FC: U.S. bill pits financial privacy against money laundering

[Declan McCullagh <declan () well com>]

http://www.wired.com/news/business/0,1367,37566,00.html

Financial Privacy Under Attack?
by Declan McCullagh (declan () wired com)

3:00 a.m. Jul. 14, 2000 PDT
WASHINGTON -- Opposition to a bill that would limit Americans' financial 
privacy appears to be growing.

A coalition of liberal, conservative, and libertarian groups wants the 
House leadership to delay a vote on a proposal to grant the U.S. government 
broader surveillance authority over some banking transactions.

The Clinton administration drafted the anti-money-laundering bill, which 
received the backing of Representative Jim Leach (R-Iowa), the chairman of 
the House Banking Committee. The committee approved the bill on June 8 and 
forwarded it to the House floor for a vote scheduled next week.

The growing debate over the bill pits two powerful factions against each 
other: Law enforcement officials claim more financial monitoring of 
Americans is necessary to thwart drug-related money laundering, while civil 
libertarians say that the proposed legislation is too extreme and privacy 
rights should prevail.

"People are becoming aware of this systematic attack on our privacy," says 
Representative Ron Paul (R-Texas), who unsuccessfully tried to attach pro 
privacy amendments to the bill while it was in committee.

[...]



http://www.politechbot.com/docs/aclu-kyc.071300.html

July 13, 2000

Re: Financial Privacy and the International Money
Laundering Act, H.R. 3886

Dear Representative:

We urge you to protect financial privacy by opposing
H.R. 3886, the "International Counter-Money Laundering
Act and Foreign Anti-Corruption Act of 2000." The bill
may come to the House floor next week. Like the Bank
Secrecy Act of 1970, this legislation gives Executive
Branch officials the authority to require the reporting of
personal financial information for law enforcement
purposes without probable cause of a crime, and creates
incentives for banks to spy on their customers. H.R.
3886 would continue an unfortunate trend of expanding
government access to personal financial information
rather than shielding it against intrusion.

This trend began in 1970 with enactment of the Bank
Secrecy Act. It required banks to maintain records of
financial transactions and make them available to law
enforcement officials. In 1992 Congress amended the
Bank Secrecy Act to authorize the Treasury Department
to adopt so-called "Suspicious Activity Reporting"
requirements. In essence, this amendment gave the
Treasury Department a blank check to require reporting
of any "suspicious transaction relevant to a possible
violation of law or regulation." The Treasury Department
issued an over-broad regulation requiring that every
$5,000 transaction that a financial institution has reason
to suspect is unusual for a particular customer must be
reported to the government whenever the financial
institution knows of no reasonable explanation for the
transaction based on available facts. Many, if not most,
innocent $5,000 transactions meet this requirement.
Approximately 100,000 such reports are filed each year,
and they are filled with personal information about the
"suspect" and her financial transactions. Only a relative
handful of these reports trigger criminal investigations.

The Suspicious Activity Reporting requirements in turn
prompted bank regulators to propose "Know Your
Customer" regulations. Those regulations would have
required financial institutions to monitor their customers'
transactions, profile them, and report as "suspicious" to
the Treasury Department's Financial Crimes
Enforcement Network (FinCEN) unusual transactions
that do not fit the profile. These regulations were
withdrawn after the Senate voted unanimously to
disapprove them, and over 250,000 people wrote to bank
regulators urging them to protect financial privacy by
withdrawing the proposed regulations.

Because H.R. 3886 would compound rather than limit
the damage done to financial privacy by the Bank
Secrecy Act, the ACLU urges you to reject this bill.

Sincerely,

Laura Murphy
Director

Gregory T. Nojeim
Legislative Counsel

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