Do We Spy On Our Members?

June 10, 2013 at 7:49 am Leave a comment

imagesCA3KAU17The news reports over the last few days detailing the extensive nature of the government’s data collection efforts make this as good a time as any to broach a question that’s been bugging me for a long time now.  Does the government have too much power to compel financial institutions — both credit unions and banks — to disclose personal financial information about their members and customers?  Increasingly, I think the answer is yes.

First, does the ability of the federal government to track financial activity through suspicious activity reports (SARS) help thwart terrorism?  Absolutely, but as anyone involved with the financial industry knows, the information collected extends well beyond terrorism or, for that matter, any activity that could pose a direct and imminent threat to citizens.  Elliot Spitzer maybe guilty of incredible hubris and extremely bad judgment, but is he a terrorist, drug dealer or money launderer?  Remember that the government only discovered Client No. 9 because of a SARS.

And the truth is that every year, financial institutions are coerced into filing more and more SARs involving potential criminal activity using a standard that would get a prosecutor laughed out of court if he tried to use it to subpoena someone’s bank documents.  How are you coerced?  Well, the way the regulatory scheme is set up, if there is any doubt at all as to whether or not you should file a SAR, the safe thing to do is to file it.  The member can’t sue you and how many of you have been criticized by your examiner for filing too many SARs as opposed to too few?

“What’s the big deal?”, you say, my members aren’t criminals and they don’t find out about SAR filings anyway.  Okay, fair enough, so starting tomorrow I want you to post the following sign in your credit union lobby:

1) pursuant to federal law, [i]f a financial institution or any director, officer, employee, or agent of any financial institution, voluntarily . . . reports a suspicious transaction to a government agency–

a) no one from the financial institution may legally inform you that such report has been made or why it was made; and

b) no government official or affiliated individual may inform you that you’ve been the subject of a SARs report, and

c) the financial institution has complete immunity for filing a SARs but may be subject to regulatory sanctions for choosing not to do so.

Call me old-fashioned, but I believe in protecting my privacy and that what I do with my money is my own business.  For too long now, Congress has paid lip service to protecting financial privacy concerns in public while creating an ever widening back door to access financial data.  There may be some crimes or activities that justify these intrusions, but right now there are inadequate safeguards for people like myself who think that it should be difficult for the government to find out what I am up to.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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