Do We Spy On Our Members?

The news reports over the last few days detailing the extensive nature of the government’s data collection efforts make this as good a time as any to broach a question that’s been bugging me for a long time now.  Does the government have too much power to compel financial institutions – both credit unions and banks — to disclose personal financial information about their members and customers?  Increasingly, I think the answer is yes.

First, does the ability of the federal government to track financial activity through suspicious activity reports (SARS) help thwart terrorism?  Absolutely, but as anyone involved with the financial industry knows, the information collected extends well beyond terrorism or, for that matter, any activity that could pose a direct and imminent threat to citizens.  Elliot Spitzer maybe guilty of incredible hubris and extremely bad judgment, but is he a terrorist, drug dealer or money launderer?  Remember that the government only discovered Client No. 9 because of a SARS.

And the truth is that every year, financial institutions are coerced into filing more and more SARs involving potential criminal activity using a standard that would get a prosecutor laughed out of court if he tried to use it to subpoena someone’s bank documents.  How are you coerced?  Well, the way the regulatory scheme is set up, if there is any doubt at all as to whether or not you should file a SAR, the safe thing to do is to file it.  The member can’t sue you and how many of you have been criticized by your examiner for filing too many SARs and opposed to too few?

What’s the big deal, you say, my members aren’t criminals and they don’t find out about SAR filings anyway.  Okay, fair enough, so starting tomorrow I want you to post the following sign in your credit union lobby:

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