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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):

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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

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Central National Bank of Cleve Virginia (Norfolk):

[blocks in formation]

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

[blocks in formation]

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.)

FOREIGN BANK SECRECY

WEDNESDAY, JUNE 10, 1970

U.S. SENATE,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS,

Washington, D.C. The subcommittee met, pursuant to adjournment, in room 5302, New Senate Office Building, Senator William Proxmire (chairman of the subcommittee) presiding.

Present: Senators Proxmire, Bennett, and Percy.

Senator PROXMIRE. The subcommittee will come to order. Our first witness this morning is Mr. Robert Morgenthau, of New York City. Mr. Morgenthau, would you come forward? We are delighted to have you with us. You have done a great deal of work in this area, and we are looking forward to your testimony.

Senator PERCY. Mr. Chairman, I have a statement of about 3 minutes. Senator PROXMIRE. I want to call on Senator Percy, who has a brief statement he would like to make.

Senator PERCY. If you would excuse me for just a moment, I unfortunately was not able to be here for the opening of these hearings and would like to make a short statement.

Senator PROXMIRE. Senator Percy.

Senator PERCY. Mr. Chairman, the problem that is causing many of us great concern, and I think is of concern to a great many Americans, is the current increase in tax and criminal activity which has been aided and concealed by the use of foreign bank accounts, especially in those countries that offer a maximum degree of bank secrecy, and therefore the importance of these hearings today is to consider two similar bills which attempt to curb this increase, S. 3678 introduced this morning by our distinguished chairman from Wisconsin, Senator Proxmire, and H.R. 15073, passed by the House on May 25, 1970.

There appears to be widespread agreement on the need for legislation to curb the illegal use of foreign bank accounts. H.R. 15073 was passed unanimously, and at the hearings held by the House Committee on Banking and Currency on the subject, all administrative agencies that testified supported the implementation of legislation to curb the illegal use of these accounts.

The American banking community has also supported the need for corrective measures in this area. While there has been uniform support for legislative action to control secret foreign bank accounts, there has been some disagreement over the specific means to be employed toward this end.

The Treasury Department, speaking on behalf of the administration, strongly opposed several elements of H.R. 15073 and urged the enactment of several other provisions.

Moreover, S. 3678, introduced by Senator Proxmire includes an additional provision not found in the bill passed by the House. This provision would prevent U.S. securities brokers from transacting business on behalf of a foreign entity unless that entity disclosed the person for whom he is acting, or certified that he is not acting for a U.S. citizen or resident. It is a new and different concept which certainly deserves the most thorough and careful study.

I believe that these differences will be thoroughly discussed and examined by our committee, and that all Members of the Senate will give careful consideration to the legislation before it. I would also like to note that the new legislation is just one element of the program necessary to effectively curb the illegal use of foreign secret bank

accounts.

I am pleased with the efforts being made presently in connection with other elements of the needed program. In addition to legislation to strengthen our own legal framework to combat this problem, the United States must seek increased assistance from foreign nations, especially those in which secret accounts are maintained for illegal purposes.

I am pleased with the vigorous efforts being made by the administration to obtain increased assistance in tax and criminal matters from Switzerland and the approach that is also being made for increased assistance from other nations.

I am also pleased with the increased efforts being made by the Internal Revenue Service and other law-enforcement agencies to improve existing enforcement methods and techniques in order to maximize their efficiency in combating the problem.

I was particularly encouraged with the recent announcement by the Treasury Department that the U.S. taxpayers will be required to declare their interest in foreign bank accounts on this year's tax return. I believe this requirement will be a very effective means of reducing the number of foreign accounts used for illegal purposes.

Finally, I am pleased with the assistance and positive attitude shown by the American banking community and other sectors of the economy that can greatly aid law-enforcement officers in combating this problem of the illegal use of foreign secret bank accounts. I welcome these hearings, Mr. Chairman.

Senator PROXMIRE. Thank you, Senator Percy. I might suggest, Mr. Morgenthau, that, since you have quite a detailed statement-it is 29 pages-that, if you would like to abbreviate it in any way or highlight it, the entire statement will be printed in full in the record. (Mr. Morgenthau's prepared statement appears on p. 260.)

STATEMENT OF ROBERT M. MORGENTHAU, NEW YORK, N.Y.

Mr. MORGENTHAU. Thank you. I thought I would read the beginning and the end and probably summarize the cases to hold my presentation to 15 minutes or less.

Mr. Chairman and members of the committee, thank you for the invitation to appear before your committee.

Information and evidence developed in recent years shows that secret foreign accounts are used to conceal tax frauds, securities fraud, and many other types of criminal conduct ranging from the smuggling of heroin to payoffs to government employees. But in addition to these

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