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COMMITTEE ON BANKING AND CURRENCY

WRIGHT PATMAN, Texas, Chairman WILLIAM A. BARRETT, Pennsylvania

WILLIAM B. WIDNALL, New Jersey LEONOR K. (Mrs. John B.) SULLIVAN, FLORENCE P. DWYER, New Jersey Missouri

SEYMOUR HALPERN, New York HENRY S. REUSS, Wisconsin

W. E. (BILL) BROCK, Tennessce THOMAS L. ASHLEY, Ohio

ALBERT W.JOHNSON, Pennsylvania WILLIAM S. MOORHEAD, Pennsylvania J. WILLIAM STANTON, Ohio ROBERT G. STEPHENS, JR., Georgia

CHESTER L. MIZE, Kansas FERNAND J. ST GERMAIN, Rhode Island BENJAMIN B. BLACKBURN, Georgia HENRY B. GONZALEZ, Texas

GARRY BROWN, Michigan JOSEPH G. MINISH, New Jersey

LAWRENCE G. WILLIAMS, Pennsylvania RICHARD T. HANNA, California

CHALMERS P. WYLIE, Ohio TOM S. GETTYS, South Carolina

MARGARET M. HECKLER, Massachusetts FRANK ANNUNZIO, Illinois

WILLIAM O. COWGER, Kentucky
THOMAS M. REES, California

PHILIP M. CRANE, Illinois
NICK GALIFIANAKIS, North Carolina CLARK MACGREGOR, Minnesota
TOM BEVILL, Alabama
CHARLES H. GRIFFIN, Mississippi
JAMES M. HANLEY, New York
FRANK J. BRASCO, New York
BILL CHAPPELL, JR., Florida
MICHAEL J. HARRINGTON, Massachusetts

PAUL NELSON, Clerk and Staff Director
CURTIS A. PRINS, Chief Investigator

BENET D. GELLMAN, Counsel

James F. DOHERTY, Counsel
JOSEPH C. LEWIS, Professional Staff Member

ORMAN S. FINK, Minority Staff Member

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CONTENTS

Bartimo, Frank A., Assistant General Counsel, Manpower and Reserve Af-
fairs, Department of Defense..

128
Desch, Carl W., senior vice president, First National City Bank of New

York, on behalf of the New York Clearing House Association, accom-
panied by Roy C. Ilaberkern, Jr., Milbank, Tweed, Hadley & McCloy;
and Henry Harfield, Shearman & Sterling-

316
Dwinell, Lane, Assistant Administrator for Administration, Agency for

International Development, accompanied by Daniel Cohen, Special
Assistant to Chief, Financial Review Division; Leslie A. Grant, Deputy
Counsel; and Robert R. Parker, former attaché and chairman of the

Irregular Practices Committee, American Embassy, Saigon, Vietnam 119

Leval, Pierre, former chief attorney, appellate division, southern district

of New York...

10

Morgenthau, Robert N., U.S. Attorney for the southern district of New

York.

18, 90

Pollack, Irving M., Director. Division of Trading and Varkets, Securities

and Exchange Commission, accompanied by Stanley Sporkin, Associate
Director; Ira H. Pearce, Special Counsel; and Allan S. Mostoff, Asso-
ciate Director, Division of Corporate Regulation-

175

Rossides, Hon. Eugene T., Assistant Secretary of the Treasury for Enforce-

ment and Operations, accompanied by Roy T. Englert, Deputy General

Counsel; Robert T. Cole, Special Assistant for International Tax Affairs;

Michael Bradfield, Assistant General Counsel; and Ira Tannebaum,

attorney--

57

Rossides, Hon. Eugene T., Assistant Secretary of the Treasury for En-

forcement and Operations, accompanied by William Dickey, Deputy

Assistant Secretary; and Robert T. Cole, Special Assistant for Inter-

national Tax Affairs.--

146

Somer, Clifford C., vice president, American Bankers Association, accom-

panied by William Heffelfinger, staff representative, American Bankers
Association..

312

Thrower, Hon. Randolph W., Commissioner, Internal Revenue Service,

accompanied by Leon C. Green, Deputy Assistant Commissioner for

Compliance; Bernard Meehan, Staff Assistant in Compliance; and Paul

Peppler, Coordinator, Intelligence Division...

64

Williford, Frederick L., executive vice president, National Microfilm Asso-

ciation, accompanied by Jerry P. Smith, marketing coordinator, financial
markets, Business Systems Markets Division, Eastman Kodak Co.,
Rochester, N.Y.; and Art Spauiding, staff assistant to the vice president,
engineering, Business Equipment Group, Bell & Howell Co., Chicago,
Ill..

340
Wilson, Hon. Will, Assistant U.S. Attorney General.

14

ADDITIONAL INFORMATION SUBMITTED FOR THE

RECORD

American Bankers Association, comments on Treasury Department's
recommendations on H.R. 15073...

335

Bartimo, Frank A.:

Information on banking facilities in Vietnam, Hong Kong, Morocco,

and Tangiers.----

142

List of banks doing business in South Vietnam..

142

Page 371 322

343

351

352

349

164 368

370

336 334

141

31

173

29

156

Committee of Foreign-Owned Banks, comments on bank secrecy legisla

tion, H.R. 15073, and related proposals.-Desch, Carl W., commentary on H.R. 15073. Eastman Kodak Co., report of the use of microfilm in maintaining records:

Charts showing technical equipment with explanatory data in the

use of microfilm for records ..
“Eastman Kodak Division Helps Banks To Find Needle in a Hay-

stack of Corporation Dividend Checks,” article from the American

Banker...
"Improving the Proof-Transit Operation,” article by Arthur Van

Vlissingen
“Microfilming Safeguards Audits Bank Network," article by

W. D. Sullivan, vice president of administration, Seattle First

National Bank.
Kennedy, Hon. David M., Secretary of the Treasury, letter to Hon.

Wright Patman, dated January 13, 1970.-
National Association of Securities Dealers, Inc., statement of

Documents pertaining to SEC's litigation with Investors Overseas
National Association of Supervisors of State Banks, statement of ----
New York Clearing House:

Comments on the testimony of Robert M. Morgenthau on H.R. 15073.

Comments on Treasury Department statement on H.R. 15073---Patman, Hon. Wright:

Advertisement of "Swiss Credit Bank," from the Wall Street Journal,

February 9, 1970..
“American Seized in Netherlands in Plot on HRA,” article from the

New York Times, January 15, 1969.-
Comparison of Internal Revenue Service testimony, excerpts of

formal and draft statements.-
Copies of four checks stolen and forged from the Human Resources

Agency, New York, N. Y., that were deposited in a bank in Switzer

land..
"Errors and Omissions,” editorial from New York Times, February

26, 1970..
"Eight Indicted in Alleged Plot To Defraud United States Through

Use of Swiss Bank Accounts,' article from the Wall Street Journal,

February 26, 1970.
Letter from Hon. David M. Kennedy, Secretary of the Treasury,

dated January 13, 1970, with an attached letter from Hon. Eugene
T. Rossides, Assistant Secretary of the Treasury, dated Janu-

ary 20, 1970...
Letter from Hon. Eugene T. Rossides, dated February 9, 1970-
Letter to Hon. David M. Kennedy, Secretary of the Treasury, dated

December 30, 1969---
Letters to Hon. Eugene T. Rossides, dated:

February 2, 1970.

February 10, 1970.
“Report by January 31, United States Directs HRA” article from

the New York Times, January 17, 1969--
Staff Report on Investors Overseas Service (IOS) and its use of secret

financial facilities.-
State Department telegram approved by Hon. Eugene T. Rossides,

Assistant Secretary of State in regard to Mutual Judicial Assistance
Treaty with Switzerland...
"Top Swiss Court Lets U.S. Look at Bank Files,” article from the

Washington Post, February 28, 1970.---
Pollack, Irving M.:

Documents pertaining to SEC's litigation with Investors Overseas

Services...

Response to questions submitted by Chairman Patman.-Rossides, Hon. Eugene T.:

Approval of State Department telegram in regard to Mutual Judicial

Assistance Treaty with Switzerland..-
Letters to Hon. Wright Patman:

January 20, 1970

February 9, 1970...
Schoch, Dr. M. Magdalena, report entitled, “Swiss Banks and Secrecy

Laws"

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157

164 88

164

166 89

32

181

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FOREIGN BANK SECRECY AND BANK RECORDS

THURSDAY, DECEMBER 4, 1969

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met, pursuant to notice, at 9:15 a.m., in room 2128, Rayburn House Office Building, Hon. Wright Patman (chairman), presiding

Present: Representatives Patman, Barrett, Sullivan, Reuss, Moorhead, Stephens, St Germain, Gonzalez, Minish, Hanna, Gettys, Annunzio, Rees, Galifianakis, Bevill, Griffin, Hanley, Brasco, Chappell, Widnall, Halpern, Clawson, Stanton, Blackburn, Brown, and Williams.

Chairman PATMAN. The committee will please come to order.

Mr. Morgenthau and Mr. Wilson, you may come around and take the witness stand, if you will, please; and Mr. Leval, will you come forward, please.

This morning we begin hearings on H. R. 15073, a bill to amend the Federal Deposit Insurance Corporation Act to authorize the Secretary of the Treasury to issue regulations requiring the maintenance of certain records by commercial banks. Further, the bill requires the filing of reports and maintenance of records pursuant to regulations issued by the Secretary, by those who do business with foreign financial institutions in jurisdictions with bank secrecy laws.

(The text of H.R. 15073 follows:)

(H.R. 15073, 91st Cong., first sess.) A BILL To amend the Federal Deposit Insurance Act to require insured banks to maintain certain records,

to require that certain transactions in United States currency be reported to the Department of the Treasury, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I-BANK RECORDS Chapter 1. INSURED BANKS.. 2. UNINSURED BANKS.-

Sec. 101 121

CHAPTER 1-INSURED BANKS
Sec.
101. Retention of records by insured banks.
Section 101. Retention of records by insured banks

The Federal Deposit Insurance Act is amended (1) by redesignating sections 21 and 22 as 22 and 23, respectively, and (2) by inserting the following new section immediately after section 20:

"Sec. 21. (a) The purposes of this section are (1) to facilitate the supervision of the business of banking, (2) to aid duly constituted authorities in lawful investi

(1)

gations, and (3) to prevent the premature destruction of certain types of evidence having a high degree of usefulness in the establishment of civil and criminal liabilities.

“(b) The Secretary of the Treasury (referred to in this section as the 'Secretary') shall prescribe such regulations as he may deem appropriate to carry out the purposes of this section.

"(c) Each insured bank shall maintain such records and other evidence as the Secretary may require of the identity of each person having an account with the bank and of each individual authorized to sign checks, make withdrawals, or otherwise act with respect to any such account.

"(d) Each insured bank shall make, in accordance with the regulations of the Secretary,

"(í) a photocopy or other copy of each check, draft, or similar instrument drawn on it and presented to it for payment.

“(2) a record of each check, draft, or similar instrument received by it for deposit or collection, together with an identification of the party for whose

account it is to be deposited or collected. “(e) Whenever any individual engages (whether as principal, agent, or bailee) in any transaction with an insured bank which is required to be reported under the Currency and Foreign Transactions Reporting Act, the bank shall require and retain such evidence of the identity of that individual as the Secretary may prescribe as appropriate under the circumstances.

(f) In addition to or in lieu of the records and evidence otherwise referred to in this section, each insured bank shall maintain such additional records and evidence as the Secretary may prescribe to carry out the purposes of this section.

"(g) Any type of record or other evidence required under this section shall be retained for such period as the Secretary may prescribe for the type in question."

CHAPTER 2-UNINSURED BANKS Sec. 121. Congressional findings. 122. Authority of Secretary. 123. Injunctions. 124. Civil penalties. 125. Criminal penalty. 126. Additional criminal penalty in certain cases. Sec. 121. Congressional findings

The Congress makes the following findings:

(1) Banks not insured by the Federal Deposit Insurance Corporation (referred to in this chapter as "uninsured banks”) constitute a legally significant component of the banking industry in the United States.

(2) Uninsured banks make use of the means and instrumentalities of interstate commerce and directly affect such commerce.

(3) The regulation by the Federal Government of the banking industry is necessary and proper in order to carry into execution the power of Congress to regulate the value of money.

(4) In order to effectively regulate the banking industry'and to effectuate the purposes set forth in section 21 of the Federal Deposit Insurance Act, it is necessary and proper to confer upon the Secretary of the Treasury the authority to impose recordkeeping requirements on uninsured banks as provided in section 122 of this chapter. Sec. 122. Authority of Secretary

The Secretary may by regulation require any type of uninsured commercial bank, trust company, or savings bank:

(1) To make such reports as the Secretary may require in respect of its ownership, control, and management and any changes therein.

(2) To require, retain, or maintain any records or other evidence of any type which the Secretary is authorized under section 21 of the Federal Deposit Insurance Act to require insured banks to require, retain, or maintain.

(3) To permit the Secretary to have access to and to obtain copies of any material referred to in paragraph (2) of this section.

(4) To maintain procedures to assure compliance with this chapter. For the purposes of any civil or criminal penalty, a separate violation of any requirement under this paragraph occurs with respect to each day and each separate office, branch, or place of business in which the violation occurs or continues.

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