Released: August 09, 2006

Government spying on your bank accounts

Source: By Shaneen Pasha, CNNMoney.com

Think you’re immune from government scrutiny into your private bank accounts? Think again. Consumers who deviate from their normal pattern of banking with a transaction worth $5,000 or more could find themselves under the microscope by federal regulators as possible terrorists or money launderers - even if their action was as innocent as suddenly paying off a credit card bill or receiving a sudden inflow of cash to buy a car.

While September 11 put the spotlight on terrorist financing and prompted calls by law enforcement for more power in investigating questionable financial transactions, banks have been handing over personal customer information to the government for years.

Since 1996, banks have been required to file a Suspicious Activity Report (SAR) whenever they detect a suspicious transaction of $5,000 or more that could involve potential money laundering or terrorist financing, said Candice Pratsch, a spokeswoman for the Financial Crimes Enforcement Network (FinCEN), the arm of the Treasury Department in charge of aggregating reports.

Personal data passed to government

SARs provide the government with addresses, names, dates of birth, Social Security numbers or passport information, along with a brief description of the financial activities that raised red flags.

Between April 1996 and December 2005, 2.19 million SARs were filed by depository institutions, according to a recent report by FinCEN. The government touts the law as an effective tool in helping law enforcement track leads for new investigations and in identifying and linking intelligence for ongoing investigations by the FBI.

But privacy advocates say the law crosses the line by making the definition of “suspicious activity” deliberately vague. That forces banks to use their own subjective discretion in filing SARs, paving the way for racial profiling and creating mountains of expensive paperwork.

“Under this law, banking regulators are starting with the premise that every American is a terrorist, and anything that they do is capable of being a terrorist act,” said James Rockett, co-head of the financial institutions corporate and regulatory group at San Francisco-based law firm Bingham McCutchen.

“The definition of unusual is so broad under the current construct ... anything that happens in any single account in the U.S., even if it’s negligibly different, is going to be reported to the government,” he said.

Rockett said the overbroad guidelines violate consumers’ privacy - especially since it’s illegal for banks to inform customers when SARs are filed on them.

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