February 17, 1999
The Clinton Administration's stealth plan to monitor everyone's personal bank account
has hit a bump in the road. With the public comment score now standing at 20,000-to-18 against
the controversial Know Your Customer (KYC) regulation, the once-friendly FDIC (Federal
Deposit Insurance Corporation) is rethinking its plan to require every bank to computerize a
financial profile on every customer (including the source of all funds) and report "inconsistent"
deposits and withdrawals to the federal gestapo.
The KYC regulation was simultaneously announced by the Federal Reserve System, the
Office of Thrift Supervision, and the Comptroller of the Currency as well as the FDIC, but those
other agencies have not revealed how many negative comments they have received. The
information gathered by the KYC spies in your local bank is supposed to feed into a huge
database in Detroit called the Suspicious Activity Reporting System, which is administered by
FinCEN (Financial Crimes Enforcement Network) and shared with a dozen other agencies.
About 93 percent of the critical comments received by the FDIC came from individuals,
not banks. Isn't that interesting. The large number from individuals proves the new power of
the Internet to alert the grassroots to Clinton's privacy invading maneuvers.
The small number of complaints from bankers reflects the fact that the American Bankers
Association originally endorsed KYC and may have helped to draft it. The big banks are only
too happy to use a federal regulation as "cover" for computerizing nosy details about their
customers that are so valuable for marketing purposes.
Under current federal law, a bank may sell or transfer any information it acquires about
its customers to a third party, such as a direct marketer or another financial institution, without
notifying the customer. Your bank can disclose your account balances, certificate of deposit
maturity dates and balances, and information about checks written or deposited into your
Sen. Paul Sarbanes (D-MD) has introduced S.187, the Financial Information Privacy
Act, to require banks to tell their customers what data it sells or shares, to whom and for what
purposes, and to give its customers the right to "opt out." That's good as far as it goes, but we
also need legislation to stop the banks from giving such information to the government.
Rep. Bob Barr (R-GA) has introduced H.R.530, the American Financial Institutions Privacy Act, to
block implementation of the Know Your Customer regulations. Rep. Ron Paul (R-TX) has
introduced the Financial Privacy Protection Package to do likewise (H.R.516), and also to sunset the Bank
Secrecy Act that has encouraged such overreaching regulations (H.R.518), and also to allow Americans to
see their own FinCEN files (H.R.517) (similar to laws that allow us to see our own FBI and credit bureau files).
The stakes for Americans are clearly defined in a timely new book called "The End of
Money and the Struggle for Financial Privacy" by Richard W. Rahn, Ph.D., nationally known economist and now a senior fellow with the Seattle-based Discovery Institute. Describing how the new technologies are making rapid and dramatic changes in our lifestyle, he poses the question of whether this will bring us more freedom or less.
The answer depends on whether or not we permit Big Government to conspire with Big
Business to monitor not only all our financial transactions, but also our ordinary daily activities.
The Big Government advocates are trying to claim that individual control over technological
innovation is suspect and a threat to law enforcement.
The major excuse for the Clinton Administration's assault on our financial privacy is
"money laundering," most of which comes from the illegal drug trade. But attempts to stop drug
use by chasing money launderers have been a costly and spectacular failure, they catch only a
few small dealers rather than drug kingpins, and they are a gross invasion of the privacy of law-abiding Americans.
The threat of terrorism is another Clinton excuse for anti-privacy regulations, but there is
no evidence that any significant terrorist was ever deterred by the money laundering cops. The
billions of dollars wasted in pursuing money laundering has merely increased the power of the
politicians to monitor our lives and increased the number of busybody bureaucrats with a vested
interest in retaining useless jobs.
Hitler and Stalin gave us the model of how tyranny maintains itself. Pass so many laws
that everyone is a potential criminal, and then law enforcement can be arbitrary, selective, and
That's why the Clinton Administration has pushed the creation of hundreds of new
federal crimes by legislation and thousands more by federal regulations. Any act of dishonesty
in which a mailed item, a telephone call, or a bank deposit plays a role has now become a federal
We simply don't trust the Clinton Administration to have the kind of knowledge about
our personal lives that the KYC regulation would provide. You have until March 8 to email
your complaint to [email protected], or fax it to (202) 898-3838.