A law that only the KGB could love -- the chilling, so-called "Know Your Customer" proposal that would require banks to spy on their customers -- is scheduled to go into effect unless Americans can stop it by the March 8 deadline.

On that date, the Federal Deposit Insurance Corporation (FDIC) will stop taking public comments about the Know Your Customer regulation. Already, more than 50,000 people have contacted the agency to oppose the proposal on constitutional, privacy, or civil liberties grounds.

And no wonder. This regulation, published in the Federal Register on December 7, 1998, requires banks to create a profile of every customer and then notify the government if they do anything "suspicious." Specifically, it requires banks to determine their customer's sources of funds; determine their customer's "normal and expected" transactions; identify transactions that are inconsistent with expected patterns; and report suspicious activity to federal investigators.

In other words, the government wants to turn every bank teller into a government informer and everyone with a bank account into a criminal suspect.

The government's rationale for imposing this regulation: To catch money launderers. But how is monitoring everyone's bank account to check for laundered money different from searching everyone's home to check for stolen goods, or stopping every car to check for drunk drivers?

It isn't, of course. In America, we're supposed to be innocent until proven guilty -- not the other way around.

So what kind of "unusual activity" could set off a red flag at your bank under Know Your Customer? Anything that deviates from your normal pattern, like depositing a Christmas bonus or inheritance, or withdrawing money to buy a house or car. Soon, an ordinary trip to the bank could turn into an interrogation, with Americans 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.

In order to put the brakes on this Big Brother banking law, the Libertarian Party has joined a coalition with the ACLU, the California Bankers Association, the Free Congress Foundation, and others to flood the FDIC with more comments by the March 8 deadline. Unless it is stopped, the regulation is scheduled to go into effect on April 1, 2000.

But stopping Know Your Customer won't be easy. Even after being pummeled by 50,000 comments already -- 600 times as many as the FDIC normally receives in response to a proposed regulation -- the bureaucrats still haven't gotten the message.

Now, they're suggesting that Know Your Customer simply needs to be "reformed." Wrong. The last thing America needs is a reformed bank spying law. Our message to the FDIC is don't reform it; repeal it. Here's why:

• Americans' banking habits are none of the government's business. In a free society, the government has no business asking where innocent Americans get their money or how they spend it. This is the kind of regulation one might have expected in East Germany, North Korea, or Cuba. But in the United States of America?
• It's an illegal, warrantless search that violates the Fourth Amendment. This new rule would force banks to turn over customers' records to government investigators within 48 hours -- without a search warrant. This is unconstitutional, plain and simple.
• There is no money-laundering crisis in America. Of the 7,300 people charged with money laundering between 1987 and 1995, only 580 were convicted. So the government is proposing to invade the banking privacy of over 100 million Americans because of crimes committed by an average of 72 people a year.
• Know Your Customer could subject customers' money to asset forfeiture. If customers can't immediately prove they're not criminals, the government could seize their money under asset forfeiture laws, which allow police to impound the property of Americans without even charging them with a crime. Perversely, instead of being the safest place to store your money, banks could become the most dangerous place.

If there's anything positive about the Know Your Customer law, it's that it teaches Americans a lesson: Know Your Government. In a supposedly free country, your government is plotting to destroy your financial privacy and force your bank to spy on you, with no evidence that you've done anything wrong.

Now that's a crime. And we have until March 8 to prevent it.

Here's how: Visit the website, http://www.DefendYourPrivacy.com/ to sign an electronic petition against the Know Your Customer law, and to send a comment to the FDIC.

Copyright 2005. The Libertarian Party of North Carolina.
Contact webmaster@lpnc.org for site problems and suggestions