CONTINUING THE STRUGGLE ON RIGHT TO PRIVACY
======================================================================
SCAN THIS NEWS
Following is a copy of the official Federal Register announcement that the
FDIC (and other involved banking regulatory agencies) are abandoning their
proposed "Know Your Customer" regulations. Thanks to Declan McCullagh for
sending it along to us.
The relevance of this event cannot be expressed strongly enough. This,
however, is by no means the first such defeat of a proposed regulation,
though it is probably the most significant thus far.
There are lessons to be learned. The act of objecting to regulations does
not equate with the almost worthless act of phoning your Congressman and
pleading with him (or her) to vote a certain way on any given bill.
Objecting to regulations is far more weighty than that. Objecting to
regulations is part of a very formal legal process which is established in
the Administrative Procedures Act (APA) - the law that "regulates" state and
federal agencies. Under the APA (state and federal versions respectively),
government agencies must publish every newly proposed regulation if it has
an impact on the public. And, they must provide an opportunity for the
public to submit comments or objections. After the period for public comment
is over, the agency must consider all comments and respond to objections if
they choose to go forward and adopt the regulation notwithstanding the
objections. The agency must announce the number of comments they received,
and the basis for objections. As you will see below, the FDIC followed this
format. In all such cases where a regulation is adopted where objections
were filed, the objections serve as a basis for future legal challenges. So,
objections are much more than just complaints, they are formal legal
challenges. This is why filing objections is so important in the rulemaking
process.
Credit goes to all the INDIVIDUALS who took the time to draft letters (and
emails) and to send them in to the FDIC. It was people getting actively
involved - not waiting on their representatives to take of the matter for
them - that made the difference. Credit also goes to all the Web-based news
outlets that made this issue the focus of many articles and reports.
No small amount of credit also goes to attorney Larry Becraft for his
bringing to light this important legal and political tool (publicly
objecting to agency regulations) for use in combating rights-violating
regulations. Here is a brief history of Larry's influence and involvement. I
believe it is relevant at this time.
In 1997, the State of Alabama Department of Public Safety initiated a
program to begin requiring fingerprints on driver's licenses. The state
agency had already purchased new fingerprinting equipment and had even
already installed the high-tech devices at several locations throughout the
State. A group of concerned citizens posed a question to Huntsville attorney
Larry Becraft, as to what could be done to stop the State's plan. Mr.
Becraft explained how the agency was bound by the State's Administrative
Procedures Act. He explained that the licensing agency was instituting the
fingerprint requirement as a regulation and that, if effective objections
were filed with the agency during the comment period there was chance to
stop the regulation prior to its implementation. Mr. Becraft immediately
drafted a letter objecting to the DPS's proposed regulation. His letter was
followed by dozens more submitted by other objectors throughout the State.
On the very day that the regulation was to go into effect, Alabama's
Governor announced that, as a result of the objections, the State was
abandoning the fingerprint plan and that the fingerprint equipment would be
quickly removed.
Later, that same year, The State of Alabama Revenue Department - the agency
responsible for maintaining motor vehicle registration records - proposed a
rule to implement the federal Driver's Privacy Protection Act (DPPA). This
deceptively named Act purported to impose an unconstitutional requirement
upon all states that they must discontinue the practice of releasing
driver's records to the public under the pretext of "protecting the public's
privacy." But the reality was that the DPPA made drivers' records
indiscriminately available to every other federal and state agency
throughout the country. And, the DPPA also authorized states to sell
information to database companies for use in "crime prevention" programs -
as well as a multitude of other approved uses. But worse still, the DPPA
violated every principle of state's rights. Mr. Becraft recommended to SCAN
that a campaign of objections should be begun to preclude implementation of
the unconstitutional DPPA regulation. Having found out about the proposal
only one week prior to its going into effect, SCAN quickly drafted a single
letter of objection to the proposed regulation and presented it to the
agency on the occasion of a public hearing held at the State's Capitol. SCAN
was the only party in Alabama to object to the DPPA-implementing regulation.
As a result, the regulation was placed on hold and ultimately the State's
Attorney General filed suit in federal court challenging the
Constitutionality of the DPPA. Shortly thereafter, in 1998, a federal court
ruled that the DPPA was unconstitutional as a violation of the fundamental
principles of dual sovereignty.
In June of 1998, the U.S. Department of Transportation published in the
Federal Register a proposed regulation to standardize all state-issued
driver's licenses, effectively setting up a national ID program. Knowing
well in advance that the regulation was soon forthcoming as a result of
requirements imposed at Section 656 of the 1996 Immigration Reform Act, SCAN
kept in constant contact with the DOT's legal department for almost a year
awaiting release of the proposal. On the day it was published in the Federal
Register, SCAN sent out an announcement about the DOT regulation. Attorney
Becraft immediately drafted a legal objection to the DOT/National ID
proposal with anticipation that further legal challenges under the
administrative process may be necessary. Over 2,500 letters of objection
were ultimately filed with the DOT and in the Fall of 1998 Congress
suspended implementation of the National ID placing a one year moratorium on
any further action.
In the Winter of 1998, the Wall Street Journal first mentioned that banking
regulators were drafting Know Your Customer regulations to be made public
soon. Shortly thereafter, the email newsletter "The Christian Alert Network"
(TCAN) reprinted portions of an early draft of the FDIC version of the KYC
proposal. Thanks almost solely to Internet mail, dedicated web pages, and
web-based news outlets (particularly WorldNetDaily and WIRED Magazine)
alerting people to the regulation and informing them as to what they could
do to combat it, over 250,000 letters of objection were eventually filed
with the FDIC. Now, in early 1999, banking regulators formally announced
that they have withdrawn their proposal due to the public's objections.
Scott
-----------------------------------------------------
Larry Becraft's letter of objection to fingerprint law in Alabama
http://www.networkusa.org/fingerprint/page2/fp-letter-becraft1.html
Dozens of letters of objection were submitted.
Outcome: Proposal was withdrawn by the Governor
SCAN objection to DPPA implementing regulation in Alabama
http://www.networkusa.org/fingerprint/page1b/fp-dmv-reg-objection.html
One letter of objection was filed with the state administrative agency.
Outcome: State Attorney General filed suit challenging the DPPA.
Larry Becraft's letter of objection to the DOT National ID, submitted
just a few days after the proposed regulation was first published.
http://www.networkusa.org/fingerprint/page1b/fp-dot-becraft-reg-obj.html
Over 2,500 letters of objection were eventually submitted to the DOT.
Outcome: Congress placed a one year moratorium on implementation.
Larry Becraft's letter of objection to the Know Your Customer regulation.
http://www.networkusa.org/fingerprint/page1b/fp-becraft-fdic-kyc.htm
Ultimately, over 250,000 letters of objection were filed with the FDIC.
Outcome: All proposing agencies withdraw the proposal.
=======================================================================
Minimum Security Devices and Procedures and Bank Secrecy Act
Compliance
AGENCY: Federal Deposit Insurance Corporation.
-----------------------------------------------------------------------
SUMMARY: The Federal Deposit Insurance Corporation (FDIC) published a
Notice of Proposed Rulemaking in the Federal Register on December 7,
1998. The proposed regulation would have required state nonmember banks
to develop and maintain ``Know Your Customer'' programs. The FDIC
received 254,394 comments from the public during the comment period.
The overwhelming majority of the commenters were strongly opposed to
the adoption of the proposed regulation. After considering the issues
raised by the comments, and in view of the strong opposition to the
proposed regulation, the FDIC is withdrawing the Notice of Proposed
Rulemaking.
DATES: Proposed subpart C to part 326 is withdrawn on March 29, 1999.
FOR FURTHER INFORMATION CONTACT: Carol A. Mesheske, Chief, Special
Activities Section, Division of Supervision (202) 898-6750, or Karen L.
Main, Counsel, Legal Division (202) 898-8838.
SUPPLEMENTARY INFORMATION:
I. Background
On December 7, 1998, the FDIC published a proposed amendment to
Part 326 of the FDIC's Rules and Regulations, ``Minimum Security
Devices and Procedures and Bank Secrecy Act Compliance'' (63 FR 67529,
Dec. 7, 1998). The proposed amendment was intended to provide guidance
to state nonmember banks to facilitate and ensure their compliance with
existing federal reporting and recordkeeping requirements, such as
those found in the Bank Secrecy Act. It was intended to help protect
the integrity and reputation of the financial services industry and
assist the government in its efforts to combat money laundering and
other illegal activities that might be occurring through financial
institutions.
The proposed amendment required each state nonmember bank to
develop a program to determine the identity of its customers; determine
its customers' sources of funds; determine the normal and expected
transactions of its customers; monitor account activity for
transactions that are inconsistent with those normal and expected
transactions; and report any transactions of its customers that are
determined to be suspicious, in accordance with the FDIC's existing
suspicious activity reporting regulations.
The FDIC's proposal was substantially the same as the regulations
proposed by the Board of Governors of the Federal Reserve System, the
Office of the Comptroller of the Currency, and the Office of Thrift
Supervision in December 1998. The FDIC issued the proposed amendment
pursuant to its authority under section 8(s)(1) of the Federal Deposit
Insurance Act (FDI Act) (12 USC 1818(s)(1)), as amended by section
2596(a)(2) of the Crime Control Act of 1990 (Pub. L. 101-647), which
requires the FDIC to issue regulations directing banks under its
supervision to establish and maintain internal procedures reasonably
designed to ensure and monitor compliance with the Bank Secrecy Act.
The FDIC also relied on its general rulemaking authority under section
9(a) of the FDI Act (12 USC 1819(a)).
II. Comments Received
During the comment period, the FDIC received 254,394 comments from
the public. Comments were received from community banks, multinational
or large regional banks, members of Congress, trade and industry
research groups, and regulatory bodies, as well as the general public.
Only 105 commenters were in favor of the proposed regulation.
The overwhelming majority of commenters were individual, private
citizens who voiced very strong opposition to the proposal as an
invasion of personal privacy. Other issues raised by these commenters
included that the FDIC lacked the authority to issue the proposal; the
cost of any Know Your Customer program would be passed on to customers;
and the regulation would be ineffective in preventing money laundering
and other illicit financial activities.
Banks, bank holding companies and other banking trade groups that
commented on the proposal uniformly opposed the proposed amendment.
Their concerns included the following: (1) the regulation would be very
costly to implement, especially for small banks; (2) the Know Your
Customer program would invade customer privacy; (3) commercial banks
would be unfairly disadvantaged and lose customers if all segments of
the financial services industry are not covered; (4) compliance with
the regulation would divert resources from Y2K preparation; (5) the
FDIC lacks authority to adopt the regulation; (6) public confidence in
the banking industry would be harmed by the regulation; and (7) the
regulation is both unnecessary and redundant, as banks are already
familiar with their customers and have adequate procedures in place.
III. Paperwork Reduction Act
The FDIC submitted a collection of information associated with the
Know Your Customer proposed rulemaking to the Office of Management and
Budget for review. That request for review is withdrawn.
IV. Board Decision
The FDIC has carefully reviewed every comment received during the
90-day comment period. Based upon that review, and in light of the
overwhelming objections raised by the public, the FDIC's Board of
Directors has decided to withdraw the proposed regulation.
-----Original Message-----
From: Declan McCullagh owner-politech@vorlon.mit.edu
...But current laws are already invasive. Background:
-----------------------------------------------------------------------
POLITECH -- the moderated mailing list of politics and technology
To subscribe: send a message to majordomo@vorlon.mit.edu with this text:
subscribe politech
-----------------------------------------------------------------------
[The above POLITECH notice is from Declan McCullagh's email newsletter]
=======================================================================
Don't believe anything you read on the Net unless:
=======================================================================
Reply to: =======================================================================
To subscribe to the free Scan This News newsletter, send a message to
-----------------------------------------------------------------------
"Scan This News" is Sponsored by S.C.A.N.
=======================================================================
INDEX
3/29/99
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 326
RIN 3064-AC19
ACTION: Withdrawal of notice of Proposed Rulemaking.
By Order of the Board of Directors.
Dated at Washington, D.C. this 23rd day of March, 1999.
Federal Deposit Insurance Corporation
Robert E. Feldman,
Executive Secretary.
[FR Doc. 99-7583 Filed 3-26-99; 8:45 am]
BILLING CODE 6714-01-P
Subject: FC: Feds abandon formal Know Your Customer regulation
http://www.wired.com/news/news/politics/story/18311.html
http://www.wired.com/news/news/politics/story/18271.html
More information is at http://www.well.com/~declan/politech/
1) you can confirm it with another source, and/or
2) it is consistent with what you already know to be true.
Or, to be removed type "unsubscribe scan" in the message BODY.
For additional instructions see www.efga.org/about/maillist.html
Host of the "FIGHT THE FINGERPRINT!" web page:
www.networkusa.org/fingerprint.shtml