Dangerous Deputies

Car dealers shouldn't be citizen soldiers


One night a few weeks ago, I was half-watching a black-and-white, early '60s episode of The Andy Griffith Show on TV LAND (Episode 60, "The Bookie Barber"), when, all of a sudden, the homespun wisdom of Griffith as Sheriff Andy Taylor touched on today's heated debate over how to balance individual privacy with security. Andy responded to a suggestion by his deputy Barney Fife by saying: "You can't ask a private citizen to become a police spy. It's too dangerous. Something could go wrong." The statement jolted me, and I thought, if only Sheriff Taylor had been there to offer this profound piece of advice to the Republicans and Democrats writing the USA PATRIOT Act.

Title III of the act, which contains provisions to counter money-laundering, requires a host of private businesses to become "police spies" on their customers. These little-known provisions of the much-talked about law draft a substantial number of private-sector employees as citizen soldiers in the war on terrorism as well as on the broadly-defined crime of "money laundering."

Do you think I'm exaggerating when I say "citizen soldiers"? Well, I'm only using the very terminology of one of the chief defenders of these provisions, former Treasury Department general counsel David Aufhauser. While at Treasury in 2002, Aufhauser gave this candid statement to The Washington Post: "The Patriot Act is imposing a citizen-soldier burden on the gatekeepers of financial institutions." He justified what he admitted was an enormous burden on businesses by saying "they are in the best position to police attempts by people who would do ill to us in the U.S. to penetrate the financial system."

Just as importantly, the PATRIOT Act also redefines the term "financial institution" to include a broad swath of businesses. The law gives the Feds the authority to apply "know your customer" requirements to securities firms, insurance companies, real estate brokers, auto dealers, jewelry stores, as well as any other business the government finds has "a high degree of usefulness in criminal, tax, or regulatory matters." New intelligence bills that have recently passed both the House and the Senate also include these businesses as "financial institutions" for the purpose of "national security letters," broad ranging administrative subpoenas for records that the FBI can send to the businesses without judicial oversight.

But as Aufhauser admitted, what Title III requires of these businesses is more than just complying with search warrants or subpoenas. They must actively monitor their customers, report transactions over a certain amount and also file what Treasury's Financial Crimes Enforcement Network, or FinCEN, calls "suspicious activity reports" on certain transactions that deviate from customers' normal patterns. Failure to report "suspicious activity" can result in civil or criminal penalties set by the Patriot Act. Since Sept. 11, FinCEN applied the financial monitoring requirements to brokerage houses, casinos, and so-called "money service businesses," a category that includes small convenience stores that process money orders or sell smart cards. It has also drafted rules for real estate agents, travel agents, and auto dealers. And that imposes great burdens on small entrepreneurs, who face increased costs and must file reports on their legitimate customers.

Small business people aren't the only ones being hurt. For banks, insurance companies, and securities companies alone, the financial-services research firm Celent Communications LLC estimates compliance with the anti-money laundering provisions will cost $10.9 billion by the end of 2005. Yet law enforcement and counterterrorism experts I spoke to maintain these regs will do little to stop terrorism. Even before the PATRIOT Act banks sent more than 12 million reports to FinCEN in 2000, and economist and former Bush administration official Lawrence Lindsey had estimated that banks file 100,000 reports on innocent customers for every one money laundering conviction. Adding the "know your customer" requirements to other businesses likely will only make the needle harder to find in an even bigger haystack.

Andy Taylor didn't say what exactly it was that could go wrong when private citizens are deputized as police spies, but I think his common-sense reasoning would cast doubt on the PATRIOT Act provisions. If businesses face criminal penalties for not reporting what the government determines to be "suspicious activity," employees will have an incentive to overreport, flooding the system with reports on legitimate transactions that they may find the slightest bit suspicious. And knowing how human nature can make even the good citizens of Mayberry act foolishly on impulse, Andy also could probably imagine another scenario. There are penalties for misuse of "suspicious activity" reporting, but knowing that a customer will likely never find out a report was filed on him, (since businesses are forbidden to tell their customers when they have filed reports), it's not a weak possibility that somewhere, someplace an employee will file a report on a customer who has made him mad. "You were rude to me" or "You knocked up my sister, so I'm going to report you to the Feds," an employee might say to himself.

In terms of impacting privacy rights as well as costs to the economy, Title III is one of most dramatic provisions of the Patriot Act. Businesses file reports to the government with sensitive data, such as Social Security numbers, of many customers who are perfectly innocent, and this information is shared upon request with domestic and foreign law enforcement agencies, often without any evidence at all. And there are few, if any, barriers to including this information in a Total Information Awareness-style database. After all, it would technically satisfy conditions that TIA defenders say they agree to: The government would only be using data it already had, even though the only reason the government had the information was that it forced businesses to give it to them.

Yet as intrusive to privacy as Title III is, it's also one of the provisions that has been the least talked about by critics of the PATRIOT Act. It's only recently received attention in the mainstream media when it was revealed that the FBI used the money laundering provisions for an extensive search of a Las Vegas strip club owner who was suspected of political corruption, not terrorism. Newsweek's Michael Isikoff then revealed that two-thirds of these money-laundering searches had no apparent connection to terrorism. Politicians expressed outrage, but none of the bills introduced in Congress to roll back parts of the PATRIOT Act, including the bipartisan SAFE Act in the Senate, even touch Title III. The reason could be that Title III was largely the handiwork of Senate Democrats.

Although to their credit, some liberal groups, such as the American Civil Liberties Union, have been critical of money-laundering laws, many liberal Democrats in Congress let their anti-business ideology trump privacy concerns. At a November 2001 Senate hearing, then-Senate Banking Committee Chairman Paul Sarbanes, D-Maryland, asked FinCEN director James Sloan why it was taking so long to require money service businesses such as convenience stores to monitor their customers and never asked one question about privacy concerns. It was a money-laundering bill sponsored by Sarbanes that became Title III of the PATRIOT Act at Democrats' insistence. House Republicans and the Bush administration had wanted to take up money laundering as a separate bill, but Democrats threatened to hold up the entire package if Sarbanes' amendment was not included.

An Oct. 2001 article in the newspaper The Hill quotes then-Senate Majority Leader Tom Daschle, D-S.D., as saying that a bill without Sarbanes's money-laundering provisions was "just something we cannot accept." Similarly, Sen. John Kerry, D-Mass., who now is attacking the PATRIOT Act in his presidential campaign, "criticized the House Republican leadership for separating the anti-money laundering bill from the counterterrorism package 'by fiat'" and "underlined the political influence of Texas bankers," according to the Associated Press. And former Clinton administration National Security Council official William Wechsler proudly told me that, especially in regard to the money-laundering section, "there are a lot of provisions of the PATRIOT Act that the Clinton administration had asked for."

Yet this initial Democratic support doesn't let Republicans and conservative defenders of the PATRIOT Act off the hook for the anti-business and anti-privacy Title III. Not only did the Bush administration and the GOP congressmen fold to the Democrats, but in defending the PATRIOT Act, the Ashcroft Justice Department has actually praised the provisions. The DOJ's tax-supported pro-PATRIOT Act website, LifeandLiberty.gov, quotes Democrats who back Title III, such as Kerry and Sen. Carl Levin of Michigan. And there seems to be an eerie silence at the pro-PATRIOT Act National Review, which had opposed Title III in its initial stages. An October 2001 "Washington Bulletin" on National Review Online by John J. Miller and Ramesh Ponnuru referred to the money laundering provisions that Senate Democrats were pushing as "bad" and "illustrations of the dangers of lawmaking during a crisis." But NR doesn't seem to have said a word about these provisions in its current effort to defend the PATRIOT Act from the growing number of critics on the right. Instead, comments like editor Rich Lowry's sarcastic suggestion that Patriot Act critics "bundle their proposals together and call them 'The Zacarias Moussaoui Protection Act'" mock the conservative values NR should be defending.

My fellow conservatives who campaign against burdensome regulations on the free market must speak out about the burdens of Title III. Especially because nearly every conservative knows that regulations that costs billions of dollars are passed on to consumers.

I, for one, am with the sound advice Sheriff Andy Taylor on this. All American citizens, including businessmen, should be vigilant. And it goes without saying that authorities should swiftly punish those who knowingly help finance terrorism. But in a free society, business owners and employees should not be compelled by the force of law to become deputized police investigators who have to scrutinize their customers for the slightest "suspicious activity." It's time to end the tour of duty of the "citizen soldiers" and let them go back to being private citizens running their businesses.

(Special thanks to the Mayberry.com web site for filling in details about this episode of The Andy Griffith Show.)