within its framework the now muted safeguards customers have every right to deserve and expect. We thank you for this opportunity of expressing our views. H. L. GERHART, Jr. President. BANK OF AMERICA, San Francisco, Calif., August 11, 1972. Hon. WILLIAM PROXMIRE, U.S. Senate, Washington, D.C. DEAR SENATOR PROXMIRE: We understand that your committee will be conducting hearings on the above bills on August 11 and 14. Because I strongly believe these bills have consequences far beyond their stated objectives, I think that it is imperative that I give you my thoughts for consideration during your deliberations. I agree with your deep concern about the privacy of financial records. I expressed some of my concerns to you in my letter of June 11, 1970 which I wrote during your Committee's deliberation on the Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act (H.R. 15073). A copy of that letter is enclosed for your ready reference. At that time I tried to express the fact that the vast majority of Americans are totally honest and deal in confidence with financial institutions. Notwithstanding that fact, H.R. 15073 was passed into law. The present public outcry and litigation demonstrates the destructive effect of this law upon the reciprocal confidence that most people have in their govern ment and in their financial institutions. This has prompted the legislation now before the Committee. It is true, of course, that there are some dishonest people who will use secret bank accounts or bank transactions to the detriment of their fellow Americans. It is also true that the banking system did not need federal legislation then to require it to spy on behalf of the government nor does it need legislation now to tell it not to. The two bills which are before your Committee now are supported by those who question why such legislation was ever passed in the first place. Now, to avoid further unnecessary legislation, extreme caution should be exercised. Your distinguished Committee is urged not to lose sight of the fact that financial institutions, which have always held in high esteem the confidentiality of its customers' affairs, are part of an honest system for meeting the needs of commerce. The bills before the Committee are both expressed objections to the Recordkeeping and Reporting Act. That being the problem, the legislation should be precisely drawn to meet these objections. There is no demonstrated need to draft encompassing new legislation to govern all bank disclosures and to repeal existing laws. Such legislation impairs the development of commercial transactions and needlessly burdens all Americans. The mistakes of two years ago should not impel us to make similar mistakes today. Congress appears to have once recognized the need to allow financial institutions to conduct their business in accordance with fair and equitable standards. The Fair Credit Reporting Act, for example, states in its preamble: "It is the purpose of this title [the Fair Credit Reporting Act] to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title." [15 U.S.C. § 1681] If this Congressional declaration is lightly ignored, then perhaps the words of Mr. Justice Oliver Wendell Holmes may be more persuasive: "The common law is the will of mankind, tested in experience and sanctioned in the light of reason." The Field Code, which California adopted one hundred years ago makes privileged information given to persons having an interest in receiving it as long as malicious motives are not present. [California Civil Code Section 47] The existence of this category of privileged communications has enabled us to have a free flow of information between credit extenders over the century. It has been a good law and should be preserved because it has served the people well. Perhaps instead, the Committee may wish to review the enclosed casenote from the University of Florida Law Review which purports to discuss all cases on this subject since 1860. One cannot help but note that the sheer paucity of cases makes two conclusions readily apparent: First, in the entire history of Anglo-American jurisprudence, there appears to have been no more than ten cases by customers against banks for improper disclosure. If this does not clearly indicate that banks have traditionally adhered to a doctrine of secrecy, it indicates that there have been virtually no problems because they have not. Second, in those few cases discussing bank secrecy, the courts have in the last century uniformly afforded the customer a right of recovery against the bank for violations, and there is every reason to believe the courts will similarly act in the future. Congress is, therefore, not faced with a defenseless minority in need of federal protection. The imposition of far reaching restrictions on financial institutions as a reaction to previous legislation hastily drawn seems, upon analysis, unwise. The common law has not failed the American People. I sincerely hope that the members of your distinguished Committee will give these thoughts full consideration. To this end, may it be made a part of the record. Very truly yours, ROBERT H. FABIAN, Senior Vice President and General Counsel. BANK OF AMERICA, San Francisco, Calif., June 11, 1970. Hon. WILLIAM W. PROXMIRE, DEAR SENATOR PROXMIRE: We have been informed that you are now conducting hearings on the above bills. I consider the subject matter of such great public importance that I think it necessary and desirable to give you my thoughts for consideration during the Committee's deliberations. At the outset I agree that the stated objective of the bills-to facilitate the discovery, investigation and prosecution of white collar crime-is a good one. A secondary objecive, the detection of tax evasion is, of course, also wholly acceptable. There are, however, some other important public policy considerations which to me indicate a need for wise restraint, both in the drafting of the bills and their implementation. It has been adequately demonstrated over the years that the vast majority of our citizens are totally honest in their business dealings with each other, in the handling of their financial affairs, and in the meeting of their debt obligations to each other and their tax obligations to the government. No country in the world has a taxpaying population with the moral standards of the people of the United States. Most people annually make an honest disclosure of their income and willingly pay their taxes without attempting to cheat their government. These mores, I think, have been developed at least partially because of a feeling on the part of the people that they can trust their government to be fair with them. They also feel that the disclosures made in their income tax returns will be treated by governmental officials in confidence. These people will, I think, justifiably resent the implication that their government is suspicious of their honesty and that they are all tax evaders at heart. If the Congress sees fit to place their bank accounts under continuous surveillance, an aura of suspicion is case over the entire populace. The suspicion, I fear, will go a long way to destroy the reciprocal confidence that the people now have in their government. I, therefore feel that it would be unwise for the Congress, in its attempt to facilitate the detection of the relatively few cheaters, to erode the present, generally good attitude of the people. It is also true, of course, that if everyone's bank account is placed under surveillance, those few who are inclined to indulge in tax evasion will cease to use the banking system and the good objective of the legislation will be relatively easily frustrated. It is also true that those dishonest people who use foreign bank accounts for the purpose of concealing illegally gained assets will not mind violating a few more laws and that they will find methods of transmitting funds to foreign countries outside of the normal banking system. I therefore feel that even the surveillance provisions relating to foreign bank account transactions may be self-defeating in large part. Except for a few highly publicized cases, the banking system is not an unwitting arm of a vast criminal conspiracy. Instead, the system is being honestly used by the people to accomplish the financial business of the nation, both commercial and private. The millions of honest and law abiding citizens who daily use the banking system do so on the assumption that their legitimate private affairs are not an open book for either the government or the general public, and rely on existing and long established common law principles of confidentiality of banking transactions and on the underlying constitutional protections of the Fourth Amendment against unreasonable governmental search and seizure. It is undesirable, in my view, to chip away at these protections because law enforcement authorities feel that their job may be made easier by the provisions of the subject bills. I fail to see any real distinction between the proposals for bank record keeping and a requirement that all telephone conversations be recorded by telephone companies or all letters be opened and copied by the postal service because the telephone or postal systems are occasionally used for illicit transactions, and because such records would aid in the discovery and prosecution of such transactions. The above comments apply in varying degrees to the record keeping and reporting requirements of Title II of both H.R. 15073 and S. 3678 (Currency and For |