out as he has on many subjects and he proposed a far greater and broader grant of power than Treasury had requested.

I think we have probably given them more than they requested. Senator Tunney has referred to Mr. Rossides' testimony in June of 1970 in which the request or the outline of powers that Treasury wanted and felt it needed and which I think it should have had was a fairly modest grant of power.

It referred to records of foreign remittance, transferring funds abroad. Transferring funds to the United States, records of large checks negotiated abroad, drawn on banks located in the United States, and records of large foreign credit card purchases by U.S. citizens and residents, records of foreign checks transmitted abroad for collection, records of letters of credit and documentary collections. Now, I think this is the area which we-which we were all aiming at. I think we all agree that if there are as the chairman has suggested white-collar criminals that we can get at through this kind of surveillance, that this is justified.

But this is an-this is exactly what we need to do. We have to spell out the justification for these additional powers. I don't think we can find the justification for the kind of surveillance of domestic banking transactions which the law actually authorizes.

I don't think we can load all this on Treasury. I think the Congress has some responsibility here, and I think the time is appropriate to redefine exactly what it is we want to do with this law which is to get at a certain class of criminals and then to give them the power and authority which will do that but not to develop a surveillance of the whole domestic banking system.

And all who do business with it. That, very simply, Mr. Chairman, is the purpose of S. 3828 which I have introduced for myself and for the distinguished Senator from North Carolina, Mr. Ervin.

It differs from Senator Tunney's bill in really one significant respect; that is, on the recordkeeping provisions. In section 6. That simply cuts back the authority to require recordkeeping to the areas in which I think we intended to give extra authority.

I believe that if we would enact this bill, we would still leave Treasury with the authority that I think every Member of Congress wants it to have to go after the white-collar criminal who may be found through his international transactions.

I think it would narrow the burden of surveillance to a very limited number of banking institutions which are the clearinghouses for international transactions, and I think would put the Congress and the country in a better posture with respect to the personal liberty which is challenged when a massive surveillance effort of this sort is undertaken. Thank you very much.

Senator PROXMIRE. Senator Mathias, under your legislation, would it be possible for a Federal law enforcement agency to obtain a copy of a check or other bank records relating only to domestic transactions?

Senator MATHIAS. Yes, if-under the current procedures. It wouldn't alter that at all.

Senator PROXMIRE. Through court orders.
Senator MATHIAS. Yes.

Senator PROXMIRE. Do you foresee some instances where the court would allow the agency to examine a person's account?

Senator MATHIAS. I certainly would; it is done every day.

Senator PROXMIRE. Would you be in favor of restricting access to bank records even if a court order is obtained?

Senator MATHIAS. I would not alter that; I think the current practice that provides for the case of any procedure, the due process at law. We are not getting at that.

Senator PROXMIRE. You do acknowledge that domestic bank records would be available in some investigations.

Senator MATHIAS. No question.

Senator PROXMIRE. Why would you limit it then to international; if domestic records are useful, why shouldn't banks be required to keep them?

Senator MATHIAS. Well, they would keep normal records as they do today. The present system, I think, is

Senator PROXMIRE. What if they don't keep them?

Senator MATHIAS (continuing). Has been adequate. I have notthere hasn't been any cry from State law enforcement officials to

Senator PROXMIRE. We had testimony that some of the big New York banks stopped keeping records of checks and that this was an impediment to the investigation.

Senator MATHIAS. Well, I have-I think that this has not been a problem of law enforcement. I think that some reasonable amount of recordkeeping is necessary on the part of the bank and on the part of depositors. I think that this is something that has been adequate for normal law enforcement purposes.

Senator PROXMIRE. The Justice Department, I understand, says that this requirement is useful and desirable from their standpoint.

Senator MATHIAS. I am sure they would. I am sure they would. I think you have to as in every other decision the Congress makes you have to measure the benefit against the cost. Now, I have no magic formula for this. You know, I think it would probably be useful for some governmental purpose to keep every cash register tape in a supermarket.

Senator PROXMIRE. What is the cost, assuming that there are protections against unwarranted disclosure?

Senator MATHIAS. Well, there is a burden of recordkeeping. We live in a world of paper jungles, and we are-this is a whole new paper jungle we are creating.

Senator PROXMIRE. Don't most banks keep copies of their checks anyway? Where is the evidence that this constitutes a significant burden? Senator MATHIAS. Well, I think if you consider the number of checking transactions that there are every day in this country, and consider the fact that banks may keep—what do they call them-Recordaks

Senator PROXMIRE. Microfilm. I understand the House testimony indicates they microfilm these and keep them any way.

Senator MATHIAS. For a period of time. Yes. I think this increases the burden. I am told it increases the burden. By creating the reservoir of information which is required by law now, I think it increases the

Senator PROXMIRE. Any idea of the dollar amount involved, the degree of the burden?

Senator MATHIAS. Very frankly, I don't have it, but I will supply it to the committee.

Senator PROXMIRE. Your bill requires a court order plus a showing of probable cause and a 21-day notice before law enforcement agencies can obtain bank records. Don't you think the 21-day provision might alert the person being investigated and make it almost impossible to bring a criminal action against him?

Senator MATHIAS. I don't think so at all.

Senator PROXMIRE. If they have 21 days, couldn't they cover their tracks pretty well?

Senator MATHIAS. What you are getting is a bank record. That is a history. I don't see that the time lag there would be a factor. I think if you have much less time than that you don't really provide an opportunity for anybody that is at all active in moving around, you don't allow him time to acquaint himself with what it is all about and to get his records in order to come in with them.

That to me does not seem an unreasonable period of time.

Senator PROXMIRE. Well, supposing you had 21 days for a search warrant for narcotics, what would be the effect on that?

Senator MATHIAS. Well, I think

Senator PROXMIRE. Twenty-one minutes for that matter.

Senator MATHIAS. I suppose the standard method of disposing of narcotics is flush them away which doesn't require 21 seconds if you have it. But I don't think that we are talking about records that that would be a period of time which is unreasonable.

Look, it is not magic with me, if the committee wanted to cut that down, a lesser time would do.

Senator PROXMIRE. Let me ask one other question before we recess temporarily and go to the floor. I understand Senator Tunney may have questions. If a law enforcement agency can convince a court of probable cause why shouldn't it be able to obtain bank records on a suspected criminal without alerting the person being investigated? What is the damage to society as a result if this were done?

Senator MATHIAS. Well, I think it is a very fundamental principle of our society that we do give a person who is under suspicion, a person who is charged, a person would have some opportunity to

Senator PROXMIRE. Certainly before bringing him to trial. In the first place the law enforcement agency has to show probable cause to get a subpena so this is not just an innocent citizen, he has to show cause, then you just investigate it before the trial. There are all the protections, of course, before the trial that we have in our system.

Senator MATHIAS. I think you have to consider, Mr. Chairman, what this really does in terms of just tightening the net a little more. You can have judicial wiretap which would be a comparable investigative procedure, you have somebody whom you are suspicious of and you go to the court and the court gives you an order to put a tap on his telephone.

All right, in the interest of society when you are dealing with certain types of criminals we have agreed that that is all right.

Senator PROXMIRE. But you have to show probable cause here. Not just suspicion in order to get action.

Senator MATHIAS. That is right. And you are just pulling the net a little tighter all the time. I just

Senator PROXMIRE. I think we better go for the vote now. But we would be delighted, Senator Mathias, to have you join us, too, to question the Justice Department and Treasury Department when they testify, and perhaps Senator Tunney has questions for you before that happens.

Senator MATHIAS. Let me say before we break here and we can come back to this but it does seem to me-you raise the question in colloquy with Senator Tunney about access, and access of course is not altered by either his bill or mine. I think that in the—and Treasury of course comes back in defense and says, "Well, access is protected." Of course this is the line of the chairman's questions now.

But none of this is spelled out in the regulations. I think if access is protected it would be very helpful if that was very clear and it is not very clear now. It is a talking point but it is not clear in the record.

Senator PROXMIRE. The committee will stand in recess for about 10 minutes or so while we go over and vote.

(The full statement of Senator Mathias follows:)

STATEMENT OF CHARLES MCC. MATHIAS, JR.. U.S. SENATOR FROM THE STATE OF MARYLAND

Mr. Chairman: I wish to thank the Subcommittee on Financial Institutions for this opportunity to testify on a matter of serious concern to us all. As you know, Senator Ervin and I recently introduced a bill, S. 3828, which is designed to remove a very real threat to the freedom and privacy of every American. I am gratified that the American Civil Liberties Union, the American Bankers Association, and the Maryland Bankers Association, have indicated their interest in our effort and have offered their support. I would first like to explain the current law and controversy, and then the provisions of my bill.

The current threat was created by the 1970 amendments to the Federal Deposit Insurance Act, better known as the Bank Secrecy Act of 1970, or the Swiss Bank Act. This act gave the Secretary of the Treasury the power to require every bank and every financial institution in America to keep records—including microfilms of every check, draft, deposit, withdrawal, or other financial transaction involving a bank and any of its customers. The law further provided that the bank must turn over these records to the Treasury Department at its request and make periodic reports of certain transactions even without a formal request by the Treasury. The Treasury is permitted to give the records to any other agency in the government.

What this means is that every agency in the Federal Government, including the IRS and the FBI, can obtain a complete history of every citizen's financial dealings, no matter how small the amount or how private the purpose. This law, furthermore, makes the financial institutions of America the servants of the government, rather than of their customers.

The expressed purpose of this legislation was to bolster the government's ability to combat international organized crime and overcome the secrecy surrounding certain Swiss bank accounts, but the power granted by this act extends far beyond the legitimate needs of the Government in this field.

The Treasury has now moved to use the vast power granted under this act. It has promulgated regulations to implement the record keeping and reporting provisions of this act. These regulations were scheduled to go into effect on July 1, 1972, but have been delayed by court order.

On several occasions during the past few months, I have written the Secretary of the Treasury, and talked with various Treasury officials. My staff has

also been in contact with Treasury officials. The purpose of these exchanges was to try to assure that the Treasury would respect and safeguard the rights and privileges of private citizens. While the Treasury has responded to each of my inquiries, the continued existence of this statute and of the Treasury regulations still represents a potential timebomb on the fundamental rights of all Americans.

As a result, the Bank Secrecy Act of 1970 raises several important Constitutional issues. The American Civil Liberties Union and the California Bankers Associations have filed suit in California and the ACLU and several banks have filed suit in the District of Columbia. In these suits, the parties contend that this law violates the First Amendment's guarantee of freedom and speech and assembly, the Fourth Amendment's guarantee against unreasonable Search and Seizure of a person's papers and effects, and the Fourteenth Amendment's guarantee that each person is entitled to equal protection under the law. The briefs further contend that the act imposes an unnecessary burden on interstate commerce and threatens to destroy the private fiduciary relationship between a bank and its customers which is essential to our modern economic system. I would associate myself with each of these contentions.

I am pleased that the Federal Court in California has now granted a temporary restraining order which will delay the implementation of the proposed regulations until the Court can hear further arguments in the case. Regardless of the Court's eventual decision, however, the Congress is obliged to promptly correct its own grievous error.

My bill, therefore, has two main thrusts to protect the Constitutional rights threatened by the Bank Secrecy Act. First, it would guarantee that a person's records contained in a financial institution are as secure from government surveillance as they would be if contained in a safe in the person's own home. Secondly, it would restrict the Treasury Department's power to require banks to maintain records to a small area of activity relating directly to international financial transactions.

The act states that a fiduciary institution may disclose the records of any customer only upon the customer's consent or under a court order which would be sufficient to support the issuance of a valid search warrant to obtain the financial records if the financial records were in the home of the customer. The act provides that any such court order must be served upon the customer and the institution at least 21 days before the records are to be turned over to the Government. This provision would give the customer time to take legal action to challenge the validity of the court order. By restraining record keeping to activities directly related to international financial transactions, this bill would exempt over 95% of the financial activities from any surveillance under this act, while still permitting the Treasury to explore possible misuse of foreign bank accounts or to pursue international organized crime. My bill, however, would not prevent financial institutions from keeping records as part of their normal business procedure if they prefer to continue doing so.

The act contains both civil and criminal penalties for any institution or individual who, knowingly and willfully, violates this act or induces any other person or institution to violate this act.

This bill does not affect the record keeping which is now required solely for the use of government agencies which supervise the internal financial operations of the bank.

The disclosure provisions of this Act apply not only to disclosures to government officials, but also to disclosures to "any person other than the customer or his duly authorized agent." Thus, the bill will prohibit undue disclosures to credit agencies or other such non-governmental bodies.

Mr. Chairman, permit me again to express my thanks to the members of the Financial Institutions Subcommittee for allowing me to appear before you today.

RECESS

Senator PROXMIRE. The subcommittee will come to order.

Senator Tunney, do you want to ask any questions?

Senator TUNNEY. No, not at this time.

Senator PROXMIRE. Our next witness is the Assistant Secretary for Enforcement at the Treasury Department.