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paparazzi

Bank Privacy Part I

by Bill Rounds Esq. on January 28, 2010

Reading time: 6 – 9 minutes

The ability to make and keep confidential relationships and have confidential communications is as vital to a free and independent people as the freedom of speech. Without the ability to think, speak, associate, and act in privacy, if you so choose, an individual cannot truly be autonomous. Just ask Justin Timberlake.  “The worst thing about being famous is the invasion of your privacy.”  If you are jealous of their fame, you can experience a similar degree of exposure as the uber-famous. Modern bank privacy rules treat us all like celebrities in the worst way. We have our own paparazzi who will chase us, in the form of banking surveillance, until we love them.  Maybe someone needs to get JT a copy of the How To Vanish book to show him how to protect his own privacy a little more.

Bank Privacy And Its Relation To Other Protected Forms of Privacy

In the US, there are still some fortresses of privacy. For example, communications between an attorney and a client are still subject to very rigorous protection from disclosure for almost any purpose. The state of California protects these communications better than any other state, and even conflicts with federal law in favor of privacy over disclosure. Doctor-patient relationships, priest-penitent, the marital relationship and a few others continue to be protected.

One of the most important things to keep private, however, is not protected, the ability to have financial  and bank privacy. The bank-depositor relationship is as important as almost any other protected relationship. Economic control over someone creates the relationship of master and servant.  If you are subject to scrutiny for every bank transaction, regardless of suspicion, you are threatened with that economic control and servitude. This is true regardless of whether or not the threat is carried out.  Even though your private bank has access to this information, the private bank does not have the power to arrest, prosecute, seize assets, or enforce capital punishment. Forced disclosure of account information puts the information in the hands of those who have that power.  If you do not like what one private bank does with your information, you can move to  a new private bank.  If you are a US citizen, you cannot move your money to a new jurisdiction if you do not like the economic control being used or threatened.  Do you love them yet?

Historical Examples Of Bank Privacy

Bank privacy has played a valiant role throughout history to improve the economic situation of entire countries and even to save the lives of thousands. Centuries ago, hawala banking sprang out of the Middle East and Asia, in part because the transactions prevented theft when transporting large amounts of money over long distances. More recently, the hawala system was used to bolster the legitimate economic needs of the people of Somalia when formal banking institutions, subject to the regular privacy demolishing disclosures, refused to deal with Somalia which was controlled by criminal gangs. When the US government restricted hawala transactions with Somalia, there was a massive meltdown of the support system for innocent Somali citizens and thousands of them suffered severe economic consequences. Do you love them yet?

But you’ve got to be kidding. How can bank privacy save lives? During the Hitler era in Germany, it became a capital offense for a German Jew to have a foreign bank account. In reaction to Germany executing a handful of Jews under this law, Switzerland increased the strength of its protection of bank privacy, making it a civil and criminal offense to release information on any account. The German government was no longer able to search the records of Swiss banks to persecute the depositors and thousands of German citizens were able to avoid execution. There is no guarantee that other oppressive countries will not attempt do the same thing now or in the future as Germany.

Current Legal Environment

Confidentiality and non-disclosure agreements are widely used in many economic situations, such as employment or purchase agreements for example, why not in banking? There are numerous laws and treaties which require forced disclosures of information about your bank accounts.  Several years ago, the US Supreme court decided United States v. Miller, holding that there is no expectation of privacy of information revealed to a third party, specifically considering bank records.  Although the correctness of this holding is arguable in the absence of an explicit confidentiality agreement, the reasoning behind the supreme court ruling has been contorted and stretched to the limit, not only permitting banks to disclose information regarding your account, but requiring them to.  Because the bank might divulge your secret, they must divulge it, regardless of suspicion of crime.

Abu Ghraib Prisoner Strip Search

FinCEN, the Bank Secrecy Act, the PATRIOT Act, and other laws prevent banks and depositors from exercising their right to confidentiality. Like surveillance cameras with motion sensors, every time you make a significant financial movement, the government is notified of your activity without your knowledge. These suspicionless financial strip searches “do not belong in a free country,” especially when they are conducted on US citizens who open bank accounts all over the world. The only other people subject to a strip search under such limited suspicion are prisoners. Still not in love?

Conclusion

The ability to live our lives free of financial surveillance is diminishing. Using the right combination of techniques to avoid financial surveillance like hawala banking, using cash and other techniques can keep you from being exposed.   It is important to at least become familiar with the best offshore jurisdictions that protect your bank privacy.  If you are more serious about bank privacy, you may consider becoming a resident of a country which has stronger bank privacy laws.  If you wonder about whether your banking practices might incur legal liability in the US you should seek an attorney to advise you on those issues.  Protecting bank privacy can also help you to avoid tax liability when traveling outside of the tax free states.

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4 comments

ABOUT THE AUTHOR: Bill Rounds, Esq. is a California attorney. He holds a degree in Accounting from the University of Utah and a law degree from California Western School of Law. He practices civil litigation, domestic and foreign business entity formation and transactions, criminal defense and privacy law. He is a strong advocate of personal and financial freedom and civil liberties. This is merely one article of 123 by .
Free HowToVanish Privacy Guide

{ 4 comments… read them below or add one }

1 Brittany February 5, 2010 at 1:20 am

It is amazing to me that this is happening today in a country that was founded on the premise that individuals were better off with a decentralized and noninvasive form of government. Our forefathers waged war with the most powerful entity in the then modern world in order to free themselves from the intensity and power of the British monarchy so that they could enjoy the liberties and freedoms that came with a more hands off system of goverment. How is it that we got to the point where we cannot even buy toilet paper without alerting the Feds? We need to find a solution to this incredible invasion of privacy so that citizens have the opportunity to go about their business without any anxiety about how their transactions will look to a government inspector as he reviews their transactions. To answer your question, Bill, I can definitely say I am not feeling the love.

2 KJ June 7, 2011 at 1:24 pm

The US government not only applies this to US citizens/residents but also foreign nationals who are non-resident aliens but may be considered residents for tax purposes (i.e. substantial presence test).

“Substantial Presence Test
You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2010. To meet this test, you must be physically present in the United States on at least:

31 days during 2010, and

183 days during the 3-year period that includes 2010, 2009, and 2008, counting:

All the days you were present in 2010, and

1/3 of the days you were present in 2009, and

1/6 of the days you were present in 2008. “

3 l.crissman December 10, 2011 at 9:29 pm

Could you please point me in the direction of more information on Hawala, perhaps in the form of a blog posting if not a personal reply.

I am aware of how hawala works, but what I lack is some way to contact hawala agents whom I could reasonably trust, as I lack an ethnic or religous identity that would facilitate such contact.

Thanks in advance.

L

4 Jon June 27, 2012 at 9:18 pm

@ Brittany. A lot of people who claim that the current govt infringes on their privacy rights must understand the infrastructure would collapse if there weren’t so much rules and regulations. I’m not implying that I agree with the rules, but I think it’s much more of a ‘vote with your feet’ decision.

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