Did You Know Your Jeweler and Car Dealer Report You to the Feds?
Federal intelligence and law enforcement agencies and their champions on Capitol Hill are bringing together – often with the best of intentions – all the elements needed to create a Chinese-style comprehensive surveillance state here at home. Rep. John Rose (R-TN), a member of the House Committee on Financial Services, is aiming to curb the government’s thirst for surveillance in at least one domain – our personal financial information.
First, some background. Last year, PPSA reported on the Transparency and Accountability in Service Providers Act that would have enlisted a host of employees of non-bank financial institutions to spy on their customers and report any activity deemed suspicious to the Federal Crimes Enforcement Network (FinCEN).
Among the 7.2 million government informants deputized to spy would have been “financial gatekeepers” ranging from attorneys to trustees, those who wire money, financial services advisors, financial managers, and most of the financial services industry. Thankfully, that proposal did not make it into law in the last Congress.
But existing financial regulations in the current anti-money laundering regime are extensive. Banks continuously scrutinize customers’ accounts and send voluminous reports to FinCEN, recording and reporting your financial life to the government without having to bother with warrants or other niceties required by the Fourth Amendment.
Other “financial institutions” are similarly required to make such reports, including merchants you might never have imagined would be in this category – ranging from pawn shops, to car dealers, to jewelers, to broker-dealers.
At a CATO event Monday, Rep. Rose, himself a former banker with deep experience in trying to comply with the law, spoke of the impossibility of financial institutions in deciphering exactly what regulations require of them in compiling “suspicious activity reports” and “currency transactions reports.”
“Banks have no idea what to report,” Rep. Rose said. As a result, reporting institutions, fearing that an omitted line of data might later be used against them by law enforcement, tend to throw as much of our data – aka, our privacy – as they can at the feds.
“They want as much as they can get,” Rep. Rose said. He added that these regulations largely explain the rising cost of opening a checking account. Similar federal requirements are heaped on ATM systems, raising costs, and creating fewer outlets for low-income and the unbanked or underbanked.
Aaron Kline of the Brookings Institution noted this system’s hunger for ever-more data isn’t even a good one for law enforcement. “They are looking for a needle in a haystack, but they keep pouring in more hay.”
Kline suggested that policymakers from across the spectrum have a common interest in reforming this flatly unconstitutional financial surveillance system. Those on the left want to make it easier and cheaper for the unbanked and low-income bank customers to get access to financial services. Those on the right are concerned that these programs violate civil liberties. And even law enforcement should be interested in reform so it can refine its searches for patterns typical of terrorists, human traffickers, and drug dealers, instead of drinking from a digital firehose.
Perhaps such a coalition will support Rep. Rose’s Bank Privacy Reform Act, which would reform the Bank Secrecy Act of 1970 by repealing requirements for financial institutions to report their customers’ financial information and transaction histories to government agencies without a warrant.
Under Rep. Rose’s bill, financial institutions would still maintain customer records for government to examine… but only after agents present them with a probable cause warrant, as the Founders intended.