20 days to contact the FDIC
Toni Howard
http://www.defendyourprivacy.com
FYI
We now have less than 20 days to contact the FDIC and demand that it
kill its proposed "Know Your Customer" rule. Please forward this message
to any friends, family, co-workers, neighbors, or other people you know
personally who may be interested. Then go to
http://www.defendyourprivacy.com
and sign the petition. It will be submitted directly to the FDIC. Plus,
a copy will be sent to your representative in the U.S. House and to both
your U.S. Senators.
'Big Brother' Program Watching Banks - and Watching You
(Washington, D.C.) - In the not-too-distant future, making a simple
withdrawal from your checking account could spark an international
criminal investigation. Forget the IRS.
Under new rules proposed by the Treasury Department's Thrift Supervision
Office and Comptroller of the Currency, along with the Federal Reserve
and the Federal Deposit Insurance Company, commercial banks will require
customers to reveal all sources of income.
Using that information, banks will establish a customer "profile,"
monitor deposits and withdrawals, and report to an international "task
force" any deviation from routine as a "suspicious activity."
The program's public image title is "Know Your Customer". Officially, it
is the "Minimum Security Devices and Procedures and Bank Secrecy Act
Compliance Program".
Its supporters argue that unprecedented government surveillance of
American citizens is necessary in order to catch drug lords and money
launderers.
The bureaucracy will have to do better than that to justify the use of
such Orwellian tactics against law-abiding citizens.
It's unconstitutional. The Fourth Amendment protects against the search
or seizure of private property without probable cause. "Know Your
Customer" completely disregards one of every American's fundamental
constitutional rights - never mind the sovereignty issue of allowing an
international agency to conduct unwarranted criminal investigations on
law-abiding Americans.
The federal government will accept public comment until March 8. It is
imperative that you contact the agencies listed immediately and tell
them you are vehemently opposed to this kind of invasion of privacy.
Federal Deposit Insurance Company
Robert E. Feldman, Executive Secretary
Attention: Comments/OES 550
17th Street NW Washington DC 20429
Fax: (202) 898-3838
E-mail: mailto:comm...@fdic.gov
Federal Reserve System
Jennifer J. Johnson, Secretary
Attention: Docket No. R-1019
20th and Constitution Avenues NW
Washington DC 20551
Department of the Treasury Manager, Dissemination Branch Information
Management and Services Division
Office of Thrift Supervision
1700 G. Street NW
Washington DC 20552
Fax: (202) 906-7755
E-mail: mailto:publi...@ots.treas.gov
~~~~~~~~~
Snoops and Spies
http://www.insightmag.com
Snoops and Spies
By Timothy W. Maier
The newest twist in the privacy wars: A federal regulatory proposal
would bring Big Brother to your bank, where he'd be counting more than
just your pennies the squirming beneath the microscope?
George Orwell had it right in his dystopia novel Nineteen Eighty-Four,
but he missed it by a decade. Big Brother wants bankers to create a
dossier on every account holder. And a federal regulatory proposal
dubbed "Know Your Customer" could do just that by turning bank tellers
into snoops. If it sounds like something out of the X-Files, it isn't.
Look for it at a bank near you.
Welcome to the Orwellian dawn of the 21st century, where the lost age of
Aquarius has become the new age of surveillance, bolstered by electronic
cascades of personal information that are ever more readily accessible.
Both liberals and conservatives increasingly are concerned about a
society they fear is all too willing to surrender another layer of
privacy in exchange for a false sense of security.
Across the nation -- in Maryland, for instance -- camera cops are
replacing the squad car. In New York, witnesses are frisked like
suspects as part of a crackdown on violent crime. In New Jersey,
critics charge that "Megan's Law," which requires child sex offenders to
register with the local cops, turns neighbors into spies and vigilantes.
In Chicago, U.S. Customs agents routinely strip search and probe body
cavities of black females traveling internationally if authorities
believe they fit a certain profile.
Not personal enough? Ask your local motor-vehicle administration if they
are selling your driver's-license photograph and personal data. Do you
live in South Carolina or Florida? The authorities there have sold some
17 million such photographs to a New Hampshire company, claiming to be
building a national database to identify theft. On Capitol Hill,
medical-identity cards and even universal identity cards top political
agendas, while the Federal Communications Commission hopes to turn your
wireless telephone into a personal tracking device so the government can
keep tabs on you -- for your own good, of course. And personal computers
built by Intel Corp. were to contain silicon chips allegedly to protect
electronic transactions but, as it happens, also to let marketers track
consumers' every move in cyberspace.
So it should come as no surprise that your trusted banker has been
enlisted by Big Brother to help him watch every financial move you make.
The Federal Deposit Insurance Corp., or FDIC, the Federal Reserve
System, the Office of the Comptroller of the Currency and the Office of
Thrift Supervision are frighteningly vague about how your banker should
implement the program. However, the rule published Dec. 7, Pearl Harbor
Day, in the Federal Register calls for uniform banking procedures to
identify customers, establish their sources of money, note their "normal
and expected transactions," watch for transactions that are inconsistent
with the customer's "normal and expected transactions," report any
transactions that are determined to be suspicious and place limitations
on amounts that can be withdrawn at any one time.
The regulators say Know Your Customer snooping is for your own good. The
banks say hold it, they don't like it. It's costly and burdensome and an
invasion of privacy, says John Byrne, senior counsel and compliance
manager for the Washington-based American Banker's Association, or ABA.
Byrne says it's not fair that banks are required to do this while broker
dealers, insurance agencies and security dealers don't operate under the
same requirement. He sees it as a substantial cost to community banks,
which would be required to purchase hardware and software programs to
conduct all of the spying. "We are concerned about the language of the
proposal," Byrne says. "It's an intrusive requirement that banks are
going to profile customers."
Why should bankers be turned into federal snoops? The proposal is
supposed to attack money-laundering techniques employed by drug
traffickers and other criminals who hide illegal profits. Such methods
include wire transfers, bank drafts and "smurfing," the practice of
cutting transactions into lesser amounts that don't have to be reported
as suspicious under the $10,000 bank-reporting laws established under
President Reagan.
Insight spoke with Richard Small, assistant director at the Federal
Reserve and author of the proposed regulation. He says it won't be as
costly as many bankers believe. Take that small bank in Kansas, he says.
"They know everyone. They know the person. They may not have to tell
them to show a driver's license. They aren't going to have to buy a new
computer or software. We just want them to formalize their policy."
Small says most banks already have Know Your Customer programs in place.
In fact, a 1990 ABA survey claimed that 86 percent of the ABA's
membership already employed such policies. One of those doing so is
Terre Haute Savings Bank in Indiana. It publishes a list of suspicious
banking activities, such as customers unwilling to provide
identification information or a borrower who pays down a loan with no
explanation of the source of funds.
While many banks and citizens are decrying the proposed rule as an
invasion of privacy, most see no problem with asking customers who
aren't account holders to put their thumbprint on the check, Small
observes. More than 16 states have adopted this as a rule, though it is
not (yet) mandated by federal regulatory agencies. "I haven't heard any
uproar about that," he says.
Byrne says that's different. Banks that require it are protecting their
customers by reducing check fraud, he says, noting that banks requiring
fingerprinting have reported a 40 percent to 50 percent drop in fraud
since implementing the practice. "The fingerprints don't go anywhere"
unless the check doesn't clear, he says.
Account holders, known to the banks, may not mind because they aren't
being fingerprinted. But what about future customers? Sharon Weidenfeld,
a Maryland private investigator, was a potential customer for
NationsBank. That is, until she was ordered to surrender her thumbprint
to cash a check there. "I thought they were going to take my mug shot
next and it would be hanging on the post-office wall next week," says
Weidenfeld.
While fingerprinting as an internal policy may be some banks' idea of
getting to know their customers, Small says the proposed rule is needed
to ensure all banks and savings institutions have consistent policies.
"Right now there is no standard or baseline," Small says. "We want to
set up that baseline. We want a system to understand and identify the
customer."
For the average consumer, the proposed Clinton bank rule means banks
would develop a profile of all your financial transactions on the bank's
database. This would include a record of the amount of funds deposited
each month, sources of income, weekly paycheck, Social Security, stocks
and normal withdrawals. Any significant deviation from this pattern and
the bank would be obligated to report the inconsistent transaction to a
federal database.
Then, zap! The FBI or perhaps the new kinder and gentler IRS might just
give you a ring or request information and documentation of expenses and
income. It's all part of the federal bureaucracy's "Minimum Security
Devices and Procedures and Bank Secrecy Act Compliance Program."
Solveig Singleton, director of information studies at the libertarian
Cato Institute in Washington, doesn't like it. "The 'Know Your Comrade'
regulations, I think, are a big step in the wrong direction," she says.
"It's basically none of the bank's or government's business where
[people] get their money and in what patterns they choose to spend it.
Until someone is convicted of a crime, it isn't right to treat them like
criminals."
Barry Steinhardt, the American Civil Liberties Union's privacy expert,
agrees. "This program turns the Fourth Amendment of the Constitution on
its head," he says. "Banking records are personal records. People are
sensitive about medical, bank and tax records. If they are disclosed you
can lose a job or be investigated by the government. There has to be
some probable cause. This affects everyone. Even little Johnny whose
bank account swells after getting a Christmas present from his
grandparents, or the average worker who gets a bonus and buys a new car,
will trigger a suspicious-activity report. It's going to be cold comfort
to be innocent of any wrongdoing if you are dragged before the IRS or
[Drug Enforcement Administration] and asked to explain an unusual money
transaction."
Small says he doubts little Johnny's Christmas gift, a bonus or a
one-time deposit from selling a car will trigger a suspicious audit,
because he says similar transactions have not done so with banks that
have Know Your Customer programs in place. "No bank in the country is
going to report suspicious activity on a one-time deposit," he says.
"Banks look for patterns."
Steinhardt is not buying that assurance. The government has been
successful in taking advantage of a passive society by either proposing
or encouraging corporations or banks to collect everything from Social
Security numbers to iris scans at automated-teller machines and pushing
to place personal information on Smart Cards, Steinhardt warns.
"Computer technology makes it possible to create this profile. The
purpose is to track our movements. And all these things -- the iris
scan, selling driver's-license photos -- increasingly are connected and
ripe for abuse," Steinhardt believes. "We are told it is done for our
own good," he says. "This kind of surveillance that takes place is
dangerous. Big Brother is not talking to us from a screen, but Big
Brother is watching us in a variety of different ways."
But Internet law expert Chris Wolf, who represented the gay Naval
officer who recently settled a privacy lawsuit with the Navy after the
service illegally obtained information about the officer's sexual
preference on America Online, says it's very unlikely abuse will occur
as long as there is an avenue to sue for privacy violations. "Banks
don't abuse private information they have already," says Wolf. "Look,
very soon we will be using fingerprints as a password for computers.
Privacy is given up these days because the technology is available. As
long as there are strict safeguards in place, I don't think it's
worrisome."
No doubt some attorneys see a whirlwind of new business in lawsuits for
invasion of privacy, but the new banking proposals have caught the ire
of 12 members of the House Banking and Financial Services Committee, who
fired off a letter to the federal regulatory agencies, saying the
"unofficial profiling of transactions that are not regular and expected
may discriminate against the poor (who are more likely to be unbanked)
as well as racial and ethnic minorities."
Meanwhile, the committee is convinced the cost of the proposed financial
regulations would be excessive -- noting implementation of the Bank
Secrecy Act cost more than $83 million -- and would lead to higher
banking fees. The committee also opposes the regulation for privacy
concerns, saying the rule would "essentially deputize tellers not only
as law-enforcement agents but private investigators as well." . . . .
Texas Republican Rep. Ron Paul of Texas, a member of the committee,
refers to the proposal as the "Spy on Your Neighbor" rule and has
sponsored a bill to kill the scheme should it be adopted. "[The
proposal] is designed to invade the privacy of every single person in
America," Paul tells Insight. "Banks will profile every person who
makes a transaction. What this says is that government will consider
you guilty until you're proven innocent. This is a very, very dangerous
program. I am not even convinced it will catch any criminals."
Charles Smith, chief executive officer of Softwar, who has been an
outspoken privacy advocate against the government's plan to safeguard
computers with universal encryption says, "The new proposal is not aimed
at the drug war but at your wallet. The government overregulation of
middle-class banking is almost a comedy routine. Soon, your average
customer will be required to leave a skin sample --not for
genetic-identification purposes -- but just to see how serious you are
about cashing a check. The real criminals transfer monies through a
variety of means that are left untouched by this example of overzealous
bureaucracy. It is, however, typical of the Clinton administration to
propose idiotic ideas for law enforcement that make us all feel good
but, in reality, are of little use against organized crime." . . . .
Federal Reserve regulator Small disagrees. The rule should help cut into
the $300 billion to $500 billion illicit-money transactions that take
place annually, or what some estimate to be as much as 3 percent to 5
percent of the gross international product, says Small. He points to a
recent General Accounting Office, or GAO, report that suggests CitiBank
had to violate its Know Your Customer program to help Raul Salinas, the
brother of Mexico's former president who was just convicted in a 1994
assassination plot of a top Mexican politician. Salinas laundered
millions of dollars from Mexico through New York to foreign accounts.
FBI money-laundering chief John Kingston tells Insight there has been
tremendous pressure internationally to create a uniform program. During
the mid-eighties, 26 nations got together to work on money laundering
and passed regulations and legislative plans to detect illicit-money
transactions, including guidelines for Know Your Customer regulations.
Most of those countries adopted it, but the United States has yet to
come fully onboard, Kingston says. The GAO report claims that banks that
follow the Know Your Customer policies see it as one of the "most
important guidelines for detecting suspicious activity."
"The FBI has relied on banks having policies, and for many years we have
been thrilled and couldn't do our jobs without those policies," he says.
"Now that they have formalized it -- it's even better. It will cause
the few banks that don't comply to do so," Kingston says, noting that 15
to 20 percent of FBI resources are spent on illegal-money cases -- and
most crimes contain an element of financial fraud.
How effective are the Know Your Customer policies? Critics compare them
to gun laws. Criminals find other means to obtain guns just as they do
to launder money. Statistically, Kingston admits, it's difficult to
measure because not all the cases go to trial. On average, about 6,000
bank-fraud convictions occur annually. In 1995, there were 957
convictions under the Federal Money Statute and some 2,034 indictments
or informations charged. Kingston says the indictments often are
dismissed in plea deals. "The Know Your Neighbor policies prevent the
money launderer from using one channel of commerce. They won't risk
going to a bank that asks too many questions," he says.
Kingston says he can understand that some people might be upset about
the personal questions in all of this. If an account holder deposited a
large amount of cash after selling her car, "the worst-case scenario is
the bank teller might try to make contact with the customer, saying they
are double-checking big transactions," Kingston says. "One of two things
is going to happen: The account holder is going to be very thankful or
they are not going to like the fact that the bank is watching the
account that closely." . . . .
Judging from the responses that the federal agencies have received
during a 90-day public-comment period, it appears people are not likely
to say thank you. Most are outraged. "We have received a record-setting
10,000 comments -- an overwhelming number of them opposed," says FDIC
spokesman David Barr, noting that many people complain about the cost
burden and privacy issues and also see the procedures as ineffective
crime measures. And how many support the proposal? "Ten," he says
sheepishly, "just 10."
Two politically polar opposites --the liberal California Bankers
Association and the conservative Christian Alert Network -- are
organizing campaigns against the rule. And some of the complaints appear
to be coming from antigovernment groups convinced of a federal or
banking conspiracy to undermine constitutional rights. The huge volume
of negative letters and e-mail, however, suggests widespread fear of the
slippery slope.
An angry Texas couple writes, "So here's two peaceful parties, not
hurting anyone, a banker and his or her customer. Now you are going to
interpose yourselves between the two of them, and mandate that one of
them should turn into a spy and a snitch, minding the business of the
other? This is a VERY BAD precedent! What's next, the grocer having to
track and report who's buying 'suspicious' amounts of beer?" A Florida
doctor writes, according to the Associated Press, "Next you'll be
implanting an electronic chip in newborns at birth so they can be
scanned as they walk in banks as an adult."
Many argue the proposed scheme is unconstitutional. Small dismisses
that argument. He notes the Supreme Court has not given individuals
constitutional protection over their banking records, since the Fourth
Amendment does not apply to records held by third parties. Besides, he
says, the federal Right to Financial Privacy Act limits the government's
access to personal financial records unless subpoenaed. Asked about the
public outrage, Small admits some of the words such as creation of a
customer "profile" may have been misinterpreted and need to be rewritten
to clarify the meaning. "We haven't made it clear enough in our
explanatory language."
Lisa Dean, vice president of technology for the Free Congress
Foundation, a Washington-based conservative organization, has followed
the proposal closely. She says the feds will rewrite the rule and "take
out the buzz words," but it still will be a "violation of privacy and
constitutional liberty."
Steinhardt of the ACLU puts it this way: "The plain language of their
proposal lays out a massive system of surveillance of banking customers.
It requires banks to track income, spending habits. If they intended
something more benign they weren't artful. And as more and more people
become victims of invasion of privacy, you will see more outrage."
FBI agent Kingston concedes the proposed regulation breeds a certain
amount of distrust. "There always has to be a balance on whether
benefits outweigh the intrusion," he says. "But in reality Know Your
Customer has existed for many years. Nothing changes but to make it
required. It has surprised me, this outrage."
The outrage may be far from over if the proposal is instituted. Now,
time is running out. The public-comment period ends March 8, at which
time regulators will examine responses and then accept, revise or kill
the proposal. If approved, banks must establish formal Know Your
Customer programs by April 1, 2000. To comment on the proposed rule,
write to Robert E. Feldman, Executive Secretary, Attention:
Comments/OES, Federal Deposit Insurance Corp., 550 17th St. N.W.,
Washington, DC 20429. Comments also may be faxed to (202) 898-3838 or
sent via e-mail to comm...@FDIC.gov.
--
http://www.imagemuse.com
http://www.house.gov/judiciary/icreport.htm
Clinton: "I am concerned by any action which
sends a signal that if you work for the government,
you're above the law, or that not telling the truth
to Congress, under oath, is somehow less serious
than not telling the truth to some other body under
oath." --As president elect,
after the Iran-Contra pardons, December 1992