FDIC "Know Your Customer" program

Kragen (kragen@pobox.com)
Sat, 16 Jan 1999 13:18:14 -0500 (EST)

I'm not too excited about this proposed program, either.

---------- Forwarded message ----------
Date: Tue, 15 Dec 1998 00:13:14 -0500
From: Declan McCullagh <declan@well.com>
To: politech@vorlon.mit.edu
Subject: FC: Letter to FDIC on Banking with Big Brother

My article:
> http://www.wired.com/news/news/politics/story/16749.html


From: "Susan Lorenz" <slorenz@theriver.com>
To: <btirg@ui.uis.doleta.gov>, <declan@well.com>
Subject: Re: Banking with Big Brother
Date: Mon, 14 Dec 1998 11:34:09 -0700

Here is a copy of the letter I just sent to the Office of Thrift Supervision,
the FDIC, and the FED.

Susan Lorenz

Sirs and Madams:

I read with interest in the Federal Register (7 December 1998) that you are
proposing substantial changes in the privacy of banking transactions.
Specifically, I understand that you are proposing that banks institute a "Know
Your Customer" Program that is substantially as follows:
As proposed, the regulation would require each nonmember bank to develop a
program designed to determine the identity of its customers; determine its
customers source 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
customers that are determined to be suspicious, in accordance with the FDIC s
existing suspicious activity reporting regulation. By requiring insured
nonmember banks to determine the identity of their customers, as well as to
obtain knowledge regarding the legitimate activities of their customers, the
proposed regulation will reduce the likelihood that insured nonmember banks
will become unwitting participants in illicit activities conducted or
by their customers.
This, Sirs and Madams, is an OUTRAGE! A recent article, I think, describes it
This is the largest invasion of privacy in banking history. It is the
equivalent of a continuous roadblock in which the police search every car and
every person every day. Only this regulation is technologically worse, for it
will create computerized profiles of individuals that will sweep suspects into
lists of suspicious characters, and from there into criminal courts,
Now, I understand that the stated purpose of this proposed regulation is to
prevent "illicit activities" from being conducted in the Nation s banks, and I
favor the prevention of illicit activities. And, there is a limit to how much
invasion of privacy I will tolerate in order to prevent alleged illicit

I think that many of my fellow Americans will agree with me. We, for instance,
are willing to tolerate inconveniences such as metal detectors and luggage
searches at airports in an effort to prevent hijacking and terrorism. I
strongly doubt, however, that we would be willing to tolerate a strip
search of
every passenger prior to every flight, and this is what the proposed
amounts to.

I am a law-abiding citizen, and I am wearying of the ever-increasing
into my private life. Please withdraw the proposed regulation.

I am forwarding a copy of this letter to my representatives in Congress.
> -----Original Message-----
> From: John Shaver <<mailto:shaverj@theriver.com>shaverj@theriver.com>
> To: Susan (river) Lorenz
> Date: Monday, December 14, 1998 7:48 AM
> Subject: Re: Banking with Big Brother
> Nev Dull wrote:
>> Forwarded-by: Roland Grefer
>> <<mailto:btirg@ui.uis.doleta.gov>btirg@ui.uis.doleta.gov>
>> Forwarded-by: Declan McCullagh <<mailto:declan@well.com>declan@well.com>
>> http://www.wired.com/news/news/politics/story/16749.html

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---------- Forwarded message ----------
Date: Thu, 14 Jan 1999 23:10:12 -0500
From: Declan McCullagh <declan@well.com>
To: politech@vorlon.mit.edu
Subject: FC: Libertarian Party opposes Know Your Customer banking plan


New regulation would require banks to spy on their customers for Uncle Sam

WASHINGTON, DC -- A new government directive will force banks
to spy on their customers and report any "unusual transactions" to
federal investigators -- and there's less than two months left for
Americans to try to stop it from taking effect, the Libertarian Party
warned today.
"Under the so-called Know Your Customer rule, bank tellers can
quiz you about where you got your money and how you plan to spend it.
And if your answers sound suspicious, they can report you to federal
law enforcement agencies," said Steve Dasbach, the party's national
"This new regulation will turn your local bank into a branch of
the federal government's civilian surveillance apparatus. It's the
ultimate invasion of your financial privacy," he said.
The Know Your Customer law has been proposed by the Federal
Deposit Insurance Corporation and is scheduled to go into effect on
April 1.
It will require banks and other financial institutions to
develop customer profiles, monitor bank transactions, and report to the
government any "unusual activity" -- such as large cash deposits or
Since "unusual activity" could include depositing a Christmas
bonus or inheritance, or withdrawing money to buy a house or car,
ordinary Americans could find themselves trying to prove to agents from
the FBI, the Internal Revenue Service, or the Drug Enforcement Agency
that they are not drug dealers or money launderers, said Dasbach.
"This law would turn every bank teller into a government
informer and everyone with a bank account into a criminal suspect," he
The Libertarian Party opposes the Know Your Customer regulation
for numerous reasons, said Dasbach.
* Your banking habits are none of the government's business.
"In a free society, the government has no business even asking
where innocent Americans get their money or how they spend it, much
less coercing businesses into secretly monitoring your bank account,"
he said.
* It's an illegal, warrantless search that violates the Fourth
"Monitoring every bank account to check for laundered money is
no different from pulling over every driver just in case some are
intoxicated, or searching every home to check for stolen goods," said
Dasbach. "It is unconstitutional -- plain and simple."
* It could subject your money to asset forfeiture.
"If you can't immediately prove you're not a criminal, the
government could seize your money under asset forfeiture laws," noted
Dasbach. "Instead of being the safest place to store your money, banks
could become the most dangerous place -- since Uncle Sam's bank robbers
can seize it at will."
The Libertarian Party has joined other civil-liberty
organizations and business groups like the ACLU, the California Bankers
Association, and the Free Congress Foundation to prevent this law from
taking effect, said Dasbach.
The FDIC has set March 8 as the deadline for public comment
about the proposed regulation -- and Americans need to let the
government know what they think about this
"Prove-You're-Not-A-Criminal" law, he said.
"We need to flood the FDIC with letters, faxes, and e-mails
demanding an end to Big Brother Banking," said Dasbach. "Americans need
to launch a Know Your Constitution program -- to remind these federal
bureaucrats that they have no right violating our privacy and dignity
this way."

To comment on the Know Your Customer regulation, write: Robert
E. Feldman, Executive Secretary, Attn: Comments/OES, Federal Deposit
Insurance Corporation, 550 17th Street NW, Washington, DC 20429. Or
fax: (202) 898-3838. Or e-mail: comments@FDIC.gov.

The Libertarian Party http://www.lp.org/
2600 Virginia Ave. NW, Suite 100 voice: 202-333-0008
Washington DC 20037 fax: 202-333-0072

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