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New Federal Patriot Act Turns Retailers into Spies against Customers
The Boston Globe ^ | 11/28/2001 | By Scott Bernard Nelson, The Boston Globe

Posted on 11/23/2001 2:58:00 PM PST by Smogger

Nov. 18--Ordinary businesses, from bicycle shops to bookstores to bowling alleys, are being pressed into service on the home front in the war on terrorism.

Under the USA Patriot Act, signed into law by President Bush late last month, they soon will be required to monitor their customers and report "suspicious transactions" to the Treasury Department -- though most businesses may not be aware of this.

Buried in the more than 300 pages of the new law is a provision that "any person engaged in a trade or business" has to file a government report if a customer spends $10,000 or more in cash. The threshold is cumulative and applies to multiple purchases if they're somehow related -- three $4,000 pieces of furniture, for example, might trigger a filing.

Until now, only banks, thrifts, and credit unions have been required to report cash transactions to the Treasury Department's Financial Crimes Enforcement Network, under the Bank Secrecy Act of 1970. A handful of other businesses, including car dealers and pawnbrokers, have to file similar reports with the Internal Revenue Service.

"This is a big deal, and a big change, for the vast majority of American businesses," said Joe Rubin, chief lobbyist for the US Chamber of Commerce. "But I don't think anybody realizes it's happened."

The impact is less clear for consumers, although privacy advocates are uncomfortable with the thought of a massive database that could bring government scrutiny on innocent people. Immigrants and the working poor are the most likely to find themselves in the database, since they tend to use the traditional banking system the least.

"The scope of this thing is huge," said Bert Ely, a financial services consultant in Alexandria, Va. "It's going to affect literally millions of people."

The filing of so-called suspicious activity reports, though, is only the latest in a series of law enforcement moves the government has made in response to the Sept. 11 terrorist attacks on New York and Washington. And so far, the filing requirement has been overshadowed by debate over the other changes.

The Patriot Act signed into law Oct. 26, for example, gives the government a vast arsenal of surveillance tools, easier access to personal information, and increased authority to detain and deport noncitizens. House and Senate negotiators came to terms Thursday on a bill that would add 28,000 employees to the federal payroll in an effort to bolster airport security, and Attorney General John Ashcroft has said he is reorganizing the Justice Department and the FBI to focus on counterterrorism efforts.

As for the business-filing requirement, specifics about what companies have to do and when they have to do it still need to be worked out. The Treasury Department has until March 25 -- the date the Patriot Act becomes law -- to issue regulations about how to put the new rules into practice.

"The law itself doesn't go into any detail, because you'd presume that's what the Treasury regulations are for," said Victoria Fimea, senior counsel at the American Council of Life Insurers. "And the devil, of course, is in the details."

When he signed the legislation, President Bush said the new rules were designed to "put an end to financial counterfeiting, smuggling, and money laundering." The problem, he and others have said, was keeping tabs on the billions of dollars that flow outside the traditional banking system and across national borders each year.

Money launderers often disguise the source of their money by using cash to buy pricey things. Later, they can resell the products and move the money into a bank account -- at which point it has been laundered, or made to look legitimate, by the aboveboard sale.

Making a series of transactions just below the $10,000 filing threshold is also illegal under the new law if it's done to keep a business from contacting the government.

Financial services companies such as banks, insurers, and stock brokerages face a higher standard under the new law than other businesses. In addition to the filing requirements, they have to take steps such as naming a compliance officer and implementing a comprehensive program to train employees about how to spot money laundering.

Unlike other businesses, though, most financial services companies already have a process in place to deal with government regulation.

"Certainly for the bigger [insurance] companies, they most likely are already tooled up for this," said Fimea. "For other companies, this creates a whole new landscape."

James Rockett, a San Francisco lawyer who represents banks and insurance companies in disputes with regulators, said he's skeptical the authorities will get any useful information from reports filed by nonfinancial companies.

"You're trying to turn an untrained populace into the monitors of money laundering activity," Rockett said. "If you want to stop this, it's got to be done with police work, not tracking consumers' buying habits."

Voices opposing any of the new law-enforcement measures appear to be in the minority, however. For now, at least, few people and few companies want to be perceived as being terrorist sympathizers.

"In a political sense, it would have been very hard for us to go to Congress in this case and loudly argue that the legislation shouldn't include nonfinancial-services guys," said Rubin, of the US Chamber of Commerce. "Everybody wants to help and to stop money laundering right now."

Scott Bernard Nelson can be reached by e-mail at nelson@globe.com.


TOPICS: Front Page News; News/Current Events
KEYWORDS: privacylist
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To: Buck Turgidson
This isn't an issue of a person's papers?

I don't think so. But I'm not a lawyer.

I am, and I do.

21 posted on 11/23/2001 4:30:58 PM PST by TheOtherOne
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To: nunya bidness
"There's a war going on! And this stuff isn't going to be used against AMERICAN CITIZENS!!"

unless you happen to have 10 grand in cash on you, but that isn't the MAJORITY of us, so why should we care?

22 posted on 11/23/2001 4:46:01 PM PST by Mercuria
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To: Native American Female Vet; tex-oma; LiberteeBell; AnnaZ; Askel5; miss print; MissAmericanPie...
!!!!
23 posted on 11/23/2001 4:48:03 PM PST by Mercuria
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To: Mercuria
Yup, (suckin on a toothpick) this is all going to go away in four years, you betcha.
24 posted on 11/23/2001 4:53:18 PM PST by MissAmericanPie
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To: Rustynailww
The 'special pen' leaves a bright red streak on a genuine bill but not on counterfeits.
25 posted on 11/23/2001 4:53:39 PM PST by pa_dweller
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Comment #26 Removed by Moderator

To: Smogger
Immigrants and the working poor are the most likely to find themselves in the database, since they tend to use the traditional banking system the least.

Anybody else wonder how many legal immigrants and working poor go shopping with $10,000 in cash? None that I know.
Now illegal aliens here with an agenda, yes...that I can see. Comments?

27 posted on 11/23/2001 5:22:37 PM PST by JD86
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To: boston_liberty
Please explain the connection between a public financial transaction and an unlawful search under the Fourth Amendment.
28 posted on 11/23/2001 5:25:44 PM PST by JD86
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To: rko1933
That is too funny...
29 posted on 11/23/2001 5:25:47 PM PST by mel
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To: Smogger
Not really sure the average person is buying anything worth $10K with cash. It's usually more effective to buy on a 0% interest plan.

The list of everyday item(s) that fall above this threshold are few and far between. The only worry here is inflation, or things bought as a set of components (e.g., home theatre).

More likely, terrorists are self-funding through credit-card fraud, or petty theft, or drug sales.

30 posted on 11/23/2001 5:27:03 PM PST by lds23
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To: savedbygrace
you think I'm gonna give the clerk my name and address

Good Luck. Most things costing $9,999 come with a title...ie car, boat, motorcycle....not all, but most.

31 posted on 11/23/2001 5:27:37 PM PST by JD86
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To: MissAmericanPie
"We got The Right Guy in office. NOTHING bad can ever come of anything he thinks of." (Got a spare toothpick?)
32 posted on 11/23/2001 5:30:42 PM PST by Mercuria
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To: RightOnline
Great post.
If this was being done in peacetime, I would be up in arms....
But we are at war, and I want our military to be up in arms.

When this is over we will beat our swords back in to plowshares.

33 posted on 11/23/2001 5:31:10 PM PST by eddie willers
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To: Smogger
This new law should not trouble anyone except someone with something to hide.

I sat on a Federal Grand Jury for year. I learned that money laundering was one of the Feds best tools for pulling white collar scum out of society.

34 posted on 11/23/2001 5:31:53 PM PST by pcl
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To: boston_liberty
This isn't an issue of a person's papers?

No, this is an issue of a person paying cash (the government's papers ie. legal tender) for a transaction.
Remember it is only colored paper with the pictures of dead Presidents on it, it is not your private papers.
I don't see a 4th Amendment connection here.

35 posted on 11/23/2001 5:32:03 PM PST by JD86
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To: JD86
Anybody else wonder how many legal immigrants and working poor go shopping with $10,000 in cash? None that I know. Now illegal aliens here with an agenda, yes...that I can see. Comments?

I don't really have a position on this issue. Yet. Since I just found out about it. My first impression is that it more likely to smoke out tax evasion than terrorist. I with your asessment that very few immigrants are running around with 10K in cash for one purchase. However, I think the most important provision is that the purchases can be cumulative. Now how the heck is a retailer going to keep track of cumulative purchases by cash paying customers?

I wouldn't get to worked up over it. It would be a very difficult if not impossible provision to enforce.

36 posted on 11/23/2001 5:34:55 PM PST by Smogger
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To: TheOtherOne
I am, and I do.

Please explain why. Because I am, and I don't.

37 posted on 11/23/2001 5:36:06 PM PST by JD86
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To: JD86
I meant to say: I agree with your asessment that very few immigrants are running around with 10K in cash for one purchase.
38 posted on 11/23/2001 5:36:52 PM PST by Smogger
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To: RightOnline
Talk to your parents and grandparents about WWII and what citizens had to "put up with" back here at home to fight enemies half a world away. I don't like it, but we're at war and as a veteran, I know that war can be hugely "uncomfortable". Your fear is that these "powers" will continue past the time this "war" is declared over in some way??? Then get off your asses and elect people who will help ensure that these laws are sticken from the books when no longer needed, even if the "drop dead clauses" are ignored by subsequent administrations.

I didn't see your other posts, but I sure agree with this one. Good Job. Well Said!

39 posted on 11/23/2001 5:37:18 PM PST by JD86
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To: pcl
One more thing, many bank tellers and other bank personal already report suspicious cash deposits of less than $10k but accumlating more that $10k over short periods of time. It was common for money launderers to be deposting $5k to $8k once a day for weeks. Many of these cases were first reported by suspecious tellers.
40 posted on 11/23/2001 5:38:27 PM PST by pcl
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