Lapas attēli

The maintenance of individuals' right of privacy has also quite properly been a matter of concern to the Congress. This has been recognized in the report of the House Banking and Currency Committee on H.R. 15073 when it is stated that “there is nothing in this bill which would make such records any more accessible to law enforcement officers much less anyone else, than they are now" and "again, it must be emphasized that the records required to be maintained are accessible only through legal process."

Senator Bennett did raise a question earlier about the privacy aspect and we would like to recommend for your consideration that an additional section be included in the bill reading somewhat as follows:

Access to Records. The records or evidence maintained by insured banks and other institutions pursuant to the provisions of this Act and the regulations issued thereunder shall be made available to law enforcement officers or other appropriate officials with respect to specific named individuals, pursuant to subpoena or other lawful process.

Many of the questions initially raised by the American Bankers Association with respect to the financial recordkeeping requirements under title I of the bill can be met under the broad discretionary authority given to the Secretary of the Treasury under S. 3678 and under H.R. 15073, as passed by the House. However, there are some matters which should have the committee's attention.

Under section 21(a) (1) of the amendment to the FDIC Act reference is made to identity of persons. This term is used throughout the bill. Usually banks identify customers by names and addresses and rely upon signatures to identify them. If the bill contemplates some other means of identity this would impose an unjustifiable burden on banks and seriously disrupt services to bank customers.

Section 21(a)(2) requires the maintenance of appropriate types of records. Banks maintain records in various forms and by various methods. It would be more accurate to require banks to maintain records of types of transactions designated by the Secretary. The type of record should be left to the bank so long as it reflects the data which the Secretary considers essential to serve the needs of the Government.

Section 2i(g) authorizes the Secretary to require banks to retain records for any length of time designated by him. This authority should be qualified with a provision that such records could not be required to be retained for a period longer than 6 years beyond the year in which the transaction occurs.

Section 21 (h) requires the Secretary to make annual reports to the Congress of his implementation of the authority conferred by this section and any similar authority, and so forth.

We think this is a good idea. It is recommended that the report should also be required to indicate the use made of the records required under the act and the number of criminal, tax, and regulatory investigations involved in such use.

We make this suggestion in order that the Congress can determine whether the use made of the records and reports justify the expenses that will be incurred by banks and other persons to comply with the regulations issued by the Secretary of the Treasury.

Section 221 of S. 3678 requires that transactions involving any domestic financial institution shall be reported to the Secretary of the Treasury at such times, in such manner and in such detail as the Secretary may require if the transactions involve the payment, receipt, or

under such circumstances, as the Secretary shall by regulation transfer of U.S. currency in such amounts, denominations, or both, or prescribe.

It is not possible to comment with any preciseness on this section since the magnitude of the reporting requirements will depend upon the kind of reports required under the regulations to be prescribed by the Secretary.

The expenses that could be imposed upon banks and other domestic financial institutions could be substantial, even if the Secretary exempts under his regulations transactions which on their face are recognized as legitimate transactions by reputable organizations, such as cash from operations of toll roads, public utilities, and so forth. Inasmuch as there is $50 billion of U.S. currency outstanding in circulation, we believe a floor on the amount of any single currency transaction that must be reported should be set by the Congress at some reasonable amount.

In lieu of this requirement a possible alternative is that legislation could be drafted in line with the provisions of present Treasury regulations relating to TCR reports—Treasury currency reports (title 31, chapter 1, section 102.1 Code of Federal Regulations) except that it apply to transactions involving $5,000 or more without regard to denominations, and transactions involving any amount which in the judgment of the financial institution exceed those commensurate with the customary conduct of the business, industry, or profession of the person or organization concerned.

Section 223 of S. 3678 provides that banks may be designated by the Secretary to receive reports required to be filed under this legislation by other persons and to transmit such reports as the Secretary shall prescribe.

Since these reports would be received by the banks as agents of the Government, and assuming that there will be a considerable volume of work, the Secretary should be authorized to reimburse the designated financial institutions for expenses incurred by them. Banks would have to make records of reports received by them, and records of their transmittal to the Secretary. This involves expense to the banks, in addition to postal charges, which alone could amount to substantial sums for an individual bank. Otherwise, such reports should be forwarded to the Secretary by the parties involved.

The full impact of the provisions of sections 231 and 241 with respect to the transportation of currency and coin and financial dealings with foreign financial agencies also cannot be ascertained in the absence of the regulations which the Secretary is authorized to prescribe in order to implement them.

An initial examination of these requirements leads us to believe that they could raise far-reaching problems affecting our normal financial operations both public and private and our foreign trade with other countries.

I think it has already been pointed out in testimony presented to you gentlemen this morning. It is requested that section 231 (a) (2) be changed to delete the words reading “or in an aggregate amount exceeding $10,000 in any one calendar year.” If these words are retained it means that the $5,000 minimum on any one occasion, set in this section for transactions that have to be reported, would be pointless since a bank would have to keep track of every transaction regardless


of size to cumulate them for the year against the $10,000 cumulative reporting requirement.

As a consequence costly recordkeeping procedures would have to be maintained to accumulate information concerning transactions which in most cases would not be subject to the reporting requirement at the end of the year.

It is recommended also that chapter 3, title II of S. 3678, covering the filing of reports of currency imports and exports, be changed to specifically exclude from the reporting requirements interbank transactions and transactions involving foreign monetary authorities for official purposes. U.S. currency is widely circulated in many parts of the world and large amounts of such currency is returned to the United States through regular banking channels. Any impediments to the free circulation of such currency could impair confidence in the U.S. dollar as a reserve currency.

The bills before you, in our opinion, give the Secretary of the Treasury broad authority to implement the objectives sought to be accomplished, namely, to provide a more effective means of apprehending persons in the United States evading the payment of taxes or otherwise engaging in illegal activities.

Commercial banks have always cooperated with law enforcement officers through lawful processes, and I can assure the committee that banks will continue their cooperation under the extended program provided for under S. 3678 and H.R. 15073. Commercial banks stand shoulder to shoulder with the Government in efforts to prevent persons from using bank facilities to further their illegal activities. We hope, however, that the Secretary of the Treasury will devise regulations that will not require an avalanche of records that will place heavy burdens and expense upon banks and serve no useful purpose to law enforcement officers.

Senator, it would appear to me that the IRS does have a bear by the tail, and we find the best way to hunt a bear is with a rifle and not a shotgun. We certainly want to cooperate with the Treasury and all other law enforcement agencies, sir.

Senator PROXMIRE. Thank you, Mr. McGehee.
Mr. Boyd.

Mr. Boyd. I understand that my statement and the attachments thereto will be a part of the record; so, I will just skip through my statement as brief as it is. (The statement with attachments appear on p. 236).

The BAFT is the association of approximately 130 U.S. banks that have international banking departments. You will find attached the names of our member banks listed by State and city.

Like everybody else, we are in favor of motherhood and our organization has gone on record in favor of the purposes of this bill. The banks suffer from crime you know as much as anyone else. We have our holdups about every few days. On the other hand, we are not persuaded that the records that would be maintained in accordance with the provisions of S. 3678 would be sufficient assistance to the duly constituted authorities to justify the very large accumulation of material that would result.

In addition, we are concerned lest the Congress feel that, in passing a bill with provisions similar to those of S. 3678 and H.R. 15073 which would create a huge mass of records, it would in fact be materially assisting the authorities.

We wish to point out that it is our conviction that if such a bill were passed, those who want to move substantial sums out of the country without detection would simply avoid the banking system even more than presently, and we feel, most of us, including ourselves, are unaware to the extent to which lawbreakers are presently avoiding the banking system. I will not expand on that, but I should say that Mr. Whitney Seymour's testimony was very good on the value that microfilm has been and also in the difficulties that we have encountered as a result of Swiss bank accounts.

But I am not sure that I see how this bill will really prevent people from getting money into Swiss bank accounts if they really want to

do so.

We are also concerned that if we tell all the lawbreakers that the banks are going to keep these microfilm records, that they will simply see to it that the transactions which they wish to conceal do not go into the banks.

On the matter of privacy, the relationship between the bank and its depositor has been touched upon and I will not go into that. It is an important part of U.S. national policy that the global acceptability of U.S. dollars be maintained. As has been pointed out, very large amounts are in the hands of foreigners and it is recognized as a matter of great importance that strong effort should be made to protect the dollar so that those foreigners will wish to retain their holdings.

Among the advantages of dollars in the eyes of foreigners is that they are readily accepted throughout the free world and are readily transferable without official knowledge or interference both within the United States and in many other countries.

Knowledgeable observers are aware that in the past governments that have required detailed reports of certain financial transactions have later placed controls thereon.

And I state a very good example there which is in the minds of all international bankers. Are not foreign holders of dollars likely to feel that the reports provided for in S. 3678 may lead to controls and that they would be well advised to transfer their money out of the United States to a more free environment while they can? It is possible to do so.

In addition some foreign holders of dollars in U.S. banks will not be happy with the knowledge that U.S. Government officials can readily obtain information on their transactions. As we know, many non-Swiss maintain accounts in Switzerland to avoid the disadvantages of having them in their own countries.

For the same reasons manny foreigners have been maintaining accounts in the United States because they feel that even though we do not have the so-called numbered accounts we do have a tradition of privacy.

Will not many of these feel that their privacy would be better preserved by some European country with consequent outflow of substantial proportions?

A good example of this is the Peruvian Government telling the nations that they have all the information on their accounts. In Swiss banks the people know they don't, but they might not be so sure if the money were in this country. As part of its effort to strengthen the dollar, the U.S. Government is endeavoring to improve our international balance of payments.

We comment on the importance of security purchases by foreigners. Anything that would make it more difficult or less attractive for foreigners to buy U.S. securities in the United States tends to have a negative effect on our balance of payments and the amount is not small.

Despite the fact that the cost of crime in the United States is very great indeed, and the banks are among those most seriously affected, any measure designed to assist duly constituted authorities in lawful investigations should, in our opinion, be examined from the standpoint of its cost, in addition to other criteria.

In a more positive vein, it is our feeling that instead of accumulating a vast amount of records of which only an infinitesimal amount could be of interest to law enforcement authorities and, instead of making it more difficult for foreigners to invest in U.S. securities, it would be preferable for Congress to require that taxpayers individually maintain such records as would enable law enforcement authorities to determine the nature of their financial operations.

I would like to say that our association has just established an office in Washington in order to work with the congressional committees, Senate committees and the departments of the executive branch on problems such as this, and we would be happy to make such knowledge as we have available to your committee and others.

In closing, I would like to say we genuinely appreciate very much this opportunity for making our views known.

If there are any questions, we would be happy to answer them.

Senator PROXMIRE. Thank you very much. First, Mr. McGehee, I want to commend you on that provision that you propose that we write into the bill. You have a privacy provision which I think is very good. I welcome that.

Mr. McGEHEE. Thank you, sir.
Senator PROXMIRE. I am inclined to favor it. It is very helpful.

I have a report from the Fed which indicates that 29 banks have branches in the Bahamas with total assets of over $3 billion or an average of $100 million per bank. How do you explain the inordinate attractions of the Bahamas to the U.S. banks?

Mr. McGEHEE. I think that has come about for a number of reasons. Take my own State of Virginia as an example. We are much more internationally minded in the State of Virginia today than we were 10 years ago. We have many companies in Virginia that have large exports overseas. We have in the Virginia State government a State Division of Industrial Development and Foreign Trade for the first time. This division was created about 8 years ago. As a result of this, export trade in Virginia has built up rather substantially.

As a result of that, Virginia businesses have financial needs abroad. Under the voluntary restraint program and so forth, as banks in this country cannot satisfy those needs under the present program, therefore, the placing of branches in Nassau is a possibility which allows banks then to participate in the Eurodollar market and receive dollars which they in turn may lend to American corporations and others abroad.

Senator PROXMIRE. But as far as the Bahamas are concerned, I had a chance to talk to the new commissioner of banking just the other day from the Bahamas, a very interesting gentleman, and he conceded

« iepriekšējāTurpināt »