SCN: [Fwd: FC: Reason's Michael Lynch on plans to decrease financial privacy]

[sharma at blarg.net]

-------- Original Message --------
Subject: FC: Reason's Michael Lynch on
plans to decrease financial privacy
Date: Mon, 08 Oct 2001 01:35:59 -0400
From: Declan McCullagh <declan at well.com>
Reply-To: declan at well.com
To: politech at politechbot.com


**********

Date: Thu, 04 Oct 2001 10:32:44 -0500
Subject: Michael Lynch on financial
privacy restrictions
From: Virginia Postrel
<vpostrel at dynamist.com>
To: Dave Farber <farber at cis.upenn.edu>,
Declan McCullagh <declan at well.com>

http://reason.com/ml/ml100401.html

Following the Money
The September 11th attack revives an
attack on offshore banking

By Michael W. Lynch

The September 11th attacks have been put
to all sorts of uses by interest
groups with preexisting agendas. Some of
the claims are patently absurd:
Some legislators, for instance, are
trying to push the Farm Security Act,
which protects such things as peanut
butter sandwiches, as more necessary
than ever in the wake of an attack on
American soil.

But it¹s the claims that appear
reasonable that may prove to be the most
damaging to freedom in the long run. The
inverse relationship between
laughability and lethality is easily
explained: The serious claims deal with
government police powers, which are
necessary to ensure our domestic
security but also contain the most
potential for abuse. That¹s certainly
the
case with the anti-terrorism bill
Attorney General John Ashcroft has been
attempting to rush through Congress.
It¹s just as true of money laundering
legislation that may be bundled into the
anti-terrorism bill or considered
as a stand-alone package.

At first glance, anti-money-laundering
efforts appear directly related to a
war on terrorist networks. To do their
deeds terrorists must, after all,
spend money. And one of Bush¹s first
acts was to freeze assets of suspected
terrorist funders and ask other
governments to do the same. To date, 19
countries have frozen the accounts of 27
groups. This action may in time
prove to be overbroad, but the
government already had the authority to
undertake it. The debate moving forward
both in Congress and internationally
will have precious little to do with
terrorism and plenty to do with the
boring but important issues of financial
privacy and international tax
competition.

The Organization for Economic
Cooperation and Development (OECD) has
been
campaigning against countries it labels
tax havens. Its high-tax members
resent their citizens' ability to park
money offshore and therefore avoid
taxes. The OECD wants information
exchange and tax harmonization, but was
unable to secure the backing of the Bush
administration earlier this year.
Without the support of U.S. -- the
world¹s largest tax haven by OECD
standards -- the initiative stalled.
Then the Twin Towers fell.

The Financial Times weighed in with an
article chiding the U.S. government
for hypocrisy and accusing the Center
for Freedom and Prosperity, the
leading opponent of the OECD¹s efforts,
of having a change of heart, since
it issued a memo expressing a desire to
see those responsible for the World
Trade Center massacre brought to
justice. Unnamed European Union
officials
have been quoted saying they think the
OECD effort is alive and kicking.
Said one EU official, "Politically it is
now going to be very difficult to
defend the continuation of tax havens."

But "tax havens" should and must be
defended. The issues of money
laundering, financial privacy, and tax
harmonization are very distinct from
one another. Many countries considered
tax havens are willing to work with
law enforcement officials to seize the
assets of people who commit crimes
that are recognized by all involved.
Piloting a plane into a skyscraper full
of people is such a crime. What some
countries reject is treating all their
citizens as criminals, and turning over
their financial information to
governments. Not a single country on
OECD¹s tax haven hit list stands
accused of harboring al Qaeda money. The
same can¹t be said of the U.S.
According to The Washington Post, some
of the terrorists maintained nine
checking accounts at Sun Trust Bank in
Florida.

This shows the limits of government
snooping. U.S. financial transactions
and bank accounts are already heavily
monitored, something I know from
personal experience. Shortly after I
opened a checking account at a
Washington, D.C. branch of First Union
roughly three years ago, it was
frozen by the corporate office because I
fit a "criminal profile." I¹d
opened an account by phone and deposited
"large" sums of money in it in a
high crime area. The large amount of
money was two checks that totaled less
than $4,000 and were drawn on First
Union accounts. The high crime area was
17th Street and Pennsylvania Avenue,
which is almost yelling distance from
the White House¹s West Wing.

The government and banks are so busy
snooping on everybody that they catch
virtually nobody. Like our intelligence
officials who can¹t analyze all the
data they currently collect, U.S.
financial snoops are buried under
paperwork. Out of 77 million reports
that banks filed from 1987 to 1996, the
U.S. Treasury Department convicted a
mere 580 people of currency transaction
violations.

Perhaps if the feds weren¹t so busy
keeping track of us petty criminals, and
the international community wasn¹t so
busy trying to insulate high-tax
countries from tax competition, they¹d
be able to devote the necessary human
intelligence to figure out exactly where
bin Laden and other al Qaeda
funders park their money. After all,
they¹ve reportedly been pursing this
very issue for more than two years.
According to the Post, al Qaeda doesn¹t
usually rely on traditional
money-laundering techniques such as
offshore
banks and large wire transfers.
Unfortunately, that won¹t stop
politicians
from going after such banks--and large
numbers of law-abiding citizens.

Michael W. Lynch (mwlynch at reason.com) is
REASON's national correspondent.

-- 
Virginia Postrel (vpostrel at dynamist.com)
Editor-at-large, Reason magazine
Author, The Future and Its Enemies
"Economic Scene" columnist, The New York
Times
Contributing editor, D Magazine
http://www.dynamist.com |
http://www.reason.com
(214) 219-5725 | (214) 219-1188 (fax)
--




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