© 2000 Discerning
the Times Digest and NewsBytes
Few people are aware that banks must report every cash
transaction you make in excess of $10,000 to the United States Treasury
Department. After such a transaction occurs, your bank or credit union is
required by the Bank Secrecy Act to file a 4789 Currency Transaction
Report with the Department of the Treasury Internal Revenue Service.
What fewer people are aware of, is that in 1996 the
Clinton Administration issued new regulation under 31 CFR Part 103
requiring your bank to scrutinize the activity of every customer and to
determine whether you are acting "suspicious". Should
your bank fail to do this, the bank is liable to prosecution, fines and
penalties as high as $500,000 and 20 years in prison.
Are these rules being enforced? Yes! In the Bank
Secrecy Act Examination Manual issued in November 1997, the Federal
Reserve Board instructs its bank examiners to determine whether each bank
has "adequate ongoing monitoring systems in place to identify ‘suspicious’
transactions." To further encourage bank participation in filling
out Suspicious Activity Reports (SARs), 31 CFR 103.21(e) "prohibits
those filing SARs from making any disclosures, except to authorized law
enforcement and regulatory agencies, about … reports; encourages
voluntary reports of suspicious activities outside the rule; and provides
that no financial institution, officer, employee or agent shall…be
liable to any person under any law or regulation of the United States or
any constitution, law, or regulation of any State … for such disclosure."
Under 31 CFR Part 103 Section 103.21 of the Treasury
Department rules, a "suspicious transaction" is defined as any
transaction involving an aggregate of $5,000 or more in funds or other
assets where the bank "knows, suspects, or has reason to suspect
that"
1. the funds were derived from illegal activities.
2. appears to evade the $10,000 reporting requirement
of the Bank Secrecy Act.
3. the bank has no reasonable explanation, background
or purpose for the transaction.
Point number three can act as a catch all for about any
financial activity that occurs.
Section 103.11 of this rule defines a
"transaction" in respect to a financial institution as a
"deposit, withdrawal, transfer between accounts, exchange of
currency, loan, extension of credit, purchase or sale of any stock, bond,
certificate of deposit..." Thus, under Sections 103.11 and 103.21,
every aggregate of transactions you make over $5,000 can be suspect.
While no rules have been issued yet, entities such as
the Non-Bank Funds Transmitter Group and Alert Global Media are urging
expansion of the "suspicious transaction" rules to include
actions such as
• A customer who refuses to provide the purpose of a
transaction.
• A customer who conducts a cash transaction when his
or her business doesn’t require it.
• A customer who repeatedly sends or receives wire
transfers of any dollar amount.
• A customer who has a nervous demeanor.
• A customer who makes cash deposits without counting
the cash.
• A customer who appears to have a hidden agenda.
• A customer who is unwilling to provide personal
background information.
• A business customer who is reluctant to reveal
details about business activities.
• A customer who makes deposits or withdrawals
primarily in cash rather than check.
• A corporation that presents financial statements
not prepared by an accountant.
Many of the financial activities involved with farming
and ranching or the operation of any private business currently fall under
scrutiny of the 1996 "suspicious transaction" rules of the
Department of Treasury. Since the Department of the Treasury transfers
"Suspicious Activity Reports" filled out by your banking
institution to the "appropriate Federal law enforcement agencies,"
normal daily business activities have the potential to trigger an IRS
audit should a bank employee not understand the nature of your business.
You can be assured that the IRS will consider you guilty until proven
innocent in such cases.
Congressman Ron Paul last year became concerned about
this invasion of privacy and introduced H.R 518 known as the "Bank
Secrecy Sunset Act." This bill not only provides a sunset provision
of the Bank Secrecy Act after one year, but requires the immediate
termination of the "know your customer regulations" issued by
this administration.
It is time that Americans also become concerned about
such rules and regulations before all privacy in banking is lost. Access
to your banking information provides the federal government with access to
almost every aspect of your private life. Put another way, Article IV of
the Bill of Rights guarantees the right of the people to be secure in
their persons, houses, papers and effects against unreasonable searches
and seizures. The question is, do you feel secure knowing these rules and
regulations are in place? V
Tom McDonnell is an economist and serves on the Board
of Directors for Sovereignty International, Inc.
