Banks tip off government to possible money laundering, fraud
WASHINGTON – Each year, federal agents peek at the financial transactions of millions of Americans – without their knowledge.
The same type of information that raised suspicions about New York Gov. Eliot Spitzer is reviewed every day by authorities to find traces of money laundering, check fraud, identity theft or any crime that may involve a financial institution.
As concerns about fraud and terrorist financing grow, an increasing number of suspicious deposits, withdrawals and money transfers are being reported by banks and others to the federal government. Banks and credit unions as well as currency dealers and stores that cash checks reported a record 17.6 million transactions to the Financial Crimes Enforcement Network in 2006, according to a report from the network, a bureau of the U.S. Treasury Department.
“I don’t think Americans understand that their financial transactions are being reported and routinely examined,” said Barry Steinhardt of the American Civil Liberties Union.
The Treasury Department’s database now contains records of more than 100 million financial transactions going back to at least 1996, said network spokesman Steve Hudak.
Teams of agents from the FBI, IRS, Drug Enforcement Administration and other agencies regularly review newly filed financial reports and launch investigations. Federal and local authorities search the database to find information about people that can help ongoing probes. Treasury Department analysts study the reports to detect trends in fraud and issue reports alerting financial institutions.
“The government has access to untold volumes of records and can draw all sorts of conclusions about us, and many are going to be wrong,” Steinhardt said.
Bankers disagree. “For the typical bank customer, this means very little because there’s nothing they’re doing that’s likely to be viewed as out of the ordinary,” said Richard Riese, head of regulatory compliance for the American Bankers Association.
The reporting system dates to the early 1970s when federal agents sought to pinpoint drug dealers by looking for people making large cash deposits.
Financial institutions have long been required to report cash transactions over $10,000. Those reports – simple notices of a deposit or withdrawal – account for more than 90% of the records the enforcement network gets each year.
Far more controversial are secret “suspicious activity reports” filed by financial institutions and reviewed by teams of agents spread around the country. The investigation of Spitzer began when a bank spotted potentially suspicious transfers from several accounts and filed reports with the IRS, according to a federal official who spoke on condition of anonymity. The official did not want his name used because he’s not authorized to discuss the case publicly.
The number of suspicious activity reports soared from 413,000 in 2003 to 1 million in 2006, according to the enforcement network.
Federal law requires the reports to remain secret. They are written by officers at financial institutions who specialize in detecting suspicious activity, such as a series of large transactions.
The analysis can protect customers by spotting unusual withdrawals that may indicate fraud, said Robert Rowe, senior regulatory counsel of the Independent Community Bankers of America.
Many of the reports are a waste, said Riese of the bankers association. “We’re reporting on a lot of things everybody knows law enforcement doesn’t have the resources to pursue,” he said.
Hudak said the “vast majority” of reports “are filed for a good reason. … There are law enforcement officials and investigators who use these reports and read them every day.”
By Thomas Frank
From: USA TODAY