Federal surveillance machine looking through your bank accounts and cryptocurrency

·5 min read
U.S. dollar bills in 2019.
U.S. dollar bills in 2019.

If you think your financial affairs are private, you need to think again. Unnoticed by most Americans, the federal government has constructed a vast surveillance regime that, if left unchecked, threatens to destroy our right to financial privacy.

The government’s push to expand financial surveillance surfaced most recently in – of all places – the proposed infrastructure bill, which contains a provision designed to allow the government to hoover up information about cryptocurrencies. Fortunately, that provision sparked pushback from several senators, but still, the proposed reporting requirements are likely to be narrowed but not eliminated.

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The provisions in the infrastructure bill are part of a larger push to force transparency onto cryptocurrency. In the last days of the Trump administration, the U.S. Treasury's Financial Crimes Enforcement Network proposed a rule that would extend certain bank reporting laws to over-$10,000 cryptocurrency transactions. And, far from reversing course, the Biden administration recently endorsed that proposal as part of its new American Families Plan – which aims to use the information to increase tax enforcement.

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And cryptocurrency is just the beginning. The administration’s tax plan would also require that all financial institutions monitor and report on the “gross inflows and outflows on all business and personal accounts.” In other words, the government would have an eye on how much you put into the bank as well as how much you take out. The administration calls this intrusive warrantless snooping by the anodyne name “comprehensive financial account reporting.”

All of this is just the latest front in an attack on financial privacy that began in 1970 with the passage of the Bank Secrecy Act – a law enacted to do the opposite of what its name suggests. The Bank Secrecy Act required banks to begin filing reports with the government, detailing the activities of their customers.

The government’s surveillance scheme has steadily expanded from there. Today, banks and other financial institutions are required by federal law to trawl their customers’ data to report anything that might be considered “suspicious,” and they face steep fines and other penalties if they fall short of the job. In January, for instance, the government fined Capital One $390 million for insufficient zeal in service of this surveillance regime.

The amount of financial data reported to the government is staggering. In 2017, the president of The Clearing House Association testified before Congress that the nation’s largest banks file a suspicious activity report once every minute. A subset of those reports leaked to the public last year. Despite constituting only about .02% of the suspicious activity reports filed between 2011 and 2017, they described over $2 trillion in transactions.

And, having involuntarily conscripted the banks as surveillance agents, the federal government is also waging war on cash, tracking it, seizing it and otherwise making it difficult to handle cash transactions without the government having to be informed. Using civil forfeiture, the government routinely seizes cash from travelers at airports, on trains and on the side of highways – for no reason other than that those travelers are carrying large amounts of cash. The government then turns the presumption of innocence on its head by forcing these property owners to prove a lawful source for their cash in order to get it back.

In other words, the government cannot monitor cash the way it monitors the banking system, so it treats people who carry cash like criminals even though carrying cash is not a crime.

Earlier this year, the government opened a new front in the war on cash when it broke open more than 800 safe deposit boxes in Beverly Hills, California. The government has now commenced civil forfeiture proceedings against over 400 of those boxes, seeking to forfeit more than $85 million in cash (plus millions more in gold, precious metals and other valuables). The government has no evidence that these box holders violated any law, and yet it is forcing them to come forward to prove their own innocence. In the government’s view, just having cash in a box is enough to make you a presumptive criminal.

So, is there a right to financial privacy?

The government’s actions suggest it thinks the answer to that question is “no,” but the framers would have thought differently. Under the Fourth Amendment, the government needs a warrant based on probable cause of some wrongdoing – not merely a hunch or some general suspicion – to search our “persons, houses, papers, and effects,” and “papers” surely includes financial records.

Founding Fathers would condemn this

In fact, a desire for financial privacy was one of the main drivers of the Fourth Amendment. As the Boston Tea Party demonstrates, the Founders were no friends of the tax man, and they objected to the intrusive searches by British tax collectors. As a result, as the Supreme Court observed in a 1977 case, “one of the primary evils intended to be eliminated by the Fourth Amendment was the massive intrusion on privacy undertaken in the collection of taxes.”

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At the Institute for Justice, we have successfully litigated cases that stopped civil forfeiture and structuring abuses, and we're now litigating to contest the government’s attempted forfeiture of the Beverly Hills safe deposit boxes. We, likewise, are opposing the extension of bank reporting to cryptocurrency. Like the framers, we believe financial privacy matters.

If the government can destroy financial privacy, it can destroy privacy altogether. After all, almost anything meaningful that you might want to do in life requires at least some expenditure of funds. Yet, if current trends continue, we will find ourselves living in a financial fishbowl — where almost everything we do is subject to the government’s surveillance machine.

Rob Johnson (@FreeRangeLawyer) and Rob Frommer (@Robert_Frommer) are senior attorneys at the Institute for Justice, which litigates nationwide in defense of constitutional rights.

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This article originally appeared on USA TODAY: The infrastructure bill will only expand financial surveillance

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