From: Michael Motyka <mmotyka@lsil.com>
Date: Thu, 26 Nov 1998 02:15:17 +0800
To: cypherpunks@toad.com
Subject: Re: [ISN] Feds Want Banks to Spy on All Customers...Even You! (fwd)
Message-ID: <365C3CDB.6F34@lsil.com>
MIME-Version: 1.0
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I spotted the *rhetorical* steel case in the first note.

The disturbing thing here is the requirement to report deviations from a
pattern. That is where it becomes a NaziReptilianProctoscope$ystem. It's
my fucking money, I can do whatever the fuck I want with it, whenever
the fuck I want to. I wish those fuckers would look at the Fourth
Amendment. 

The structuring stuff looks like it could get pretty wierd: how I move
my money should not matter but maybe it does.

Why do reptiles have such a bad name? Some of my favorite politicians
are reptiles. 

BTW - the FDIC site state that there is no statutory requirement for a
'Know Your Customer' system. You could also say that they are not
interested in little guys, that they need this stuff to do their job,
but if the laws are written so that anyone can be targeted without a
warrant then there is a *big* problem. Especially worrisome is automated
pattern analysis without a warrant - a violation of the 4th.

So, what are the alternatives to keeping your money in a standard
financial institution? 

Seems to me that keeping it at home is pretty risky - eventually some
low-life will figure it out and then you'll have to choose between your
cash and your left nut.

Keeping it all tied up in goods is not any bargain either. A small
fraction perhaps...

Mike

>From the FDIC site.

Pardon the formatting - it's straight from the .gov.

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http://www.fdic.gov/search97cgi/s97_cgi.exe?action=View&VdkVgwKey=http%3A%2F%2Fwww%2Efdic%2Egov%2Fbanknews%2Fmanuals%2Fexampoli%2F98FINREC%2Ehtm&DocOffset=1&DocsFound=11&QueryZip=know+your+customer&Collection=www&SortField=Score&SortOrder=Desc&SearchUrl=http%3A%2F%2Fwww%2Efdic%2Egov%2Fsearch97cgi%2Fs97%5Fcgi%2Eexe%3Faction%3DFilterSearch%26QueryZip%3Dknow%2Byour%2Bcustomer%26Filter%3Dfilters%252Fallwww%252Ehts%26ResultTemplate%3Dfdic%252Ehts%26QueryText%3Dknow%2Byour%2Bcustomer%26Collection%3Dwww%26SortField%3DScore%26SortOrder%3DDesc%26ResultStart%3D1%26ResultCount%3D25&ViewTemplate=view%2Ehts&ServerKey=Primary&AdminImagePath=&Theme=Power&Company=FDIC


"Know> <Your> <Customer>"
                  Policy

                  One of the most important, if not the most important
means by which financial
                  institutions can hope to avoid criminal exposure to
the institution from customers who
                  use the resources of the institution for illicit
purposes is to have a clear and concise
                  understanding of each customer's practices. The
adoption of "<know> <your>
                  <customer>" guidelines or procedures by financial
institutions has proven extremely
                  effective in detecting suspicious activity by
customers of the institution in a timely
                  manner. 

                  Even though not required by regulation or statute, it
is imperative that financial
                  institutions adopt "<know> <your> <customer>"
guidelines or procedures to enable
                  the immediate detection and identification of
suspicious activity at the institution. The
                  concept of "<know> <your> <customer>" is, by design,
not explicitly defined so
                  that each institution can adopt procedures best suited
for its own operations. An
                  effective "<know> <your> <customer>" policy must, at a
minimum, contain a clear
                  statement of management's overall expectations and
establish specific line
                  responsibilities. While the officers and staff of
smaller banks may have more frequent
                  and direct contact with customers than their
counterparts in large urban institutions, it
                  is incumbent upon all institutions to adopt and follow
policies appropriate to their size,
                  location, and type of business. 

                  Objectives Of "<Know> <Your> <Customer>"
                  Policy

                    1.A "<know> <your> <customer>" policy should
increase the likelihood the
                       financial institution is in compliance with all
statutes and regulations and adheres
                       to sound and recognized banking practices. 
                    2.A "<know> <your> <customer>" policy should
decrease the likelihood the
                       financial institution will become a victim of
illegal activities perpetrated by a
                       customer. 
                    3.A "<know> <your> <customer>" policy that is
effective will protect the good
                       name and reputation of the financial institution. 
                    4.A "<know> <your> <customer>" policy should not
interfere with the
                       relationship of the financial institution with
its good customers. 

                  At the present time there are no statutory mandates
requiring a "<know> <your>
                  <customer>" policy or specifying the contents of such
a policy. However, in order to
                  develop and maintain a practical and useful policy,
financial institutions should
                  incorporate the following principles into their
business practices: 

                    1.Financial institutions should make a reasonable
effort to determine the true
                       identity of all customers requesting the bank's
services; 
                    2.Financial institutions should take particular care
to identify the ownership of all
                       accounts and of those using safe-custody
facilities; 
                    3.Identification should be obtained from all new
customers; 
                    4.Evidence of identity should be obtained from
customers seeking to conduct
                       significant business transactions; and 
                    5.Financial institutions should be aware of any
unusual transaction activity or
                       activity that is disproportionate to the
customer's known business. 

                  An integral part of an effective "<know> <your>
<customer>" policy is a
                  comprehensive knowledge of the transactions carried
out by the customers of the
                  financial institution. Therefore, it is necessary that
the "<know> <your>
                  <customer>" procedures established by the institution
allow for the collection of
                  sufficient information to develop a "transaction
profile" of each customer. The primary
                  objective of such procedures is to enable the
financial institution to predict with
                  relative certainty the types of transactions in which
a customer is likely to be engaged.
                  Internal systems should then be developed for
monitoring transactions to determine if
                  transactions occur which are inconsistent with the
customer's "transaction profile". A
                  "<know> <your> <customer" policy must consist of
procedures that require proper
                  identification of every customer at the time a
relationship is established in order to
                  prevent the creation of fictitious accounts. In
addition, the bank's employee education
                  program should provide examples of customer behavior
or activity which may
                  warrant investigation. 

                  Identifying The Customer

                  As a general rule, a business relationship with a
financial institution should never be
                  established until the identity of a potential customer
is satisfactorily established. If a
                  potential customer refuses to produce any of the
requested information, the
                  relationship should not be established. Likewise, if
requested follow-up information is
                  not forthcoming, any relationship already begun should
be terminated. 



Structured Transactions

                  Section 103.53 prohibits the structuring of
transactions for the purpose of evading the
                  currency transaction reporting requirements. Anyone
who causes or attempts to
                  cause a bank to fail to file a CTR or to file a false
CTR is covered under this section
                  as well as anyone who attempts to structure or assists
in structuring any transaction
                  with one or more domestic financial institutions. A
cash transaction in excess of
                  $10,000, which is subsequently withdrawn upon
realization that a CTR is being
                  prepared, should be reported as a possible attempt to
structure a transaction. See
                  also 31 U. S. C. 5324. 

                  Examiners should be alert to consecutive transactions
involving cash in excess of
                  $10,000. Suspect transactions should be pursued
further. The following are examples
                  of types of transactions that may be reviewed for
possible structuring activity: 

                    1.Cashed checks - pay particular attention to
multiple items cashed by the same
                       person. 
                    2.Cash deposits. 
                    3.Savings withdrawals/certificates of deposit
redemptions. 
                    4.Personal money orders or official checks sold. 
                    5.Official checks sold or cashed - look for
consecutive items. 
                    6.Savings Bonds sold or redeemed. 
                    7.Traveler's checks sold or cashed. 
                    8.Loan payments or loan proceeds made in cash. 
                    9.Securities sold or purchased for cash if the
financial institution acts as agent for
                       an individual and the transaction involves more
than $10,000.