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Obama Action On “Financial Privacy” Will Have Questionable Impact On Average Americans

Advocates of “civil liberties” are concerned because Reuters reported that the Obama administration is planning to give U.S. spy agencies full access to financial data about U.S. bank accounts. The problem with these concerns is that the spy agencies already have access to that data. All the administration is trying to do is make it official. As it so often happens, civil liberties advocates are ignoring massive holes in the Constitutional protections on privacy in the United States.

No Privacy for Foreign Transactions

The first is that the protections of the U.S. Constitution do not extend beyond the borders of the United States. If an American communicates with somebody in a foreign country and that country’s police or spy agency eavesdrops on the communication, there is no constitutional protection. Foreign governments are bound by their constitutions, not by ours. The foreign spy agency can share that data with its U.S. counterparts if it wants.

This is particularly problematic because much of the world’s financial industry is centered in London. Many of the world’s financial transactions move through the city of London, including stocks, banks, currency trades, gold-based exchanged traded funds or ETFs (the bullion that backs them is kept in English vaults), bonds, and much more.

That should be a concern because Britain, unlike the United States, has no written constitution. British spy and law enforcement agencies have none of the restrictions that American spy agencies do. This doesn’t mean that Britain is not a free country; it simply has a very different system than ours.

Another troubling thought here—many financial transactions move through dictatorships or quasi-dictatorships such as China and the Persian Gulf states. Others move through countries like France that have very different ideas about civil liberties than we do.

If you engage in any sort of international financial transaction, whether you buy foreign stock or wire money to your cousin traveling in India, chances are somebody is already monitoring your activities. That information is probably being shared with American agencies. Despite what some people think, those agencies are doing nothing illegal or unconstitutional by looking at such information.

The Hole in Constitutional Protections for Privacy They Don’t Tell You About

There is also another massive hole in constitutional protections for privacy that politicians on both sides of the aisle conveniently ignore. The hole is that search warrants and the protections associated with them only apply when somebody plans to use the information gathered in a criminal prosecution in court.

That might restrict the FBI, DEA, Secret Service, ICE, and other law enforcement agencies. Their purpose is to create cases that will stick in court. It will not restrict the CIA, National Security Agency (NSA), military intelligence agencies, etc., from looking at your bank records. After all, they are not trying to make a case in court; they are gathering information for other purposes, such as tracking terrorists or arms sales.

My personal guess is that the spy community is already extensively monitoring the bank accounts of average Americans. The concern over the Obama administration’s plans is too little too late. The “privacy advocates” are showing up after the game is already over.

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The Real Concern with the Obama Plan

The Obama plan is to simply allow U.S. intelligence agencies, the military, and law enforcement agencies to have a computer link to something called the Financial Crimes Enforcement Network or FiCen. FiCen is a database of reports of suspicious activity reported by banks, casinos, and other entities maintained by the Department of the Treasury.

This can affect average people because some of the “suspicious activities” might include your everyday actions. There’s a provision about reporting cash transactions that exceed $10,000. If applied across the board, that would include daily or weekly deposits from a lot of small businesses. It might also affect charities, churches, mosques, and even schools. If your church bingo game takes in $11,000 in cash and your church bookkeeper deposits all of the proceeds, you’ve just committed a “suspicious activity,” and your church is now listed in FiCen.

It’s hard to see how this information would help intelligence agencies. Terrorists and gangsters are smart enough not to deposit or withdraw more than $10,000 in cash at once. The average mob boss or drug smuggler already knows the loopholes, but the poor guy who runs the corner bar does not. If he has a good weekend and takes in $12,000 in cash and deposits it on Monday, the neighborhood barkeeper is now in FiCen.

Nor would it be that much help to law enforcement agencies because it is doubtful whether this information is admissible in court. Yet this information exists, and it can be abused.

Personally, I’d be much more concerned about the FiCen data falling into the hands of computer hackers than government abuse. This data presumably includes IBN and bank account numbers, which make electronic fund transfers (direct deposit) possible. If criminals can get it, they can start cleaning out bank accounts.

Beyond that, there is the threat of government confiscation, which has happened before in U.S. history. During the 1930s, the Roosevelt Administration confiscated gold bullion from average citizens as part of the “New Deal.” Foreign-owned property and some property of U.S. citizens was also confiscated at the beginning of World War II. Japanese Americans that had their property stolen from them by FDR in 1942 were not compensated for the losses until 1987.

Confiscation isn’t likely now, but things could quickly change. If the U.S. government faces a situation where it cannot pay the bills—say if a bankrupt Chinese government dumps all the U.S. treasury bonds it owns on the open market—Uncle Sam might get desperate for cash and start looking at confiscation, particularly if the government can brand some group of people as traitors or enemies as it did to Japanese Americans in 1942. (Many argue that one of the main reasons for placing Japanese Americans in detention camps was so their property could be stolen.)

How to Protect Your Assets

Protecting your financial transactions from such eavesdropping is difficult. There are a few things that you can do to protect yourself. An obvious one is to never deposit or withdraw more than $10,000 in cash; make two deposits or withdrawals instead.

Another is to use alternative financial arrangements, such as cash, gift cards, preloaded debit cards, and money orders that might be harder to track. Even these present problems because most preloaded debit cards are attached to a bank account. Also, avenues once considered more anonymous such as cash transactions and money orders can be tracked fairly easily through modern, computerized cash registers.

A better way to protect your assets is to invest in things that will be difficult for the government to confiscate. This might include land, tools, or equipment you can use in your business; a method of generating your own electricity; seeds and gardening supplies; or something you feel you can trade. Another great investment that cannot be confiscated is marketable skills. Many Japanese Americans did well after World War II because they had marketable skills that FDR and his bureaucrats could not steal. Be leery of gold and other precious metals because they are vulnerable to market forces and confiscation.

The main thing is to be aware of that there is no longer any such thing as financial privacy. It disappeared long ago, and it is not coming back any time soon. Learn to act accordingly and don’t expect the advocates of “civil liberties” to protect you.

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