Letter to the House Urging Opposition to the "Financial Anti-Terrorism Act of 2001"; the Oxley Bill

Dear Representative:

We urge you to oppose the "Financial Anti-Terrorism Act of 2001" (the "Oxley bill"). This legislation will be on the floor as early as Wednesday, October 17. While there is a need to shut down the financial resources used to further acts of terrorism, this legislation goes far beyond its stated goal of combating international terrorism. Instead, the legislation provides the government with more tools to invade our privacy and undermines basic constitutional protections against unfair government penalties.

First, the Oxley bill would continue the unfortunate trend of expanding government access to personal financial information rather than safeguarding it against intrusion. This bill would encourage financial institutions to monitor daily financial transactions even more closely and then require them to share information with other federal agencies, including foreign intelligence agencies such as the CIA. In 1992, Congress amended the Bank Secrecy Act to authorize the Treasury Department to require "Suspicious Activity Reporting." In essence, this amendment gave the Treasury Department a blank check to require reporting of any "suspicious transaction relevant to a possible violation of law or regulation." Suspicious activity reports are not limited to anti-terrorist activities or even money laundering, but rather go to violations of any law or regulation. Section 207 of the bill extends immunity for such disclosures established under current law to explicitly include contract law. This could mean that the privacy policies established under the Gramm-Leach-Bliley Act would be trumped when companies disclose information thought merely to be relevant to violations of any law or regulation.

Section 119 requires that, in addition to law enforcement, intelligence agencies, such as the CIA, would also receive suspicious activity reports. These reports are usually about wholly domestic transactions of U.S. citizens, and do not relate to foreign intelligence information. In addition, Section 119 would allow law enforcement and intelligence agencies to get easy access to individual credit reports without notice or third party review. Through these provisions, the CIA would be put back in the business of spying on Americans, and law enforcement and intelligence agencies would have access to a range of personal financial information without ever showing good cause as to why such information is relevant to a particular investigation.

In combination with current law, these requirements would encourage banks to implement far-reaching programs that analyze and collect data on every day banking activity and then hand over the detailed activity reports to the government based on mere suspicion of wrongdoing.

Finally, Title III would eliminate any expectation of financial privacy in foreign jurisdictions or in international transactions.

Second, Sections 101, 102, and 103 of the Oxley bill would undermine the goals of the Civil Asset Forfeiture Reform Act (CAFRA) that was enacted only a year ago. Section 101 purports to create a new crime of "bulk cash smuggling" in an attempt to overturn a Supreme Court decision interpreting the Eighth Amendment. This "new" crime would prohibit individuals from knowingly concealing more than $10,000 in currency with the "intent to evade a currency reporting requirement under section 5316." Section 5316 of title 31already requires an individual to report the transport of more than $10,000 in cash into or out of the United States, and failure to report such currency transactions is already punishable under current law.

Instead, it appears Section 101's primary purpose is not to create a new tool in the fight against money laundering, but rather to evade the holding of the Supreme Court decision in United States v. Bajakajian, 524 U.S. 321 (1998). In that case, a person was prosecuted for failing to report that he was traveling out of the country with more than $10,000. The money was lawfully earned, so the man's only "crime" was his failure to report the cash to the U.S. Customs Service. Even so, the government seized all of the money and refused to return it.

For the first time in history, the Court applied the Eighth Amendment to a forfeiture case and ruled that the government had violated the excessive fines clause. In an opinion by Justice Thomas, the Court held forfeiture of $357,144 for a mere currency reporting violation was "grossly disproportional" to the gravity of the offense and was thus unconstitutional.

This bill would attempt to get around the Bajakajian decision by requiring an individual to show the currency was legally obtained and intended for a lawful purpose before a court could even consider what fine would be "grossly disproportionate" to the reporting violation. The government should bear the burden of proving wrongdoing rather than imposing a burden on the individual to prove innocence.

In addition, Section 102 of the bill would extend harsh forfeiture penalties to run-of-the-mill reporting violations under the tax code. The Internal Revenue Service (IRS) requires individuals and business owners to report any business transactions involving more than $10,000 in cash. The Oxley bill would extend forfeiture penalties to run-of-the-mill violations of IRS reporting requirements. For example, a small contracting firm that receives $11,000 in cash for installing a kitchen and fails to report the transaction to the IRS, could be required to forfeit the entire payment.

Section 103 of the bill on "Interstate Currency Couriers" would combine the law enforcement abuses of racial profiling and civil asset forfeiture. Under current civil forfeiture law, the government can already seize cash from persons traveling if it believes the cash was unlawfully obtained. Once the cash is taken, it is difficult, if not impossible, for the innocent person to have that cash returned. DEA agents seized $9,600 from a man named Willie Jones. The DEA claimed that the money was the proceeds of a drug crime. In fact, Mr. Jones was carrying the lawfully-earned money in order to purchase shrubbery for his nursery. Mr. Jones was never criminally prosecuted and he did not seek to have the money returned because he believed that any money he recovered would be consumed in legal fees. Jones told the Pittsburgh Press on April 5, 1992, "I don't wear gold chains or jewelry and I don't get into trouble with the police. I didn't know it was against the law for a 42-year-old black man to have money in his pocket."

Section 103 would make it illegal to conceal while traveling either in a car or on public transportation, more than $10,000, if the money was illegally obtained. While the government has to prove beyond a reasonable doubt that the money was obtained illegally or the person was "willfully blind" as to its source, it only needs probable cause to seize the money under asset forfeiture laws. Making it a crime to carry large amounts of money would encourage forfeiture abuses and lead to more cases like that of Mr. Jones. Even individuals who are acquitted or never charged criminally will be left in the position of having to fight with the government to get their property back.

This provision may impact, disproportionately, people of color and immigrants in two ways: these groups of people often have a more difficult time getting access to sources of credit and bank accounts and so use cash transactions more frequently than do others; and people of color are more likely to be stopped when driving or using public transportation, and so will be subjected to this provision disproportionately.

Finally, if the Oxley bill becomes law, Federal officials could open anyone's outgoing international mail. Under current law, the Customs Service is empowered to search without a warrant inbound mail handled by the United States Postal Service (USPS), and packages and letters handled by private carriers such as Federal Express and the United Parcel Service. This power derives from the traditional authority of the sovereign to protect its borders against inbound contraband, and to collect duties on inbound freight. Section 121 would expand this authority to enable the U.S. Customs Service to search outbound mail without a warrant, judicial supervision, or even a "reasonable suspicion" of a crime. That means customs officials could open anyone's international mail sent through the USPS or a private carrier. Congress has in the past repeatedly rejected similar proposals and it has no place in the anti-terrorism bill.

As the United States Postal Service wrote: "For the first time in America's 225-year history, [Section 121] would allow sealed, outbound International Mail to be stopped and searched at the border without a warrant. There is no evidence that eroding these long established privacy protections will bring any significant law enforcement improvements over what is achieved using existing, statutorily-approved law enforcement techniques." (Letter to Chairman Oxley from the USPS, dated October 10, 2001.)

The ACLU recognizes the need to shut down the financial roots of terrorist activities, but this legislation casts a broad net that would undermine innocent people's civil liberties without any showing that the provisions to which we object would effectively get at the source of the problem. Again, we urge you to reject the "Financial Anti-Terrorism Act of 2001."

Sincerely,

Laura W. Murphy
Director

Katie Corrigan
Legislative Counsel