over $150,000 a year. This is for the accumulation of the records only and makes no provision for the cost of equipment at about $240,000 or for maintenance of files or for the retrieval of information which could be very difficult and expensive. This seems to us to be a high cost to pay for records whose value is questionable if one believes as we do that determined lawbreakers familiar with the provisions of the Act would, to a very great extent, be able to transfer funds secretly, without using the banking system.

In a more positive vein, it is our feeling that instead of accumulating a vast amount of records of domestic transactions 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 United States 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.

The attached Appendix A, "Statement re S. 3678 and H.R. 15073," contains some constructive suggestions along these lines that we believe should be given careful attention.

Our Association has just established an office in Washington. One of the functions of that office is to better acquaint Senators and Congressmen and their staffs with the various aspects of international banking. We hope that you will call upon us if you feel that we can be helpful.

The Bankers Association for Foreign Trade again wants to express its appreciation for this opportunity to make its views known. Should there be any questions we would be very pleased to answer them either now or at some future date, verbally or in writing.

APPENDIX A

STATEMENT RE S. 3678 AND H.R. 15073

The proponents of the above bills aim to restrict the use by tax evaders and other criminals of international payments mechanisms. They seek to do this by facilitating investigations by law enforcement agencies. The technique adopted in both bills is to impose extensive record-keeping and reporting requirements.

Neither bill is well-calculated to accomplish the general objectives, because (1) the burden on legitimate operations seems certain to outweigh the practical benefits of policing illegal activities, and (2) dedicated malefactors can too easily evade detection. Probably it is impossible to devise a regulatory scheme that will completely block lawbreakers while leaving the channels of legitimate trade unclogged.

The following program, however, might better tend to meet this dual standard. If legislation is inevitable, it should provide :

I. All financial institutions (not merely banks) should be required to maintain filmed or other adequate copies of records evidencing international transactions. There is no need to complicate retrieval by covering domestic transactions.

II. All persons subject to the jurisdiction of the United States should be required to report all international transactions executed by them or on their behalf.

The pattern of such law would place the responsibility for reporting where it belongs, that is on those individuals who use international payments mechanisms or otherwise deal with foreign financial institutions or in foreign currencies. No burden is imposed upon the vast majority of persons who are not engaged in international transactions, nor is the privacy of such persons in any respect invaded. The burden of record-keeping is distributed more widely; loopholes that would exist if record-keeping were confined to banks are eliminated; and at the same time no unnecessary burden of record-keeping is imposed (1) on those banks or financial institutions that are not involved in international transactions, nor (2) upon the domestic transactions of any financial institutions.

Imposition of reporting requirements on principals provides an additional investigative tool; failure to report would itself be a crime and suspicion of failure to report would justify an investigation in cases where investigation of an ancillary crime might be difficult. Compliance with the reporting requirements is made effective because the record-keeping function of financial institutions provides a ready cross-bearing.

The two-tier pattern not only reduces the burden of reporting that would other

wise lie on financial institutions, but eliminates a multitude of unnecessary and confusing reports so as to make retrieval of information and identificiation of violations more readily available.

While it is clearly an invasion of privacy to require reports of or permit browsing among financial records of persons subject to the jurisdiction of the United States, it may not be unreasonable to require persons who are dealing in international transactions to report that fact.

APPENDIX B

BANKERS' ASSOCIATION FOR FOREIGN TRADE

MEMBER BANKS-ARRANGED BY STATES AND CITIES

The Connecticut Bank and Trust Michigan (Detroit):
Company

Hartford National Bank & Trust

BANKERS ASSOCIATION FOR FOREIGN TRADE-Continued

MEMBER BANKS-ARRANGED BY STATES AND CITIES continued

Montana (no members).

Nebraska (Omaha):

The Omaha National Bank

Nevada (no members).

New Hampshire (no members).
New Jersey (Newark):

National Newark & Essex Bank

(Paterson):

New Jersey Bank N.A.

New Mexico (no members).
New York (Albany):

National Commercial Bank & Trust
Co.

(Buffalo):

Manufacturers and Traders Trust
Co.

Marine Midland Trust Company of
Western New York

(New York):

American Express Company

Banco de Ponce

The Bank of New York

Bankers Trust Company

Oregon (Portland):

First National Bank of Oregon

United States National Bank of
Oregon

Pennsylvania (Philadelphia):

Central-Penn National Bank

The Fidelity Bank

First Pennsylvania Banking &
Trust Co.

Girard Trust Bank

The Philadelphia National Bank
Provident National Bank

(Pittsburgh):

Mellon National Bank & Trust Co.
Pittsburgh National Bank

Rhode Island (Providence):

Industrial National Bank of Rhode
Island

Rhode Island Hospital Trust Na-
tional Bank

South Carolina (Columbia):

The South Carolina National Bank Sounth Dakota (No members).

Brown Brothers Harriman & Com- Tennessee (Memphis):

First National Bank of Memphis
National Bank of Commerce
Union Planters National Bank of
Memphis

Texas (Dallas):

First National Bank in Dallas
Mercantile National Bank at Dallas
Republic National Bank of Dallas

Marine Midland Grace Trust (Fort Worth):

Company

Morgan Guaranty Trust Co. of
New York

National Bank of North America
Sterling National Bank and Trust
Co. of New York

North Carolina (Charlotte):

First Union National Bank of
North Carolina

North Carolina National Bank (Winston-Salem):

Wachovia Bank & Trust Company

North Dakota (no members).

Ohio (Akron):

First National Bank of Akron

(Cincinnati):

The Central Trust Company
Fifth Third Bank

(Cleveland):

The First National Bank of Fort
Worth

The Fort Worth National Bank

(Houston):

Bank of the Southwest N. A. Hous-
ton

The First City National Bank of
Houston

Houston National Bank
Texas Commerce Bank N. A.
Co.

Delaware (no members).

District of Columbia (Washington,
D.C.):

American Security
Company

The Riggs National
Washington, D.C.

Utah (no members).

Vermont (no members).

Central National Bank of Cleve Virginia (Norfolk):

land

The Cleveland Trust Company

The National City Bank of Cleve

land

Society National Bank of Cleveland

Union Commerce Bank

(Toledo):

First National Bank of Toledo

Oklahoma (No members).

and Trust

Bank of

United Virginia Bank International

Virginia National Bank

Washington (Seattle):

The National Bank of Commerce of Seattle

The Pacific National Bank of

Seattle

Peoples National Bank of Wash

ington

Senator PROXMIRE. Thank you, gentlemen, very much. Your testimony has been most helpful. Again I apologize for keeping you so late.

The committee will stand in recess until 10 o'clock tomorrow morning when we have four witnesses, including Mr. Robert Morgenthau. (Whereupon, at 1 p.m., the committee was adjourned to reconvene the next day at 10 a.m.)