Pubdate: Thu, 28 Jan 1999 Source: Washington Times (DC) Copyright: 1999 News World Communications, Inc. Website: http://www.washtimes.com/ Contact: James Bovard Note: James Bovard is author of "Freedom in Chains: The Rise of the State and the Demise of the Citizen," to be published next month by St. Martin's Press. Citizens can voice their appreciation for the pro-posed regs by emailing to or by faxing to (202) 898-3838. See also: http://www.drcnet.org/wol/076.html#kyc SNOOPING EYES ON SAVINGS? New proposed federal regulations will convert banks into conspirators against their depositors. The "Know Your Customer" rules, announced last month in the Federal Register, could be a landmark in the history of the subversion of American privacy and property rights. But enough Americans may yet rally in time to block this power grab. The new rules vastly expand the number and types of private activities that bankers must report to federal overseers. The effect will be to treat law- abiding citizens like drug kingpins. Under the new rules, banks must "determine its customers' sources of funds, determine, understand and monitor the normal and expected transactions of its customers, and report appropriately any transactions of its customers that are determined to be unusual or inconsistent." The purpose of the rules, according to regulators, is to let the government better "combat illicit activities." And since Congress has criminalized so many different types of private behavior, efforts to "combat illicit activities" could just-ify providing the government information on almost any bank transaction of private citizens. Any bank failing to report "unusual or inconsistent" behavior by its depositors could face major investigations and an array of sanctions. Thus, the regulatory sword of Damocles will be hanging over the head of any bank official who hesitates to "drop a dime" on customers who trusted him. In fact, the standards for violations are so vague that anyone who has a one-time surge in income -such as selling a car or receiving a bonus at work - could be reported as a suspected drug dealer. Barry Steinhardt of the American Civil Liberties Union warned that "every time little Billy gets a large gift from his grandmother, there's going to be a suspicious-activity report. It turns banks into cops, into police spies for the government." The new rules will oblige bankers to allow the feds to see private financial records within 48 hours of a request - no search warrant necessary. Money Laundering Alert newsletter reported that the "big winners" from the "revolutionary" new rules will be "U.S. law enforcement agencies." Many citizens may shrug this off, assuming that since they have nothing to hide, they have nothing to fear. But laws are extremely complex and prosecutors can be very arbitrary. The Justice Department is adamant that criminal intent is not necessary for a citizen to be a criminal under banking laws. In 1994, the Supreme Court overturned the money laundering conviction of an elderly couple who had paid off their Nevada casino debts in large cash payments. (The couple did not know their action broke the law). The Justice Department responded to the court's decision by racing to Capitol Hill and persuading Congress to revise the law to remove any requirement that a citizen have willfully violated the law before being convicted and sent to prison. Treasury Undersecretary Ron Noble proclaimed at the time that that law would "further the growing partnership between the banking industry and law enforcement." The new regulations could make it easier for government agencies to confiscate people's property. Banks will be pressured to create "dossiers" on their customers to satisfy the new regulations. Divergences from their customary pattern could create a presumption of illicit behavior. And, unfortunately, a mere suspicion is often all that is required for federal agents to confiscate private property. Federal agencies routinely confiscate a person's property without even filing criminal charges based only on hearsay evidence - mere gossip or rumors. If the citizen wants his property back, he must sue the government and prove in court that his property is innocent; the government has no burden of proof. Can government be trusted with more information that it could use to punish citizens? Consider the pretexts that government uses to confiscate cash from people on the street or driving their cars. Federal, state and local police routinely seize money from people they stop and search - merely because the cash causes a policedog to "alert" to some trace of cocaine on the money. But a federal appeals court noted in 1995 that more than 75 percent of all circulated currency is "contaminated with drug residue." Thus, the court noted, "it is extremely likely a narcotics detection dog will positively alert when presented with a large sum of currency." Though prosecutors know most American currency is tainted with cocaine residue, they still invoke the "tainted currency" ruse to steal as much as they can. The proposals have sparked a firestorm of opposition: The Federal Deposit Insurance Corp. has been hit with more than 10,000 comments on the proposed regs, most of them in opposition. A federal banking official told the Associated Press that the deluge of responses stemmed from "anti-government groups." However, this is how some federal employees characterize anyone seeking to block bureaucratic tyranny. Rep. Ron Paul, Texas Republican, is leading the fight in Congress against the regs. If people acquiesce to this expansion of federal power, it is certain that, in future years, regulators will come back and demand even deeper intrusion into people's lives. The "Know Your Customer" regulations are the latest warning sign that government agencies feel entitled to gather practically unlimited information about citizens. The banking agencies invite public comment on, among other issues, "whether the actual or perceived invasion of personal privacy interests is outweighed by the additional compliance benefits anticipated by this proposal." Citizens can voice their appreciation for the pro-posed regs by emailing to or by faxing to (202) 898-3838. - --- MAP posted-by: Richard Lake