77-169 4.674 OVERSIGHT HEARINGS INTO THE OPERATIONS OF THE IRS (Administration of Bank Secrecy and Reporting Act) 94-2 HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS NINETY-FOURTH CONGRESS SECOND SESSION JUNE 28, 29, AND JULY 1, 1976 Printed for the use of the Committee on Government Operations COMMITTEE ON GOVERNMENT OPERATIONS JACK BROOKS, Texas, Chairman L. H. FOUNTAIN, North Carolina JOHN E. MOSS, California DANTE B. FASCELL, Florida WILLIAM S. MOORHEAD, Pennsylvania WM. J. RANDALL, Missouri BENJAMIN S. ROSENTHAL, New York JIM WRIGHT, Texas FERNAND J. ST GERMAIN, Rhode Island FLOYD V. HICKS, Washington DON FUQUA, Florida JOHN CONYERS, JR., Michigan BELLA S. ABZUG, New York JAMES V. STANTON, Ohio LEO J. RYAN, California JOHN L. BURTON, California RICHARDSON PREYER, North Carolina MICHAEL HARRINGTON, Massachusetts ROBERT F. DRINAN, Massachusetts EDWARD MEZVINSKY, Iowa BARBARA JORDAN, Texas GLENN ENGLISH, Oklahoma ELLIOTT H. LEVITAS, Georgia ANTHONY MOFFETT, Connecticut FRANK HORTON, New York PAUL N. MCCLOSKEY, JR., California JOEL PRITCHARD, Washington EDWIN B. FORSYTHE, New Jersey ROBERT W. KASTEN, JR., Wisconsin WILLIS D. GRADISON, JR., Ohio WILLIAM M. JONES, General Counsel WILLIAM H. COPENHAVER, Associate Counsel J. P. CARLSON, Minority Counsel COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE BENJAMIN S. ROSENTHAL, New York, Chairman Hearings held on- Alexander, Donald C., Commissioner, Internal Revenue Service; accompanied by William E. Williams, Deputy Commissioner; Meade Whitaker, Chief Counsel; Thomas V. Glynn, Assistant to the Commissioner; Singleton B. Wolfe, Assistant Commissioner (Compliance); Thomas J. Clancy, Director, Intelligence Division; Anthony J. Totera, Chief, Tax Forms Development Branch; Anita F. Alpern, Assistant Commissioner (Planning and Research); Robert H. Terry, Assistant Commissioner (Accounts Collection and Taxpayer Service); Joseph G. McGowan, Director, Office of International Operations; and Robert J. Stankey, Jr., Assistant to the Director, Financial Crimes and Frauds, Office of Law Enforcement, Department of the Treasury. Crampton, Scott, Assistant Attorney General, Tax Division, Depart- ment of Justice; accompanied by Myron C. Baum, Deputy Assistant Attorney General; Cono R. Namorato, Chief, Criminal Section; and Edward M. Vellines, Criminal Section_.. Grissinger, Charles, and Jacob Kaufman, subcommittee staff investi- gators on detail from the General Accounting Office Hills, Roderick M., Chairman, Securities and Exchange Commission; accompanied by Stanley Sporkin, Director, Division of En- Keeney, John C., Deputy Assistant Attorney General, Criminal Division, Department of Justice; accompanied by Lawrence Callaghan, Special Assistant to the Attorney General, Office of Legislative Affairs; William C. Hendricks, attorney, Fraud Section, Criminal Division; and Mark M. Richard, Chief, Fraud Section, Macdonald, David R., Assistant Secretary of the Treasury, Enforce- ment, Operations and Tariff Affairs; accompanied by James J. Featherstone, Deputy Assistant Secretary, Enforcement; and Robert J. Stankey, Jr., Assistant to the Director, Financial Crimes and Frauds, Office of Law Enforcement _ _ _ Letters, statements, etc., submitted for the record by— Alexander, Donald C., Commissioner, Internal Revenue Service: 166-173 Clancy, Thomas J., Director, Intelligence Division, Internal Revenue Hills, Roderick M., Chairman, Securities and Exchange Commission: Material concerning legislative recommendations and the need Keeney, John C., Deputy Assistant Attorney General, Criminal Division, Department of Justice: Prepared statement and additional 24-34 Letters, statements, etc.—Continued Macdonald, David R., Assistant Secretary of the Treasury, Enforcement, Operations and Tariff Affairs: Page 45 47-63 Information concerning cross-referencing between frequent international travelers and persons who have identified themselves as having a foreign bank account__ Prepared statement and additional material_ Smith, John T., II, General Counsel, Department of Commerce, and Richard G. Darman, Assistant Secretary for Policy: Prepared statement and biographical data _ - 178-203, 204-205 Stankey, Robert J., Jr., Assistant to the Director, Financial Crimes Frauds, Office of Law Enforcement, Department of the Treasury: September 17, 1976, letter to Chairman Rosenthal concerning a memorandum dated July 28, 1972___ APPENDIX Additional material relative to the hearings---. 164-165 211 OVERSIGHT HEARINGS INTO THE OPERATIONS OF THE IRS (Administration of Bank Secrecy and Reporting Act) MONDAY, JUNE 28, 1976 HOUSE OF REPRESENTATIVES, COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to notice, at 10:05 a.m., in room 2172, Rayburn House Office Building, Hon. Benjamin S. Rosenthal (chairman of the subcommittee) presiding. Present: Representatives Benjamin S. Rosenthal, Robert F. Drinan, Anthony Moffett, Elliott H. Levitas, Edward Mezvinsky, and Garry Brown. Also present: Peter S. Barash, staff director; Herschel F. Clesner, chief counsel; Eleanor M. Vanyo, assistant clerk; and Henry C. Ruempler, minority professional staff, Committee on Government Operations. OPENING STATEMENT OF CHAIRMAN ROSENTHAL Mr. ROSENTHAL. This morning the subcommittee continues its oversight review of the Internal Revenue Service and Federal agency enforcement of the Bank Secrecy Act of 1970. The initial phase of the hearings will explore the use of foreign financial facilities for illegal and improper purposes by U.S. citizens or residents and by persons doing business here. We will be examining the effectiveness of administrative steps undertaken by the Government under the Bank Secrecy Act to meet the problem. At hearings of the House Banking Committee in the late sixties relating to foreign bank secrecy, it was estimated that the use of foreign secret financial facilities created a loss of tax revenues to this Government in the hundreds of millions of dollars. We will attempt to determine if this situation continues to exist today. Recent public disclosures showing that foreign secret financial accounts were utilized for many questionable corporate payments and illegal campaign contributions raises serious questions as to the reporting and disclosure programs instituted under the Bank Secrecy Act. The subcommittee will explore what use has been made of information relating to foreign financial accounts obtained by the Internal |