New Banking Regulation Delivers Serious Blow To Privacy Rights

By Mike Wilson

Editor, APC Newswire

In its relentless drive to monitor every facet of our lives, the federal government may soon force the nation’s financial institutions into becoming Big Brother’s eyes and ears.

This will be the result of a new proposed regulation by the Federal Deposit Insurance Corporation (FDIC) called Know Your Customer (KYC). According to the FDIC plan, “the regulation would require each member and non-member bank to develop a program designed to determine the identity of its customers; determine its customers’ source of funds; determine the normal and expected transactions of its customers; monitor account activity for transactions that are inconsistent with those normal and expected transactions; and report any transactions of its customers that are determined to be suspicious …”

The coming regulation is a far cry from current laws that require banks to report cash deposits over $10,000 in order to identify possible criminal activity. Under KYC, banks will be forced to collect the private information of every account holder and then create computer “profiles” of their customers’ “typical” transactions. From that point, any transaction that is not consistent with an account holder’s “profile” will be reported to federal authorities.

For instance, if a citizen sells his car for $2,500 in cash and then deposits the money into his bank account, he’ll most likely be paid a visit by the Federal Bureau of Investigation (FBI) if a $2,500 cash deposit is not a “normal” transaction for him. Likewise if the same person were to withdrawal $2,500 in cash, he will likely be investigated for buying drugs, laundering money or evading taxes.

Thus far the nation’s largest financial institutions are not helping to protect the privacy of their customers — rather they’re embracing the measure, claiming it will help keep “dirty money” out of banks. Skeptics though, say banks stand to make tremendous profits with the likelihood that the Know Your Customer (KYC) regulation will result in other rules that severely restrict cash transactions.

“When banks can get such high fees for every ATM transaction,” said the president of a large national bank, “don’t you think they see what would happen if they were paid for every single transaction by every person in the country — in the world for that matter? The potential for higher profits is astounding.”

The banker also said he expects all financial transactions over $100 to be restricted to electronic transfer “within a few years at most.”

Unfortunately, the severe damage KYC does to American liberties under the guise of catching criminals is just one part of a multi-fronted assault. For instance, the FBI was recently granted sweeping new “roving wiretap” powers. This means that federal law enforcement agencies can now monitor virtually any phone conversation in the United States — without a warrant. The FBI insists all Americans will be safer as a result because it better equips the agency to fight terrorists. Yet Americans might also be safer if the FBI were able to put video cameras in every home — but that is not how free societies stay free. The question is, how far is too far? Limited government advocates are furious over the FBI’s new roving wiretap authority and insist that it usurps the very core of American freedom.

So too does the coming requirement for every American to carry a National Identification (ID) Card. Just like the Know Your Customer proposal, the National ID law is a system for the federal government to monitor everyone’s actions by requiring the collection and electronic storage of all personal data. Passed into law in 1996, the Illegal Immigration Reform and Responsibility Act will, by October 2000, turn state-issued drivers licenses into defacto National ID Cards. This is achieved by mandating the use of Social Security numbers as “unique numeric identifiers” and forcing applicants to submit to fingerprinting (*Editor’s note: The Illegal Immigration Reform and Responsibility Act of 1996 does not spell out the mandate for fingerprinting. Instead, its provisions successfully laid the groundwork for the Department of Transportation and American Association of Motor Vehicles to do the dirty work for them. It has since been accomplished. Department of Transportation document DOT HS 803 800, page eight, section four says “the right thumb or index finger print should appear on all applications for a drivers license.”)

Once the deadline for implementing the National ID Card arrives, Americans will be required to carry the card in order to board an airplane, cash a check, open a bank account, be hired for a job, be promoted at a current job, purchase firearms, and receive any type of government benefits such as Social Security or Medicare. Eventually National ID Cards will come complete with computer chips that will include medical records, school records, employment records, tax records and possible arrest records.

One common denominator in most legislation that requires an exchange of liberties for “security” is the quiet — even sneaky — way the bills are passed. Big government advocates who favor these measures are acutely aware of how unpopular such initiatives are with the American public. For instance, the one time Congress openly debated roving wiretap authority (in 1996) it was soundly defeated. To get it passed in late 1998, the provision was quietly slipped into the Omnibus Spending Bill, a patchwork of many different bills that was so big not one member of Congress was able to read it in its entirety.

The same type of stealth legislating is how the nation ended up with the National ID Card requirement — it was buried on page 600 of a 1,300-page document. And to the further outrage of both citizens and legislators, this backdoor effort was later carried a step further with a behind-the-scenes campaign to use Bill Clinton’s Executive Order 13083 as a vehicle for implementation of the National ID. Currently the battle to stop this National ID Card rages on.

And now the battle ground for American liberty versus Big Brother government has expanded to the nation’s banks. The only hope of defeating the measure is to deliver a mountain of formal written opposition to the FDIC while the agency accepts public comment over the next few weeks. And unless there’s a massive outcry from American citizens, Know Your Customer will be the law of the land by early March. — at the expense of what remains of the American public’s freedom and liberty.

Tom DeWeese
[email protected]

Tom DeWeese is one of the nation’s leading advocates of individual liberty, free enterprise, private property rights, personal privacy, back-to-basics education and American sovereignty and independence.