Spy on Your Customers… or Else
By Mark Nestmann
Do you distrust the banking system? Prefer to do business in cash? Complain about the encroachment of Big Brother into every facet of your life?
If you answered “yes” to any of these questions, you’d better watch out. You’re a “person of interest” – and a growing number of businesses must report your “suspicious activities” to the feds. If they don’t, they can be fined and the responsible parties even imprisoned.
These requirements originated in a law called the “Bank Secrecy Act” (BSA). Of course, this Orwellian law has nothing at all to do with protecting bank secrecy. Indeed, the BSA has all but eliminated confidentiality.
Regulations issued under the BSA require financial institutions to notify the Financial Crimes Enforcement Network (FinCEN), a Treasury Department bureau, of any unusual transactions in which their customers engage. Reporting is mandatory for transactions that exceed $10,000 and are not the sort in which the particular customer would normally be expected to engage. For money transmitter businesses, a $2,000 threshold applies.
The businesses covered by these requirements must file “suspicious activities reports” (SARs) secretly, without your knowledge or consent. FinCEN makes the reports available electronically to every US Attorney’s office and to dozens of law enforcement agencies. No court order, warrant, subpoena, or even written request is needed to access a report.
What exactly is suspicious? According to official Treasury guidance, suspicious behavior includes:
Paying off a loan;
Objecting to completing Currency Transaction Reports (required for transactions over $10,000);
Changing currency from small to large denominations;
Buying cashier’s checks, money orders, or travelers’ checks for less than the reporting limit $10,000 for a cash transaction);
Making deposits in cash, then having the money wired somewhere else; and
Withdrawing cash without counting the cash first.
Now, FinCEN has issued preliminary regulations that could extend these rules to investment managers. All SEC-registered investment advisers would be required to design and implement an anti-money-laundering program. They would also need to file SARs with FinCEN.
Once these rules come into effect, investment advisors would no longer be accountable to you, their client. Their highest duty, reinforced by civil and criminal sanctions, would be to act as unpaid undercover agents for the US Treasury.
But FinCEN’s suspicious transaction reporting rules are just the tip of the iceberg. For instance, official guidance from the FBI and other government agencies indicate that all of the following actions make you a terror suspect:
Making an inter-library loan request for “The Little Red Book” by former Chinese communist leader Mao Tse-Tung;
Owning a suspicious cat;
Wearing a politically provocative shirt;
Searching online for a pressure cooker and backpack;
Putting a “Do not disturb” sign on the door to your hotel room;
Making politically inflammatory remarks when getting atattoo;
Attempting to shield your computer screen from the viewing of others;
Expressing frustration with “mainstream ideologies”; and
Storing more than seven days of food in your home.
Then there’s the “drug courier profile” developed by the Drug Enforcement Administration (DEA). The following profiles are all court-approved reasons to search you and your property:
Having a pale or dark complexion;
Having a Hispanic appearance;
Being between the ages of 25 and 35;
Acting too nervous or too calm;
Carrying $100, $50, $20, $10, or $5 bills;
Wearing casual clothing;
Having window coverings on your personal residence;
Buying a one-way or round-trip airline ticket; and
Being among the first, last, or middle group of passengers off of an airplane.
As Richard Miller expressed in his landmark book, Drug Warriors and Their Prey,
Being a citizen is sufficient cause to suspect a person of criminal conduct, thereby constricting civil liberties protections for that person. That situation is hard to distinguish from the legal status of citizens of Nazi Germany.
In a world that views virtually everything you do as suspicious, there aren’t a lot of options to protect yourself. Indeed, simply by expressing your interest in privacy, asset protection, precious metals, or any of the other topics I cover routinely, you’re likely on one government watch list or another already.
However, you can take steps to avoid having a bank or other financial institution – including an investment manager – file an SAR on you. If you’re considering doing anything out of the ordinary in your account, talk to an officer at the bank, brokerage, or other financial institution first. For instance, you might want to let someone know before you pay off a loan or make or receive a large transfer.
If you have a reasonable explanation for the transaction, it’s much less likely to set off an alarm. And in a country in which all citizens are considered criminal suspects, that’s definitely something you want to avoid.