-Caveat Lector- Soon you may have to "explain" your spending habits to your local banker. Better by nice to nosy tellers. flw Wired News Banking with Big Brother by Declan McCullagh 9:25 a.m. 10.Dec.98.PST US banks must monitor their customers and alert federal officials to "suspicious" behavior under a government plan that has drawn fire as an Orwellian intrusion into Americans' privacy. A set of proposed regulations released Monday requires banks to review every customer's "normal and expected transactions" and tip off the IRS and federal law enforcement agencies if the behavior is unusual. "It turns us into surveillance agents for the government," said John Ehrensperger, compliance director for Atlanta-based Sun Trust Bank. Ehrensperger stressed that he was not speaking on behalf of his employer. Adopting so-called "Know Your Customer" programs will stifle drug-related money laundering, the Federal Reserve Board has claimed for years. "The proposed regulations will reduce the likelihood that banks will become unwitting participants in illicit activities," the proposed rules say. Government officials argue the rules are not overly intrusive, and that privacy critics are overreacting. "It's overly alarmist," said Bob Moore, a spokesman for the Federal Reserve Board. "We're not going to invade anyone's privacy." Unless regulators change their minds, banks will be required to comply no later than 1 April 2000. The Federal Reserve, the Office of Thrift Supervision, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have published identical requirements. As written, the rules will not apply to credit unions. When a bank detects any "suspicious activity," current regulations require that the company 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 are required to telephone law enforcement "in situations involving violations requiring immediate attention." The bank sends the information to a computing center in Detroit, where it becomes part of the Suspicious Activity Reporting System, a mammoth searchable database jointly administered by the IRS and FinCEN that went online in April 1996. Over a dozen agencies -- including the FBI, IRS, Secret Service, bank regulators, and state law enforcement -- share access to the data. The proposed rules require banks to determine the "source of a customer's funds" -- such as payroll deposits -- and authorize federal agents to inspect "all information and documentation" of accounts upon request. An alliance of conservative, libertarian, and privacy groups is mobilizing to fight the Know Your Customer plan. "The idea that the average American is going to have to justify to a federal agency where they got their money and how they used it -- and proving it to those agents -- is just beyond the comprehension of most Americans," said Lisa Dean, vice president of the Free Congress Foundation. "It's not done in a free society." Dean is preparing a report to be published by the end of December, but in the meantime she's encouraging groups to submit their own comments to the government by the 8 March 1999 deadline. The American Civil Liberties Union believes the proposed rules are "a major concern" and an unwelcome extension of the drug war, said legislative council Rachel King. The ACLU plans to fight the proposal, as will the Electronic Privacy Information Center, director Marc Rotenberg said. In 1996, Federal Reserve Board Governor Edward Kelley ordered the agency to begin developing Know Your Customer regulations, and the first draft was finished in summer 1997. The Organization for Economic Cooperation and Development's money laundering task force also has endorsed Know Your Customer rules, calling them "the cornerstone" of the group's recommendations to member nations. "The program should also be designed to allow banking organizations to monitor the transactions of their customers to ensure that they are consistent with their expected transactions, and identify and report, as necessary, those transactions that are unusual or suspicious," Herbert Biern, a top Fed official, told the House banking committee in June 1998. DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! 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