ments referred to in this section shall not apply to domestic financial transactions involving less than $500."

The Committee also amended subsection (d) of new section 21 to provide: "Each insured bank shall make, to the extent that the regulations of the Secretary so require, (1) a photocopy or other copy of each check, draft, or similar instrument drawn on it and presented to it for payment." The addition of the words to the extent that . . . so require" would appear to be a clear grant of power to the Secretary of the Treasury to provide that the photocopying requirement does not extend to all international transactions and to all domestic transactions involving $500 or more. In oher words, he is given the authority to prescribe the extent of the photocopying requirement. While the Committee Report recognizes this power, it indicated that, in view of the Congressional findings, the Secretary is left with "little choice but to require, upon the effective date of the legislation, that banks photocopy all checks except" those covered by the $500 exemption provision. But the report does recognize that "the Secretary's duty to impose such a requirement is neither absolute nor permanent." In introducing S. 3678 on April 6, 1970, which contains a new section 21 similar to that in H.R. 15073 as passed except that S. 3678 does not contain the less-than-$500 exemption provision, Senator Proxmire explained the authority of the Secretary as follows: "Nonetheless, the expense involved might outweigh the potential benefit and for this reason, the Secretary of the Treasury is given full authority to exempt certain classes of checks from the photocopy requirement."

The Treasury is concerned that the language of Subsection (d) of the somewhat conflicting statements of legislative intent might lead to an interpretation requiring the Secretary of the Treasury to issue regulations providing that all banks photocopy all checks drawn on them, or, under H.R. 15073, all checks except checks of less than $500 used in domestic financial transactions.

Since, as indicated above, additional work must be done to develop efficient recordkeeping requirements for domestic transactions, Treasury urges that the bill be further amended to eliminate the reference to specific types of domestic records, and to place the responsibility to develop specific requirements on the Secretary of the Treasury. Regulations would be developed to identify the types of documents subject to these requirements, specify the minimum amounts, establish the classification of documents (such as checks paid or checks deposited) and other classifications subject to these requirements.

It would be unwise to adopt legislation with such mandatory requirements without greater knowledge of the use to which such records could be put, and little more than a cursory idea of the costs involved.

It should also be noted that the $500 domestic exemption provision contained in H.R. 15073 most likely would not accomplish its apparent purpose, to eliminate the recordkeeping requirements in connection with relatively small domestic checks. It would be impossible for banks to ascertain with certainty whether a particular small check was negotiated abroad or was a domestic item. One could not tell simply from the name of the endorser whether a check were endorsed abroad. Therefore, in order to be in certain compliance with the international recordkeeping requirement which has no minimum exemption, banks would have to microfilm all checks regardless of amount.

2. TYPE OF RECORDS

Title I of both bills contains language related to recordkeeping requirements in terms of "photocopies" and "a photocopy or other copy" of enumerated instruments. This terminology raises a possible implication that only hard copies rather than microfilm or other film records would be acceptable or could be required by the Secretary in lieu of actual photocopies. Since microfilm is much less expensive than hard copy processes and provides acceptable reproductions of the records in question, it is suggested that the use of the term "photocopies" in section 21(a)(1) and "photocopy or other copy" in section 21(d) (1) be replaced by "microfilm or other reproductions" and "microfilm or other reproduction" respectively.

3. RECORDS OF IDENTITY OF CUSTOMERS AND SIGNATORIES

Subsection (c) of new section 21 of the Federal Deposit Insurance Act provides: "Each insured bank shall maintain such records and other evidence as the Secretary shall 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." The Treasury agrees with the

purpose of this provision, but believes that the Secretary of the Treasury should specifically be given the authority to establish exemptions. For example, it might be decided to limit the requirement for identity records to certain types of accounts involving minimum amounts or to exclude from the identity record requirements employees with authority to sign checks or make deposits where the account owner maintains complete personnel records.

4. ANNUAL REPORT TO CONGRESS

Subsection (h) of new section 21 of the Federal Deposit Insurance Act provides: "The Secretary shall make an annual report to the Congress of his implementation of the authority conferred by this section and any similar authority with respect to recordkeeping or reporting requirements conferred by other provisions of law." The Secretary of the Treasury already makes an annual report to Congress and it should be made clear that the information requirement by subsection (h) may be furnished as part of that report.

5. GEOGRAPHICAL SCOPE

In accordance with recommendations made by the Treasury, the geographical scope of Title II of H.R. 15073 has been clarified so that financial institutions are subject to the reporting requirements only to the extent they perform functions within the United States. Thus, a United States branch of a foreign bank would be required to file relevant reports while a foreign branch of a U.S. bank would not be subject to these requirements. However, S. 3678 does not contain this clarification, but rather has retained in Section 203 (f) and (h), the original language of H.R. 15073, which could be construed to require comparable reports from foreign branches of U.S. banks and other financial institutions. Under this language, for example, any bank which has a branch abroad would be both a "domestic financial institution" and a "foreign financial agency" within the meaning of these definitions in S. 3678. It is recommended S. 3678 be amended to conform to Section 203 (g) and (h) of H.R. 15073.

Moreover, it would appear that the Secretary of the Treasury does have authority to similarly confine the applicability of Title I, of both H.R. 15073 and S. 3678 to offices of financial institutions located within the United States. How ever, it would be desirable for this authority to be clarified in both bills.

6. RETENTION PERIODS

The bills presently do not limit the authority of the Secretary to specify retention periods of required records. It is recommended the bills prescribe a general six-year retention period with authority conferred on the Secretary to reduce the period generally or for specific types of records. It should also be provided that any record which has been called for by a Federal agency in connection with an investigation or proceeding must be retained while the investigation of proceeding is pending.

7. TYPES OF INSTITUTIONS TO MAINTAIN RECORDS OR FILE REPORTS With respect to the persons engaged in various businesses which must maintain records under Title I of the bills, it should be noted that in Section 123, S. 3678 applies to a much narrower group of functions than H.R. 15073. The reason for this is not clear. Since the purpose of this section should be to eliminate potential loopholes which otherwise could permit the international transfer of funds through businesses which would not have to maintain records of such transfers, it is recommended the language of section 123 in S. 3678 be amended to be consistent with and as broad as the lanugage of H.R. 15073.

With respect to the definition of a "financial institution" found in section 203 (e) of Title II of the bills, the New York Clearing House has recommended it be broadened to also include specifically agencies within the United States of foreign banks, travel agencies, licensed transmitters of funds, and telegraph companies. The Treasury believes this recommendation has merit.

8. PURPOSE OF TITLE II

As originally introduced, H.R. 15073 stated a number of purposes, including facilitating the supervision of the business of banking, the establishment of civil liabilities, the regulation of the value of money and the collection of

statistics necessary for the formulation of monetary and economic policy. The Treasury argued that the only proper purpose of the bill is to assist criminal, tax and regulatory investigations and proceedings. The House accepted this view in part and amended Title I in conformity therewith. For example, new section 21 of the Federal Deposit Insurance Act was amended by the House to provide: "It is the purpose of this section to require the maintenance of appropriate types of records by insured banks where such records may have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings." (Section 21 (a) (2)).

However, the stated purposes of Title II, set forth in Section 202 of H.R. 15073 and S. 3678 have not been changed. Section 202 still provides, "The purposes of this title are (1) to facilitate the supervision of financial institutions properly subject to Federal supervision, (2) to aid duly constituted authorities in lawful investigations, and (3) to provide for the collection of statistics necessary for the formulation of monetary and economic policy." The Treasury urges that Section 202 be amended to make it clear that the only purpose of Title II is to assist criminal, tax and regulatory investigations and proceedings. This is especially important to avoid unnecessary incursions on the right of privacy. Also, under Section 204 of the bills the authority of the Secretary of the Treasury to prescribe regulations for the implementation of Title II is limited to those "he may deem appropriate to carry out the purposes of this title."

9. DEFINITION OF MONETARY INSTRUMENTS

Originally the reporting requirements of H.R. 15073 were limited to specified transactions in U.S. currency. The Treasury recommended that this be enlarged to include items equivalent to U.S. currency. The purpose of this change was to close a potential loophole through which reporting requirements could be avoided by not using U.S. currency but rather its equivalent. The House Banking and Currency Committee responded by extending the reporting requirements to specified transactions in monetary instruments and Section 203 defined "monetary instruments" to include "coin and currencies of the United States, and in addition such foreign coin and currencies and such types of checks, bills, notes, bonds, or other obligation or instruments as the Secretary may by regulation specify "The Committee Report on H.R. 15073 clearly indicates this definition is intended to be no broader than to include "bearer instruments which may substitute for currency." (page 22). In order to more restrictively define the types of non-currency items included within the term "monetary instruments" within the statute itself, it is suggested the definition of "monetary instruments" be amended to include "coin and currency of the United States, and in addition such foreign coin and currencies, and such types of travelers' checks, bearer negotiable instruments, bearer investment securities, or their equivalent, as the Secretary may by regulation specify." The term "or their equivalent" is necessary to permit the Secretary of the Treasury the necessary discretion to include other types of instruments which are easily transferable which may not be bearer in form. For example, a non-bearer security accompanied by a power of attorney could be negotiated by a series of individuals without leaving a record of the chain of ownership. The Secretary should be empowered to include such instruments within the definition of "monetary instruments." Otherwise, serious loopholes in the legislation could develop.

10. INCONSISTENCY WITH S. 30, THE ORGANIZED CRIME CONTROL ACT The immunity provision in S. 3678 and H.R. 15073 is inconsistent with S. 30, the pending Organized Crime Control Act. The immunity granted by Section 211 of S. 3678 and H.R. 15073 would apply to the transaction with respect to which the witness is compelled to testify. On the other hand, the policy of the Administration reflected in S. 30 and as expressed in the testimony of Assistant Attorney General Wilson, is that the appropriate scope of immunity is with respect to the testimony and that the immunity should not bar prosecution with respect to the transactions testified to if other evidence is obtained with respect to that transaction as long as the other evidence is obtained independently of the testimony with respect to which the immunity applies. Therefore, the Treasury endorses the recommendation of Assistant Attorney General Wilson that Section 211 either be deleted or made to conform to the immunity provision now appearing in S. 30.

11. FILING TREASURY CURRENCY REPORTS

Section 223 of the bills provides for a reporting procedure under which domestic financial institutions could be designated to receive Treasury Currency Reports to which they were not a party, and then transmit them to the Treasury Department. Since the Treasury believes all Treasury Currency Reports should be filed directly with the Treasury Department, Section 223 is superfluous and should be deleted.

12. CUMULATIVE EXPORTS AND IMPORTS OF MONETARY INSTRUMENTS

Section 231 of H.R. 15073 and S. 3678 requires that any person who participates in the transportation of monetary instruments in an amount exceeding $5,000 on any one occasion or $10,000 in any calendar year to report such activity if it involves a place outside the United States. The reporting requirements applicable to cumulative transportation of monetary instruments in excess of $10,000 would be extremely difficult, if not impossible, to implement from an administrative standpoint. For example, if an individual failing to file a report were found to be transporting less than $5,000 worth of monetary instruments in his possession, it would not be ascertainable whether he had transported an additional amount during the calendar year to reach a cumulative figure in excess of $10,000.

Therefore, the Treasury recommends the deletion of the $10,000 cumulative reporting requirement.

13. REPORTS OF EXPORTS AND IMPORTS OF MONETARY INSTRUMENTS

Section 231 (b) of the bills sets forth the information that can be required by the Secretary of the Treasury in reports of exports and imports of monetary instruments. As presently drafted, this provision does not provide sufficient authority to the Secretary to require additional information which he may deem necessary for these reports to be effectively utilized. For example, it would not presently permit the Secretary to require individuals filing these reports to provide their Social Security numbers which are necessary to relate the information contained in the reports to taxpayers' general tax records. This section should be redrafted to broaden the Secretary's authority to require relevant information in reports of exports and imports of monetary instruments.

14. SECTION 241

Section 241 authorizes the Secretary of the Treausry to impose four independent requirements in connection with international transactions and relationships (1) require reporting by financial institutions of their clients' international transactions and relationships; (2) require reporting of these transactions and relationships by the clients (U.S. citizens, residents, and persons in the U.S. doing business therein) themselves; (3) require recordkeeping by financial institutions of their clients' international transactions and relationships; and (4) require recordkeeping of these transactions and relationships by the clients themselves.

With respect to the first requirement, reporting by financial institutions, for the reasons set forth in the June 9, 1970 testimony of Assistant Secretary Rossides, the Treasury Department has concluded it would be inappropriate to support legislation requiring reports by financial institutions of information obtained from the records of international transactions.

With respect to the second requirement, reporting by clients, the Treasury already has announced that taxpayers will be required under existing statutory authority to report the existence of interests in foreign bank, brokerage, and similar accounts on their tax returns. Since the Internal Revenue Service already is empowered to issue a summons for records of any specific taxpayer involving his transactions with a foreign bank account, a burdensome reporting requirement on taxpayers involving individual transactions with these aecounts would not be justifiable. In any instance in which the disclosure of the existence of an account or other information raises questions of tax liability for which the Internal Revenue Service would need additional information of individual transactions, the IRS can obtain such records through the issuance of a summons. Therefore, the authority in Section 241 to require reports by individuals of transactions with foreign accounts is unnecessary.

With respect to the third requirement provided in Section 241, recordkeeping by financial institutions, the Treasury has indicated the need for such records

However, Treasury has suggested that these requirements be implemented in a more straightforward approach, under which international recordkeeping requirements would be limited to banks and other listed financial institutions in the United States, specified types of records would be listed, and the Secretary would be empowered to substitute for, eliminate from or add to the requirements by regulation. This could be accomplished by amending sections 241 and 242 or by amending Title I.

With respect to the fourth requirement of Section 241, recordkeeping of foreign transactions by individuals, the Treasury has stated that it is considering the issuance of regulations pursuant to existing statutory authority requiring taxpayers with interests in foreign bank, brokerage and similar accounts to maintain specified records of transactions they have with these accounts. In view of the existing authority to implement such a proposal, the corresponding authority provided in Section 241 is superfluous.

Based upon the foregoing, Treasury recommends the deletion of Sections 241 and 242 of the bills, or its amendment along the lines suggested.

15. ADMINISTRATIVE RESPONSIBILITY TO ASSURE COMPLIANCE BY FINANCIAL

INSTITUTIONS

The Treasury Department believes that the intent of the bill is to assign to the appropriate Federal agency the responsibility to make sure that banks, brokers and other financial institutions are complying with the requirements imposed upon them by the bills and the regulations issued thereunder. Such an intent was made specific in H.R. 16444 introduced by Representative Widnall on March 12, 1970. Section 405 of that bill provides—

"SEC. 405. RESPONSIBILITY OF SECRETARY

"The Secretary shall have the responsibility to assure compliance with the requirements of this Act and to the greatest extent possible delegate such responsibility to the appropriate bank supervisory agency, or other supervisory agency."

H.R. 15073 and S. 3678 impose recordkeeping requirments for insured banks and for insured savings institutions in Title I in the form of amendments to existing statutes the enforcement of which has already been assigned to various federal regulatory agencies. In addition, the bills elsewhere impose recordkeeping and reporting requirements on uninsured bank and savings institutions and on certain other businesses which perform financial functions, as well as reporting requirements on insured entities. With respect to these recordkeeping and reporting requirements, it would be desirable for the bills to specify the responsibility of the Secretary of the Treasury to make sure that the requirements are being carried out and to make appropriate delegations of responsibility. The Treasury urges that the bills be amended accordingly.

16. ENFORCEMENT AUTHORITY WITH RESPECT TO REPORTS OF EXPORTS AND IMPORTS OF MONETARY INSTRUMENTS

Section 302 (g) of H.R. 16444 specifically authorizes the Secretary of the Treasury to prescribe regulations including "the procedures to be followed by the Bureau of Customs, including border and mail checks, to assure compliance with the requirements imposed by this chapter." While it is believed the intent of H.R. 15073 and S. 3678 is to authorize such procedures, it would seem desirable that the bills contain a provision comparable to Section 302(g), H.R. 16444.

17. SHARING INFORMATION CONTAINED IN REPORTS WITH OTHER FEDERAL AGENCIES

The reports required to be filed under Title II of H.R. 15073 and S. 3678 are to be filed with the Treasury Department. In order for full use to be made of these reports in accordance with their intended purpose, it will be necessary for other agencies to have access to them. While the Federal Reports Act of 1942 (44 U.S.C. 3507) provides for the sharing of information between Federal agencies, it does not apply to the release of information by the Internal Revenue Service. Release of information by the Internal Revenue Service is governed by Section 6103 of the Internal Revenue Code which provides that returns made with respect to income and certain other taxes "shall be open to inspection only upon order of the President and under rules and regulations prescribed by the Secretary or his delegate and approved by the President." While it would appear