Letter to the House on Financial Privacy and the International Money Laundering Act
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 These regulations were withdrawn after the Senate voted unanimously to disapprove them, and over 250,000 people wrote to bank regulators urging them to protect financial privacy by withdrawing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.
Like the Bank Secrecy Act, H.R. 3886 would give the Secretary of the Treasury broad discretion to require U.S. financial institutions to report financial activity involving foreign financial institutions and international transactions. It would allow bank regulators to require the maintenance for law enforcement purposes of any records, and to require the reporting of any transaction, without limitation, upon only a finding that the transaction or the foreign jurisdiction in which the international transaction is made, is "of primary money laundering concern." The bill does not even impose a minimum dollar amount for international transactions that must be reported. In addition, the bill would extend protections from civil liability enjoyed by financial institutions filing Suspicious Activity Reports and create additional criminal offenses for failing to file such reports, or for filing an incomplete report with law enforcement officials.
Taken together, these requirements mean more access by the Government to personal financial information without judicial review or even any showing of probable cause of crime, together with enhanced incentives to financial institutions to report such transactions. Indeed, nothing in the bill would prohibit bank regulators from issuing for foreign transactions the same "Know Your Customer" regulations they proposed in order to implement similar reporting requirements for domestic transactions.
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 W. Murphy
Director
Gregory T. Nojeim
Legislative Counsel