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FOREIGN BANK SECRECY AND BANK RECORDS

HEARINGS

BEFORE THE

COMMITTEE ON BANKING AND CURRENCY

HOUSE OF REPRESENTATIVES

NINETY-FIRST CONGRESS

FIRST AND SECOND SESSIONS

ON

H.R. 15073

A BILL TO AMEND THE FEDERAL DEPOSIT INSURANCE ACT
TO REQUIRE INSURED BANKS TO MAINTAIN CERTAÍN REC-
ORDS, TO REQUIRE THAT CERTAIN TRANSACTIONS IN U.S.
CURRENCY BE REPORTED TO THE DEPARTMENT OF THE

TREASURY, AND FOR OTHER PURPOSES

DECEMBER 4, 10, 1969; FEBRUARY 10, MARCH 2, AND 9, 1970

Printed for the use of the
Committee on Banking and Currency

U.S. GOVERNMENT PRINTING OFFICE

41-642

WASHINGTON : 1970

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, Tennessee 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 Işland 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

128

316

119

175

Bartimo, Frank A., Assistant General Counsel, Manpower and Reserve Af-

fairs, Department of Defense...
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. Haberkern, Jr., Milbank, Tweed, Hadley & McCloy;

and Henry Harfield, Shearman & Sterling-
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.--

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

of New York..

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

York,

Pollack, Irving M., Director, Division of Trading and Markets, 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

Rossides, Hon. Éugene 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-

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

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

panied by William Heffelfinger, staff representative, American Bankers

Association.

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---

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 Spaulding, staff assistant to the vice president,
engineering, Business Equipment Group, Bell & Howell Co., Chicago,

Ill...

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

ADDITIONAL INFORMATION SUBMITTED FOR THE

RECORD

American Bankers Association, comments on Treasury Department's

recommendations on H.R. 15073..

Bartimo, Frank A.:

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

and Tangiers...

List of banks doing business in South Vietnam.

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340

14

335

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349

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368

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336
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173

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29

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

Àgency, 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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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:)

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(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 section.8 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)

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