PRIVACY OF BANKING RECORDS ANOTHER DRUG WAR CASUALTY

Our government hates money.

Now that might sound odd, since Congress is so very good at spending it,
but the truth is, money is considered a drug-war enemy. The ease with which
money moves without our government being able to track it has led to an
elaborate set of rules designed to prevent narcotics smugglers from
enjoying their illicit profits. But the consequence of these rules is that
all of us who engage in financial transactions are now targets of
government spying.

Today, every bank customer is a suspect. If a financial institution has
reason to believe a transaction is out of the ordinary for that person, it
must submit a "suspicious activity report" to the Treasury Department's
Financial Crimes Enforcement Network. This is done without the customer's
knowledge and it means banks are expected to know their customers'
financial habits and revenue sources.

(For those who have been following these issues, this might sound like the
"Know Your Customer" regulations that were defeated in 1999 when the
government received over 300,000 negative public comments. While the
regulations were withdrawn, the suspicious activity report program
continues under the Bank Secrecy Act.)

Since 1997 the U.S. Postal Service Office has also been sending "suspicious
activity reports" to the federal government. When customers of money orders
and wire transfers seem to have more money than they should or if they seem
to be avoiding the reporting requirements that kick in for money orders of
$3,000 or more, a report must be filed. In a training video on how to
identify a suspicious transaction, the postal service tells its employees,
"It's better to report 10 legal transactions than to let one illegal
transaction get by." The program is called "Under the Eagle's Eye." A name
that says it all.

But getting American banks and the postal service to rat out their mostly
innocent customers was the easy part. It's getting the rest of the world to
join in that's been the challenge.

If you want a reason to join the black-helicopter set, read the reports put
out by the Financial Action Task Force on Money Laundering, the 29-nation
financial task force that includes the U.S., Germany, Japan and the rest of
the world's richest industrial nations. The task force has developed a set
of 40 "recommendations" to combat international money laundering that read
like the postal services' training video.

Under the recommendations, all countries around the world are expected to
force their banks to know their customers and their financial habits. Banks
are also expected to submit "suspicious activity reports" on
out-of-the-ordinary and large cash transactions, and keep the monitoring
program secret from their customers.

Sound familiar?

According to Bradley Jansen of the Free Congress Foundation, the group that
has been leading the battle against these incursions, "Countries are also
supposed to set up foreign intelligence units that are not under the
control of the government's financial regulators but under law enforcement,
with the aim of setting up a global network of unaccountable financial police."

In June, FATF issued its annual report of "blacklisted" countries -- those
nations that have made insufficient progress in following FATF's
recommendations. This year Russia and the Philippines made the list, as
well as 13 other nations.

Those that make the blacklist are subject to full-blown economic sanctions,
something our government is loath to do, or advisories issued to our own
banks to require detailed documentation before doing business there, an
approach that relies on voluntary cooperation to limited effect.

But for the past two Congresses, a bill has been introduced to give the
secretary of the Treasury vast new unilateral powers to add teeth to FATF's
blacklist. The International Counter-Money Laundering and Anticorruption
Act would give the Treasury secretary the option of barring U.S. banks from
doing business with nations that refuse to compromise the privacy of their
bank customers. And now the legislation has renewed life, since the
chairmanship of the Senate Banking, Housing and Urban Affairs Committee has
shifted from Republican Phil Gramm of Texas, an opponent of the measure, to
Paul Sarbanes, Maryland Democrat, a supporter and co-sponsor.

The U.S. is saying to other nations: Spy on your people, know how they get
and use their money or you can forget about doing business with us.

So much for our tradition of government restraint, where the actions of
individuals are not subject to state scrutiny without probable cause.

We might pride ourselves in being a beacon of liberty, but in reality the
light we're shining is not to advance freedom but to invade privacy. Our
anti-money-laundering efforts are just another way we have exported our
drug war to the detriment of civil liberties around the world.