Explore Freedom

Explore Freedom » Financial Privacy: R.I.P.

FFF Articles

Financial Privacy: R.I.P.


Okay, this is going too far. According to the Federal Register of December 7, the Federal Deposit Insurance Corporation (FDIC) wants a new way to snoop on us. It proposes a mandatory program for insured nonmember banks called “Know Your Customer.”

This is not some friendly way for banks to serve us better. It’s right out of Orwell’s 1984 . Here’s what Big Brother would require the banks to do in the name of getting to know us:

·Set up procedures to identify its customers;

·Establish their customers’ sources of money;

·Establish their customers’ “normal and expected transactions”;

·Watch for “transactions that are inconsistent with those normal and expected transactions”;

·”Report any transactions…that are determined to be suspicious, in accordance with the FDIC’s existing suspicious activity reporting regulation.”

Why does FDIC want to keep such close watch over us? According to the Federal Register, the new regulation will “reduce the likelihood that insured nonmember banks will become unwitting participants in illicit activities conducted or attempted by their customers.”

Very nice. We’re all guilty till proven innocent. Thus crumbles one of the most important pillars of Western jurisprudence, the principle that citizens are to be free from general suspicion of wrongdoing by government. If this rule is adopted, America will have crossed the Rubicon into authoritarianism for sure.

There’s another angle to this regulation as well. Some banks already have such procedures, and the FDIC and those banks wish to “level the playing field.” I take this to mean that customers don’t like the snooping and will favor banks that don’t do it. The regulation will see to it that we can no longer find such banks.

Excuse me, is this still the United States of America? Or did I forget that I got on a plane and landed in Albania or North Korea or Cuba?

The program is being sold as necessary to protect the reputation of banks. “When transactions at financial institutions involving illicit funds are revealed,” states the item in the Federal Register, “these transactions invariably damage the reputation of the financial institutions involved and, potentially, the entire financial sector.” Somehow, I think banks can protect their reputations without the heavy hand of government mandating that they snoop on their customers. Besides, citizens trusted with the vote are likely to understand that banks are not responsible for how their depositors obtain money. Heck, my 11-year-old son knows that!

FDIC asks us not to worry about a loss of privacy. It expresses confidence that banks will acquire only the information necessary to the task and will not misuse that information.


Banks will be concerned that gathering too little information and failing to turn it over to the government will get them into trouble with the authorities. They will be likely to err on the side of kowtowing to the state. Kiss the last bits of your financial privacy goodbye.

The government’s rationalization for this systematic snooping relates to the need to ferret out illegal activity. When you realize that such activity is an invariable adjunct to victimless crimes, the whole blasted idea is exposed for the naked power grab it is. From the beginning, libertarian opponents of the war on drug users warned that outlawing consensual activity (no one is forced to buy or sell drugs) will lead to wholesale violation of our civil liberties. Under the guise of ending drug use, the government is able to do things that would have appalled the American people a few generations ago. This is just the latest thrust of the jackboot onto the throat of Lady Liberty.

Fortunately, there is opposition. The California Bankers Association opposes the plan as “intrusive and cumbersome.” The Christian Alert Network is organizing a campaign against the rule as well. Other opposition can be expected.

Citizens can voice their dissent by March 8, 1999. Write to Robert E. Feldman, Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, DC 20429. Comments may also be sent by fax to (202) 898-3838, or by e-mail to comments@FDIC.gov.

Don’t wait. This is serious!

  • Categories
  • This post was written by:

    Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.