Monitoring Law-Abiding Americans
By Phyllis Schlafly
December 30, 1998
Hiding behind the unprecedented headlines of the last few weeks,
"Big Brother" government has been steadily expanding its encroachments on our
personal privacy. What we thought was one of the most benign and beloved of federal
agencies, the Federal Deposit Insurance Corporation (FDIC), proposed a revolutionary
regulation called 1 "Know Your Customer."
The proposed FDIC regulation would require each bank to do the
following: determine the identity of all its customers, determine each customer's sources
of funds; determine each customer's normal and expected bank transactions; monitor the
activity of each account, looking for deposits and withdrawals that are inconsistent with
the expected pattern of financial transactions; and report any transactions that someone
might call "suspicious."
Wow! Did you think that freedom in America includes the freedom to
manage your own money without the government looking over your shoulder? Well, think
"Know Your Customer" will enter a profile of all your
financial transactions on the bank's database. The bank will maintain a computer record of
the amounts you normally deposit each month and the sources of the money (e.g., your
weekly paycheck, your Social Security, your stock dividends) and the amounts you normally
withdraw each month (e.g., rent or mortgage, automobile payment, food, utilities, credit
card payment, cash for pocket money).
Then, if you deviate significantly from this pattern (such as by
earning some extra money or buying or selling a car), your once-friendly bank will report
the "inconsistent" transactions to a federal database.
The bureaucracy's moniker for Know Your Customer is the Minimum
Security Devices and Procedures and Bank Secrecy Act Compliance Program. The proposed
regulations will authorize federal agents to inspect "all information and
documentation" of accounts.
Some banks have already created a Know Your Customer policy. The
Terre Haute Savings Bank publishes a long list of banking "activities that are
suspicious in nature," including: "Customer is reluctant to provide any
information requested for proper identification.... Traffic patterns of a customer change
in the safe-deposit area.... Increased wire activity when previously there has been no
regular wire activity.... Borrower pays down a large problem loan suddenly, with no
reasonable explanation of the source of funds."
The government pretends that this extraordinary surveillance is
necessary to detect money laundering by drug kingpins. In fact, the government averages
less than 100 money laundering convictions per year, few of which even involve drug
When this regulation was announced during the second week of
December, it attracted almost 3,000 complaints in the first three days. A spokesman for
the California Bankers Association, John Stafford, charged that it is both intrusive and
cumbersome, and that Know Your Customer really means "Invade your customers'
John Ehrensperger of Atlanta's Sun Trust Bank commented, "It
turns us into surveillance agents for the government." Most banks, however, haven't
spoken out because they will just pass the costs along to their depositors, and they are
comfortable with the federal law that immunizes them from liability when disclosing
allegedly suspicious customer activities to the government.
Current law already requires banks to report to the government cash
transactions exceeding $10,000. The bank must complete a five-page report that includes
the customer's name, address, Social Security number, driver's license or passport number,
date of birth, and information about the transaction.
The banks send this information to the Suspicious Activity Reporting
System, a huge searchable database that went on line in Detroit in April 1996 and is
jointly administered by the IRS and FinCEN. This database shares its secrets with more
than a dozen agencies, including the FBI, IRS, Secret Service, bank regulators, and state
Federal Government surveillance is also curtailing personal privacy
on another front. The Federal Communications Commission (FCC) is trying to turn all
wireless phones into personal tracking devices so that, if you use a cell phone, the
government will always know where you are.
When Congress passed the Communications Assistance for Law
Enforcement Act (CALEA) in 1994, it was clearly understood, and FBI Director Louis Freeh
confirmed in his testimony, that the statute does not include any power to "disclose
the general location of a mobile facility or service." The FCC is now trying to
rewrite the statute by a regulation, issued October 22, that would require cellular and
other wireless phone companies to track the location of their customers, identifying the
cell site at the beginning and end of every call.
Fifty million Americans now carry cellular phones and have made them
part of their daily lives. If this FCC regulation is allowed to go into effect, the
federal busybodies will have the power to monitor our movements, our associations, and our
This is one more tentacle of the Clinton Administration's plan to
monitor the daily business of law-abiding private citizens and treat us all as if we are
criminals. It's completely phony for the Clintonites to complain about the "poisonous
politics" of spying on public officials' misbehavior when the Administration has a
comprehensive plan to spy on private citizens' whereabouts and money.
Eagle Forum http://www.eagleforum.org
PO Box 618 Alton, IL 62002
Phone: 618-462-5415 Fax: 618-462-8909
Testimony of Herbert A. Biern
Associate Director, Division of Banking Supervision and Regulation