Ron Paul's Texas Straight Talk - A weekly Column

February 2, 1999

Orwellian rules face major opposition
Paul legislation will restore financial privacy

It has turned into a case of government agencies against everyone else.
More than 14,000 people -- average American consumers, bankers, and civil-liberties advocates -- have written federal agencies in opposition to the gross violation of privacy known by the Orwellian title "Know Your Customer." This response is even more remarkable when one realizes that the usual number generated by these agencies' rules is less than a hundred.

Almost three months ago I first reported on the proposed regulations brought forward by the Federal Reserve, the FDIC and other regulatory agencies. These regs would turn bank tellers from reluctant information-gathers to unwilling investigators for the federal government's ongoing War-on-Everything -- which obviously includes the privacy of ordinary Americans.

Under the existing Nixon-era Bank Secrecy Act, financial institutions already must report large transactions to the government. Under these new rules, not only would the banks have to collect the raw data on transactions like a low-level spy but will now be required to serve as the government's front-line investigators. Investigating who and what? Everyone, and everything financial. Forget the Fourth Amendment, forget the notion of innocent until proven guilty, and forget search warrants; these regulations assume everyone is as guilty as Al Capone.
The rules require banks to create profiles on its customers' accounts, and when a customer steps outside that profile, he or she must be reported to the federal government for "suspicious" activity. In addition, the banks will have to track the source of the deposits and, again, report that information to the government. A bank teller would have to report as "suspicious" the 20-year-old, minority single mother who makes an "out-of-profile" $500 cash deposit. That the cash was the gift from a family member, and not funds earned illicitly, would be an inconvenient fact she may never have the opportunity to present. Under current drug-forfeiture laws, her account could be seized, and assets forfeited, without her ever being charged with -- let alone tried for -- any crime.
Not only does this represent a toppling of our legal heritage and a dangerous philosophic shift, but it is also a ridiculously heavy burden to place on financial institutions.
The many bankers who have contacted my office have said they are not sure which is worse: the heavy toll this will take on our precious liberties, or the high cost these rules will mean for the institutions and passed on to customers.
Understandably, American consumers aren't thrilled either. Once again the federal government is creating yet another file on them; it is creating fresh opportunity for an over-eager bureaucrat to make a mistake and destroy an innocent person's life.
To combat this, I will be introducing three pieces of legislation. The first is the "Know Your Customer Sunset Act," which will immediately stop these rules from going into effect. The second is the "Bank Secrecy Sunset Act," which will force Congress to either rewrite the poorly written, abused Nixon-era program, or devolve that power to the states. The third is the "FinCEN Public Accountability Act." This legislation will require that agencies let Americans see their own "financial history" files created under current rules, much like what is required of the FBI and credit bureau reporting agencies.
Congressmen are signing on these measures due in large part to the growing chorus of Americans who are saying, to paraphrase our founding fathers' cry, "don't tread on my privacy rights!" Dozens of organizations, ranging from banking and technology groups to conservative family-values coalitions to the liberal ACLU, are joining in the fight to oppose these regulations.
As a member of the House Committee on Banking and Financial Services, this important threat to our financial privacy will be a top priority for me.
They may call their rules "Know Your Customer," but they read a lot more like "Spy on Your Neighbor." If we act quickly and properly, we have the chance to stop them.