BANKERS CAN'T BE POLICE OFFICERS

In December 1998, the Federal Deposit Insurance Corp. posted for
comment a notice of a proposed federal banking regulation, the ``Know
Your Customer'' rule.

The rule ``would require each ... bank to develop a program designed
to determine the identity of its customers; determine its customers'
sources of funds; determine the normal and expected transactions of
its customers; monitor account activity for transactions that are
inconsistent with those normal and expected transactions; and report
any transactions of its customers that are determined to be
suspicious.''

Three months later, after receiving some 225,000 e-mail messages and
letters, nearly all opposing the rules, banking regulators scrapped
the proposal. While the banking public was willing to acknowledge the
need to track money-laundering practices, which hide profits from
criminal activities, the public outcry over privacy concerns won out.

Now the Clinton administration, in response to allegations involving
Russians and a major U.S. bank, has proposed a strategy to fight money
laundering that looks as intrusive as the ``Know Your Customer'' rule.
It would impose tighter regulations on banks and other financial
institutions and includes a requirement that storefront check
cashiers, brokerage firms and casinos notify authorities of suspicious
activities the way banks do.

Banks have been to some degree in the squealing business since the
passage of the Bank Secrecy Act of 1974, which obligates them to
report to the government cash transactions of $10,000 or more. It was
passed to combat money laundering and the drug trade; it meant bankers
could not ignore what they knew was wrong. But this latest effort
would vastly increase the government's efforts and would force
financial institutions to delve deeply into the private lives of customers.

This comes just a month after the Clinton administration directed
federal law enforcement agencies to collect information to determine
the extent to which their officers were considering race in searches.
Now a strategy is unveiled that would demand banks ``profile'' anyone
deemed ``suspicious.''

And that is just on the federal level. At a meeting last week of a
task force formed to combat escalating money laundering in Florida,
representatives of state agencies proposed such things as tougher
reporting requirements for any business that ``transmits'' cash and a
new law allowing authorities to freeze bank accounts suspected of
being used for money laundering, according to Tribune reporter
Michelle Pellemans. But the most draconian recommendation was one to
require fingerprints of anyone opening a bank account.

One Tampa businessman told Pellemans the proposals evoke a ``police
state type feeling'' and would put unfair burdens on small businesses.

It is wrong to ask financial institutions to become investigators for
law enforcement by keeping files on customers and reporting
``suspicious'' activity. Bankers are not police officers.

Money laundering is an international problem that must be curtailed.
But as with all our efforts to fight crime, we should not trample
civil liberties in the process.