We consider them to be the highest quality of evidence and the very best evidence in many of these cases.

Senator PROXMIRE. You indicate that you know of a Swiss bank being used for Las Vegas skim money. Can you tell us roughly how much money is involved?

Mr. WILSON. No; we don't know that. We know it is a large amount based upon the number of trips and the probable amount that the couriers carry, but we do not have access to any direct proof of just how much they are carrying.

Senator PROXMIRE. If you know the money is going into the bank, why don't you simply arrest the courier?

Mr. WILSON. We have no offense for which we can arrest him. It is not an offense to carry cash out of this country.

Senator PROXMIRE. Can you explain the customary procedures used by gamblers in the transfer of illegal skim money into Swiss bank accounts?

Mr. WILSON. Yes, sir. They use many different procedures, but in essence it is first a transportation problem of getting the cash into a bank account. As you can appreciate, our whole economic system is based upon credit, and credit is power. Cash in large quantities is virtually unusable in many situations, because they cannot, for instance, without creating more questions than they would like to answer to an inquiry, say, gain control of a corporation with a payment of cash, or other uses of cash, real estate, that sort of thing. So, any racketeer has the primary problem of converting a cash flow from, say, an illegal gambling operation into usable credit. That is one of his top problems.

They have, especially now in the racket field, a money mover, a man who moves money, and that is one of the things they do to change cash flow that is itself of little value to them into usable. credit.

Senator PROXMIRE. What does the money mover charge for it? Mr. WILSON. They get 2 to 5 percent from informer information, depending on the size of the transaction.

Senator PROXMIRE. How would the legislation before this subcommittee aid in preventing the transfer of illegally obtained funds?

Mr. WILSON. First it makes a great deal more evidence available. inside the United States than we have now in that it requires the photocopying of checks passing through most bank accounts. I noticed in the report from the committee, the House committee, that Chairman Patman objected to the exception of checks under $500 and he had a rather strong argument against it, and I am not prepared to say that he is not right.

The exception for $500 was put in I think in order to try to eliminate the possibility of a great deal of paperwork. But in any event, that provision will be very helpful in all types of cases, not just organized crime cases. It will be very helpful in the collection of income tax.

Secondly, the main thing this act does in addition to that is to make it illegal to carry cash outside of the United States without first reporting it, and it makes the reporting an act which we can attach legal significance to, and those two things I think are of immense importance to law enforcement.

Senator PROXMIRE. If a person is already violating the law, wouldn't he also violate this statute as well?

Mr. WILSON. Yes, sir.

Senator PROXMIRE. But you feel you would be in a stronger position to prosecute?

Mr. WILSON. Yes.

Senator PROXMIRE. Who else besides gamblers transfer funds into secret foreign bank accounts?

Mr. WILSON. We think it is used extensively in the narcotics traffic. It is probably used in the concealment of stolen securities, stolen bonds, stolen stocks, which frequently show up in Europe and other places and which are used to be converted into credit.

Senator PROXMIRE. The Treasury already requires banks to report unusual currency transactions under the authority contained in the Trading With the Enemy Act. Why aren't these reports good enough for your purposes?

Mr. WILSON. Well, they haven't been. We have not construed the Trading With the Enemy Act to apply to such things as couriers of Las Vegas skim and I don't believe that the Treasury does either.

Senator PROXMIRE. When you correct your remarks, would you check this out a little further and give us other reactions you have on that?

Mr. WILSON. Yes, sir; I would like an opportunity to give you a fuller discussion of that.

Under the Trading With the Enemy Act domestic institutions primarily engaged in cashing checks and exchanging currency must report "unusual" financial transactions. The weakness in this system arises from the varying definitions of the word "unusual" applied by the domestic institutions. A $10,000 cash withdrawal my be unusual for bank A and commonplace for bank B. In addition many banks do not sufficiently verify the identity or the address of the individual engaging in the transaction.

Under S. 3678 transactions on which reports would be required would be expanded to include currency "or such other monetary instruments as the Secretary of the Treasury may specify." Reports would no longer be made by the domestic institution alone but by the real party in interest as well. The improvement is obvious and the advantages to law enforcement equally obvious.

Senator PROXMIRE. Do you know of any cases where funds have been deposited in a U.S. bank on the condition that some or all of the proceeds be loaned to a designated borrower?

Mr. WILSON. Oh, I think that is done. I can't think now of specific cases, but I think it is a practice that happens. A borrower goes to a bank and they say we are "loaned up," we don't have any money, and if you can find someone who will put in a CD, a certificate of deposit, why, we will make you a loan.

So the borrower goes around, and he goes to a loan broker and, in effect, purchases a CD for the bank. I think that is a practice that is used some.

Senator PROXMIRE. What I was referring to was where perhaps criminal elements, organized crime do that.

Mr. WILSON. We have cases in the southern district of New York.

Mr. Seymour can discuss it in greater detail. I think we have had some situations where the borrower has, in effect, borrowed back his own money from a foreign bank.

Senator PROXMIRE. Does this type of indirect lending violate any banking statute, assuming that the loan is otherwise bankable?

Mr. WILSON. Not unless it is a violation of SEC regulations. If it is used for margin to evade the margin requirements, it could, or it might be used in some more elaborate type of fraud, but just the transaction itself would not be a violation.

Senator PROXMIRE. When a U.S. bank accepts deposits under the condition of making loans to designated borrowers, do you think it would be a good idea to require the bank to report the existence of such an arrangement with the Secretary of the Treasury?

Mr. WILSON. I am going to defer to the Treasury on that, Senator. I am not that familiar with the banking practices to be able to answer that.

Senator PROXMIRE. Would a violation of our tax or securities laws also be considered illegal under Swiss law if the violation had occurred there?

Mr. WILSON. I am not familiar with the Swiss law. They do have a taxing system that does have some criminal penalties involved in it, especially in their local taxation, and I am not real familiar with it. But the Swiss generally have maintained that in our negotiations with them on the treaty that normal income tax fraud case in this country would not be a violation in that country. The Treasury experts who have been closely examining the Swiss laws feel that that may not be entirely accurate, but I don't know the answer to it.

Senator PROXMIRE. If a particular category of crime is not illegal under Swiss law, can Swiss banks cooperate with foreign law enforcement agencies by disclosing information?

Mr. WILSON. They cannot now without violating their own secrecy laws unless it comes out in some proceeding. Now, we have had a case or two where there have been Swiss proceedings involving Swiss violations that exposed the account and we got information that way. Senator PROXMIRE. In your view, is it likely that Switzerland will agree to a treaty which will permit their banks to disclose information in connection with tax and securities cases?

Mr. WILSON. I think they will. We have negotiated with them for over a year. We are down to the final stages. They have been very cooperative, and in my judgment they are negotiating in good faith, and in my judgment we will secure a treaty.

Senator PROXMIRE. Mr. Wilson, you recommend elimination of the immunity provisions because S. 30, the crime bill, will take care of this. But enactment of S. 30 is not a certainty this year.

Why not retain the immunity provisions in this bill and provide that S. 30 supersede them when enacted?

Mr. WILSON. In my prepared testimony I suggested that if an immunity provision be retained in S. 3678 that it employ the language of section 6002 of S. 30. In that way, should S. 30 fail of enactment this year, we would at least retain the type of immunity approved by the Senate in S. 30.

Senator PROXMIRE. You would support that?
Mr. WILSON. Yes, sir.

Senator PROXMIRE. Recently a man named Max Orvitz was convicted in New York for violation of the SEC insider rules for the sale of $500 in debentures held in a Swiss bank. Mr. Orvitz' crime was discovered after a package containing $50,000 cash dropped and broke open in a New York post office.

Doesn't the bizarre nature of this case lead you to believe there are countless other transactions going on undetected? Mr. WILSON. It would indicate that.

It is one of those strange combinations of circumstances that led to his undoing, but it would indicate that. I, myself, am convinced from what I have seen that we don't know really much about how much currency flows back and forth between the United States and Europe.

Senator PROXMIRE. What makes it particularly suspicious to me is when you recognize that $9 billion, as I understand it, of securities in this country were purchased from Switzerland, a little country with a small population, modest incomes, $9 billion purchased, when only $24 billion altogether was purchased from around the world. This indicates to me there is something going on that is hard to explain on the grounds of ordinary commerce and trade and financeMr. WILSON. I certainly agree with you.

Senator PROXMIRE (continuing). In a big way. In fact, that puts it much too conservatively. There obviously is a great deal of illegal action going on in order to take advantage of these secret bank accounts.

Mr. WILSON. I think there is no question that the pressure of the American income tax system operates so that many American citizens who are, in effect, evading the income tax system, use this as a method of investing their money.

Senator PROXMIRE. Is there any way you could tell us whether these are Mafia types doing this, criminal elements, or does it seem more reasonable that these may well be professional people-doctors, lawyers, executives of various kinds who are evading tax laws in this way?

Mr. WILSON. The field I am familiar with, and I work in, is the criminal field and the organized crime work is in our division, and I can answer positively that organized crime figures are involved in this and on a rather large scale. The extent of others I have no knowledge of— other people who are not in organized crime.

Senator PROXMIRE. Would it seem reasonable that this involves many evaders besides the Cosa Nostra?

Mr. WILSON. I would think it would.

Senator PROXMIRE. Mr. Seymour, how important is it to your office to have microfilmed checks available in connection with criminal investigations?

Mr. SEYMOUR. I would say it is an indispensable tool of law enforcement.

Senator PROXMIRE. Do you know any cases where copies of checks of less than $500 were important?

Mr. SEYMOUR. I can think of a personal experience when I was part of the team that prosecuted the Frank Costello income tax case back in 1954 where we were able to prove cash expenditures of $18.000 growing out of an investigation of a single microfilmed check in the amount of I think $5.20.

Senator PROXMIRE. An excellent example.

The House bill exempts from the photocopying requirement checks under $500. If this were done, couldn't criminals rather easily evade the attempt of the act by simply writing a series of checks for $499? Mr. SEYMOUR. I would think that is one way it might be done, although I think probably the experience of law enforcement is that one does not have to be even that devious to think of transactions under a fixed limit that might provide good investigative leads or provide techniques for evasion.

Senator PROXMIRE. Is it your impression that most banks microfilm checks except for the larger ones?

Mr. SEYMOUR. I think that is probably generally true, that the smaller banks tend to microfilm as a matter of course, and it is the larger, high volume banks that have discontinued it.

Senator PROXMIRE. If a large bank does not now microfilm checks, do you think this constitutes a competitive advantage which enables large banks to attract business away from small banks?

Mr. SEYMOUR. My opinion would be that of an uncertain expert. I think you might ask one of the Treasury executives that question.

Senator PROXMIRE. How easy is it to open a numbered Swiss account? Can anyone do it?

Mr. SEYMOUR. Yes, indeed. We have indications of very active solicitation here in the United States on the most casual basis, sometimes over a drink in a Manhattan apartment.

Senator PROXMIRE. How does that solicitation occur?

Mr. SEYMOUR. It can be done by representatives of the banks actually coming here and being introduced to people of means who might be interested in, say, violating margin requirements.

Senator PROXMIRE. They call on the phone like a boiler room operation?

Mr. SEYMOUR. It can be done on the phone, it can be done through the mail, it can be done face to face, and it can be done right here without the depositor ever leaving our shores.

Senator PROXMIRE. How much money is involved in opening an account?

Mr. SEYMOUR. Nominal. I think we have examples of $50.

Senator PROXMIRE. For $50 I could open an account in a Swiss bank today?

Mr. SEYMOUR. Yes.

Senator PROXMIRE. And conceal whatever cash transactions I wish to conceal?

Mr. SEYMOUR. That is my understanding.

Senator PROXMIRE. How active have some of the Swiss banks been in soliciting accounts?

Mr. SEYMOUR. I think it really depends on the banks. By and large it tends to be the smaller, agressive banks who are actively soliciting, and from our indication doing so for illegal purposes.

Senator PROXMIRE. The Senate bill goes beyond the House bill by prohibiting U.S. brokers from accepting stock orders from foreign banks unless the foreign bank discloses the party for whom he is acting or certifies he is not acting for a U.S. citizen or resident. How effective would this provision be in curbing violations of our securities laws?

Mr. SEYMOUR. Again, I would suspect that the representatives of the Securities and Exchange Commission could give you a definitive an