$100.00 denominations. This latter information, when matched with safe deposit box visitations and other account transactions was especially revealing. The availability of bank records made the tax indictment against this narcotics trafficker possible. Several IRS and Customs cases involving bank records are set forth in our submissions for the record. The Securities and Exchange Commission also depends heavily on bank records. SEC regulations require brokers to maintain and make available all bank account records including cancelled checks for both civil and criminal investigations. The SEC also requires extensive recordkeep of the transactions handled by broker and dealers. Such records are most useful in SEC investigations; however, bank records are the next most valuable source of information. The SEC needs them in a large number of its investigations, perhaps as much as half. Availability of "on us" checks is mandatory for tracing both international and domestic transactions. Domestic checks are usually involved in international transactions and are often needed to trace the funds used in such transactions to their domestic sources. About 301 3 criminal cases active during the past 12 months involved foreign assets or foreign financial transactions. We find increasing levels of criminal activity involving international transactions. While U.S. tax evaders are still secreting Finds in Switzerland, they are doing so as well in the Bahamas and Mexico, among other places. Fortunately a majority of banks microfilmed "on us" checks even before the current regulations were issued. However, there was an alarming trend to maintain such records for only brief periods of time and some larger banks were ceasing to copy checks entirely. The regulations issued by Treasury thus, to a large degree, are designed merely to maintain the status quo. Treasury News on S. 3814 and 3. 3828 Treasury's views on the legislation introduced by Senator Tunney, S. 3814, and by Senator Mathias, S. 3828, have been requested. The main thrust of S. 3828 (the Mathias bill) is to create a new privileged relationship between a financial institution and its customer. This bill would deny IRS and other law enforcement agencies access to account records in possession of financial institutions, except with the consent of the subject of investigation or on the order of a Court upon a showing of probable cause. The Tunney bill, S. 3814, would deny enforcement agencies access to Such records without the consent of the subject or upon presentation of a Federal or State subpoena or summons after compliance with an involved procedure to assure notice to the subject and opportunity to litigate the propriety of the subpoena or summons. Senator Tunney's bill also provides for access upon presentation of a Court order based on a showing of probable cause. For a variety of reasons, these provisions would prove unworkable in the vast majority of civil and criminal investigations, including civil tax examinations. We support the general principle that a person's account records should not be available for inspection by anyone who may ask about them, but we believe the banking community is generally discharging its responsibilities to its customers. Since Public Law 91-508 does not expand governmental access to bank records, and since there has been no showing of abuse of existing investigatory authority by Federal, State or local law enforcement or regulatory bodies, we find no justification for this type of restrictive legislation. Although our study of this entire matter is still proceeding, in view of the Congressional mandate, we decided we could delay no longer the issuance of implementing regulations. However, as I stated earlier, we are presently considering a number of additional exemptions including an exemption for all checks drawn for $100 or less. While such small checks have been helpful in certain cases in the past, our review suggests there may be good cause to find that the microfilming of such checks does not have a high degree of usefulness. We estimate that approximately 90% of all personal checks would be covered by such an exemption. anticipate that a final decision on this matter will be made shortly. Reporting Requirements of the Law I In addition to the recordkeeping requirements, the statute and regulations require three types of reports: (1) all persons maintaining foreign bank or security accounts must disclose that fact on their Federal income tax returns, and maintain adequate records of such accounts (Section 241 of the Act makes this requirement mandatory). (2) all persons transporting, mailing, or shipping from the United States to a foreign country, or receiving from without the United States, currency or bearer instruments in amounts in excess of $5,000, must report such transactions to Customs (Section 231 of the Act makes this requirement mandatory). (3) financial institutions must report transactions of more than $10,000 in which currency is involved. This requirement is based on Section 221 of P.L. 91-508 which provides that currency transactions involving domestic financial institutions shall be reported to the Secretary of the Treasury under such circumstances as the Secretary shall prescribe. This section of the regulations represents a liberalization of requirements which have been in existence since 1959. This new regulation replaces a previous requirement to report currency transactions of $2,500 or more with a requirement to report only those of $10,000 or more. Moreover, banks are not required to report transactions which the bank concludes are commensurate with a customer's normal conduct of business. We support these three reporting requirements because they place IRS in a position to identify instances of tax evasion by U.S. taxpayers involving foreign accounts and international transactions Reports of international |