RIGHT NOW, FEDS MIGHT BE LOOKING INTO YOUR FINANCES

Banks Tip Off Government to Possible Money Laundering, Fraud

WASHINGTON -- Each year, federal agents peek at the financial
transactions of millions of Americans -- without their knowledge.

The same type of information that raised suspicions about New York
Gov. Eliot Spitzer is reviewed every day by authorities to find
traces of money laundering, check fraud, identity theft or any crime
that may involve a financial institution.

As concerns about fraud and terrorist financing grow, an increasing
number of suspicious deposits, withdrawals and money transfers are
being reported by banks and others to the federal government. Banks
and credit unions as well as currency dealers and stores that cash
checks reported a record 17.6 million transactions to the Financial
Crimes Enforcement Network in 2006, according to a report from the
network, a bureau of the U.S. Treasury Department.

"I don't think Americans understand that their financial transactions
are being reported and routinely examined," said Barry Steinhardt of
the American Civil Liberties Union.

The Treasury Department's database now contains records of more than
100 million financial transactions going back to at least 1996, said
network spokesman Steve Hudak.

Teams of agents from the FBI, IRS, Drug Enforcement Administration
and other agencies regularly review newly filed financial reports and
launch investigations. Federal and local authorities search the
database to find information about people that can help ongoing
probes. Treasury Department analysts study the reports to detect
trends in fraud and issue reports alerting financial institutions.

"The government has access to untold volumes of records and can draw
all sorts of conclusions about us, and many are going to be wrong,"
Steinhardt said.

Bankers disagree. "For the typical bank customer, this means very
little because there's nothing they're doing that's likely to be
viewed as out of the ordinary," said Richard Riese, head of
regulatory compliance for the American Bankers Association.

The reporting system dates to the early 1970s when federal agents
sought to pinpoint drug dealers by looking for people making large
cash deposits.

Financial institutions have long been required to report cash
transactions over $10,000. Those reports -- simple notices of a
deposit or withdrawal -- account for more than 90% of the records the
enforcement network gets each year.

Far more controversial are secret "suspicious activity reports" filed
by financial institutions and reviewed by teams of agents spread
around the country. The investigation of Spitzer began when a bank
spotted potentially suspicious transfers from several accounts and
filed reports with the IRS, according to a federal official who spoke
on condition of anonymity. The official did not want his name used
because he's not authorized to discuss the case publicly.

The number of suspicious activity reports soared from 413,000 in 2003
to 1 million in 2006, according to the enforcement network.

Federal law requires the reports to remain secret. They are written
by officers at financial institutions who specialize in detecting
suspicious activity, such as a series of large transactions.

The analysis can protect customers by spotting unusual withdrawals
that may indicate fraud, said Robert Rowe, senior regulatory counsel
of the Independent Community Bankers of America.

Many of the reports are a waste, said Riese of the bankers
association. "We're reporting on a lot of things everybody knows law
enforcement doesn't have the resources to pursue," he said.

Hudak said the "vast majority" of reports "are filed for a good
reason. ... There are law enforcement officials and investigators who
use these reports and read them every day."