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Ron Paul Dear Colleague on Know Your Customer as Violating Civil Liberties

Ron Paul Dear Colleague on Know Your Customer as Violating Civil Liberties
April 29, 1999

(J. Bradley Jansen was Ron Paul’s legislative staffer for these issues at the time)

“The intended targets of the [Know Your Customer] regulations [i.e., the criminals] will most likely find ways to get around these requirements…It seems unlikely that individuals who smuggle drugs, commit murder or engage in other criminal acts will be seriously discouraged from those acts by the prospect of having to lie to a banker.”
a bank compliance manager in a letter to regulators

April 29, 1999
Dear Colleague,

This dragnet approach of violating everyone’s civil liberties in the hopes of removing drugs from the streets has failed. The public outrage over the proposed formal Know Your Customer rule, and under the informal requirement under the Bank Secrecy Act,

American Bankers Association surveyed their members (“Money Laundering Deterrence and Bank Secrecy Act Research Report,” 1990) and found that after nearly two decades of reporting requirements and with 86% of responding banks already having a Know Your Customer policy in place (and with a ninefold increase in Currency Transaction Report filings in the previous four years), only 7% of responding banks were “aware of any prosecution cases that resulted from their filing of CTRs, or from their reporting of a suspicious currency transaction.”

This violation of privacy imposes a great cost with little benefit. The Independent Bankers Association of America’s letter to regulators regarding the Know Your Customer proposal read, “There has been no indication of instances when these reports have been successfully utilized in the prosecution of criminal activities . . . Therefore, given the lack of demonstration of benefits from any prior reporting that has been required under the Bank Secrecy Act, it is clear to the IBAA that the costs of the proposal would outweigh any minuscule benefits many thousand times over . . . The IBAA and others have encouraged law enforcement officials to share the results of these efforts with banks, but there has been little evidence that would convince banks that their compliance with the Bank Secrecy Act is providing useful information leading to prosecution and conviction of criminals.”

To cosponsor HR 516, the Know Your Customer Sunset Act, and HR 518, the Bank Secrecy Sunset Act, please contact Bradley at 225-2831.


Ron Paul