Mr. McGEHEE. We would be willing to cooperate with them if they came in through the legal process.

Senator PROXMIRE. And the expense would be justified in that case. In connection with a previous question, you pointed out that I did give bad examples of Puerto Rico and the Virgin Islands, but Jamaica, Trinidad, Barbados, for instance, are all outside the United States. Jamaica has two banks, not 28 like the Bahamas does, Trinidad has two. Barbados has one.

So, apparently the secrecy provision in the Bahamian law didn't hurt the Bahamas in building up their banking industry.

Mr. BOYD. Sometimes you really have to take things on faith. I know the people that have established banks there, and I promise you if you went through the files of their proposals to their management, you would not-I cannot believe that in two cases out of the 29-in fact I would be willing to bet you even money that there would be no reference to the secrecy provisions of Nassau. That just isn't something that is attractive to us. We wanted a base for Eurodollars for our bank, and I am sure that is what the others were looking for. We just don't do that kind of business, frankly.

Senator PROXMIRE. I certainly accept your sincerity.

Mr. BOYD. If you would like, I would be happy to query my friends who have branches there and see if this was a factor in their decisions. I cannot believe it was. We just don't do that kind of business.

This is another thing that bothers me, if I may just interject another thought, there are certain areas where crime functions, and to some extent this extensive microfilming might well be helpful in Manhattan, but one of the things that bothers me is if this bill passes I visualize banks all over the country accumulating extensive microfilming records that would never be referred to. I may be wrong about that. (The prepared statement of Mr. Boyd together with attachments follows:)

STATEMENT OF WILLIAM BOYD, JR. ON BEHALF OF THE BANKERS ASSOCIATION FOR FOREIGN TRADE

Good morning gentlemen. My name is William Boyd, Jr. and I am Senior Vice President and Manager of International Banking of the Pittsburgh National Bank, of Pittsburgh, Pennsyvania. Today I am speaking for the Bankers Association for Foreign Trade of which I am President.

BAFT is the assocation of approximately 130 United States banks that have international banking departments. You will find attached the names of our member banks listed by state and city.

Today we are not attempting a complete review of S. 3678. Much of it does not directly affect international bankers. We simply wish to make certain observations that we believe will be helpful to members of the Committee.

Our organization is on record by unanimous vote as supporting that portion of the purpose of this bill which states that it is to aid duly constituted authorities in lawful investigations. The United States international bankers are very much concerned with the growth of crime in this country and wish to do everything feasible to assist in combating it.

On the other hand, we are not pesuaded that the records of domestic transactions 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 woud result. At this point I would like to say that we have no objection to retaining records of certain categories of international transactions. These could certainly be helpful.

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 substantially assisting the authorities and that its mission was accomplished.

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 would secretly use cash or readily negotiable bearer instruments or would resort to other less convenient but fully effective devices that would not be reported. We now turn our attention to certain particular aspects of this proposal that concern us.

In the first place, there is the matter of the relationship between the United States bank and its depositors. We believe that if the banks are required to keep records similar to those provided for in S. 3678 there must be a provision that the information is to be released only with respect to specific named individuals and pursuant to subpoena orother lawful process. Government officials must not be entitled to browse at will.

Secondly, in support of United States trade and investment throughout the world, the United States banks have developed extensive facilities. One important service is their head office trading in foreign exchange and Eurodollars. It would appear to us that regulations developed in accordance with S. 3678 might well interfere to such an extent with this high-volume, rapid trading, as to make it impracticable to conduct such operations effectively in the United States. This would further impair the position of this country as a leading international financial nation and restrictions on trading would make the dollar less useful as an international currency.

Thirdly, it is an important part of United States national policy that the global acceptability of United States dollars should be maintained. Very large amounts are already 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. One need only examine our own recent past to find an example. In 1963 United States banks were required to file more detailed reports than previously on foreign loans and deposits. Then in 1965 the Federal Reserve initiated the Voluntary Foreign Credit Restraint program which controls foreign lending by banks.

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? In addition some foreign holders of dollars in United States banks will not be happy with the knowledge that United States 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 many 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?

As part of its effort to strengthen the dollar, the United States Government is endeavoring to improve our international balance of payments. In the past an important positive factor affecting the flow of funds into the United States has been the investment by foreigners in United States securities. Any regulation that makes it more difficult or less attractive for foreigners to buy United States securities in the United States tends to have a negative effect on our balance of payments and the amount is not small.

In Section 401 of Title IV there is the provision that those engaged in effecting transactions in securities must submit detailed information about the client of any foreign financial agency at the time of the transaction if any United States citizen or United States resident is a beneficiary. It is our feeling that this provision makes investing in United States securities less attractive.

Despite the fact that the cost of crime in the United States is very great bal

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. A considered estimate of the cost of the records required by S. 3678 for one bank with deposits of about one and one-half billion dollars is

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

Florida (Miami):

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 and Trust
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 Cleve-
land

Union Commerce Bank

(Toledo):

First National Bank of Toledo

Oklahoma (No members).

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