Money: Banks and Secrecy

More liberal muddling


The Bank Secrecy Act of 1970 requires banks to maintain complete records of all customer transactions, creating what has been termed a financial dossier on every depositor [see REASON, December 1973, p. 25]. During the hearings on this law the practical question of how law enforcement agencies were to obtain access to these records was not squarely faced.

Under the prior law, including the 1970 act, it was unclear whether an investigating officer could obtain access to a customer's bank records without a subpoena, although at least one state court (California) had held that such access violated a constitutionally protected right of privacy.

In light of this uncertainty, the Treasury has had a policy of accepting the individual bank's decision as to whether a subpoena was necessary for access to customer records, an arrangement which civil libertarians found distressingly informal.

Congress has responded with a flurry of bills, most of them by liberal sponsors, to amend the Bank Secrecy Act. E.g., S.2200, sponsored by Senator Cranston; S.3814, Senator Tunney; H.R. 550, Rep. Koch; H.R. 10021, Rep. Rousselot.

Although the bills differ in details, their major provisions are similar. The amendments provide for four means of access to customers' records held by a financial institution:

  1. Customer consent
  2. Administrative subpoena or summons
  3. Search warrant
  4. Judicial subpoena.

A financial institution would be forbidden to disclose customer information unless required by one of these four means.

The bills also would limit to two situations the bank's requirement to keep records or make reports on a customer's activities: (1) when required by the Internal Revenue Code or (2) when required by a bank supervisory agency. The fact that these are considered to be a limitation on government indicates how open-ended are the potential powers of the government under the present law.

Probably the best comment on these amendments was provided by Senator Cranston in his remarks introducing his own bill,

"…The provisions…do not deny law enforcement officials access to bank records. The purpose is to provide statutory guarantees to confidentiality of bank records while at the same time satisfying the needs of the government for access."

If anything, these amendments could be regarded as strengthening the investigatory powers of the government by making it clear that they are limited to those permitted by the Fourth Amendment. It is not immediately clear that these amendments would in any significant way expand our present Fourth Amendment protections against unreasonable searches and seizures. These amendments might in fact be harmful in that they would clarify what a court might otherwise find to be an unconstitutional ambiguity in the Bank Secrecy Act.

The Cranston and Rousselot bills have been endorsed by the liberal ABA Section on Individual Rights which found,

"These bills are not inconsistent with the thrust of the Bank Secrecy Act, in that they do recognize the critical need for thorough recordkeeping.…The proposed legislation does not undermine the effectiveness of the Bank Secrecy Act, the Section feels. Instead, it can only strengthen it by removing any doubts about potentially unconstitutional applications of its provisions."

As matters presently stand, there seems to be no legal or political force challenging the requirement that banks maintain financial dossiers on their customers. The issue is merely one of the mechanics of government access. There seems to be an agreement that such records have a 'high degree of usefulness' in the suppression of crime and that the threat to privacy involved in keeping these records is outweighed by the benefits supposedly accruing to the public from more efficient law enforcement.

The libertarian proposition that private affairs, particularly one's bank account, are simply none of the state's business has no serious support in liberal circles. They are troubled only if these records would show that you contribute to the Black Panthers or the Weathermen. It is in fact the old liberal distinction between economic freedom and political freedom, a distinction which makes it so difficult for the liberals to compose a principled defense of the right of privacy.


While the liberals dither, the state marches on. To locate holders of Swiss bank accounts, the IRS hit upon the device of using high-speed copiers to record the front of all air mail arriving from Switzerland. They then compared the postage meter number on the envelopes with meter numbers known to be used by certain Swiss banks and compiled a list of several hundred suspected account holders. It then picked 150 of these for audit. One of the lucky 150 has just lost a federal appeals court ruling that this method of surveillance violated his Fourth Amendment privilege against unreasonable search.

This case is an example of what can be accomplished when imaginative police work is coupled with the new hardware available to the state. It is unlikely that this method would have been practical with the volume of mail coming from Switzerland without the use of high-speed copying equipment. The government needed no "new powers" to carry out this successful investigation. The century-old postal monopoly was quite sufficient.

Davis Keeler's Money column alternates monthly in REASON with John J. Pierce's Science Fiction column. © 1975 Davis E. Keeler.