May 04, 2005

The New York Times recently featured a front-page story about how a working group within the U.S. Treasury has been considering the prospect of accessing banks' logs of international money transfers. The information-sharing provisions of the USA PATRIOT Act have made this line of inquiry possible without further legislation, and it's a logical extension of the aims of the Act.

Banks' cooperation, by providing full access to their entire databases, would push some of the burden of scanning those transactions onto the government.

As it stands now, each financial institution uses its own resources and anti-money laundering tools to detect suspicious transactions, which they report as "suspicious" on their own initiative. Each institution necessarily has a limited view of the entire picture, using separate detection methods that may not dovetail for complete anti-money laundering coverage.

By giving the government access to the whole picture, perhaps the duty to scan that information for actionable data would transfer to the government as well. The ability to use a common filtering algorithm across a comprehensive pool of transactions would, in theory, enable more effective intelligence gathering.

The larger question revolves around the proper role of government. For example, should the federal government install tracking devices in every car on the road so that it would be easier to respond to an Amber Alert? While the benefits are clear, the cost to society from the loss of privacy is much harder to measure in advance and near impossible to roll back once implemented. Once a government starts monitoring its citizens to a greater and greater extent, it becomes harder to conceive of protections that can adequately ensure that the information collected cannot be used outside of the original intent.

Finally, how would customers react? Customers place a high level of importance on privacy, particularly in terms of their vulnerability to identity theft. Would the American people voluntarily accede to having their finances become an open book to the government?

Whatever the outcome of the reported U.S. Treasury initiative, this is a debate that should be held in the public eye.