Unintended Consequences: Spitzer got snagged by the fine print of the Patriot Act

[Freddie Stubbs]

Source: Newsweek

Something Strange: After 9/11, Treasury issued stringent new regulations that required banks to look for unusual transactions

When Congress passed the Patriot Act in the aftermath of the 9/11 attacks, law-enforcement agencies hailed it as a powerful tool to help track down the confederates of Osama bin Laden. No one expected it would end up helping to snag the likes of Eliot Spitzer. The odd connection between the antiterror law and Spitzer's trysts with call girls illustrates how laws enacted for one purpose often end up being used very differently once they're on the books.

The Patriot Act gave the FBI new powers to snoop on suspected terrorists. In the fine print were provisions that gave the Treasury Department authority to demand more information from banks about their customers' financial transactions. Congress wanted to help the Feds identify terrorist money launderers. But Treasury went further. It issued stringent new regulations that required banks themselves to look for unusual transactions (such as odd patterns of cash withdrawals or wire transfers) and submit SARs—Suspicious Activity Reports—to the government. Facing potentially stiff penalties if they didn't comply, banks and other financial institutions installed sophisticated software to detect anomalies among millions of daily transactions. They began ranking the risk levels of their customers—on a scale of zero to 100—based on complex formulas that included the credit rating, assets and profession of the account holder.

Another element of the formulas: whether an account holder was a "politically exposed person." At first focused on potentially crooked foreign officials, the PEP lists expanded to include many U.S. politicians and public officials who were conceivably vulnerable to corruption.

The new scrutiny resulted in an explosion of SARs, from 204,915 in 2001 to 1.23 million last year. The data, stored in an IRS computer in Detroit, are accessible by law-enforcement agencies nationwide. "Terrorism has virtually nothing to do with it," says Peter Djinis, a former top Treasury lawyer. "The vast majority of SARs filed today involve garden-variety forms of white-collar crime." Federal prosecutors around the country routinely scour the SARs for potential leads.

Read more: http://www.newsweek.com/id/123489

[kestrel91316]

1. Question: How many highly-placed REPUBLICANS have been

snooped on and found to be doing the exact same thing as Spitzer and yet have suffered no consequences?

Enquiring minds want to know. I am assuming MANY.

The USA PATRIOT Act and other forms of "legal" snooping are and have always been about selective enforcement and going after one's political enemies. They have NOTHING to do with actually protecting Americans from terrorism or anything else.

[RantinRavin]

2. They wrote the law

so they know to pay cash to a 100 dollar hooker rather than wire transfers to multi-thousand dollar hooker.

[PassingFair]

4. But look what they get for CASH:

[RantinRavin]

5. I'm sure they at least used traveler's checks

for him...to get him to travel the hell off the scene when they were done.

[PassingFair]

7. Luckily they don't have to reveal WHITE HOUSE records.

On cummings and goings during the Bush admin......

[RantinRavin]

9. Yaeh, I just ate lunch

and would hate to lose it so soon.

[pitohui]

14. traveler's checks are cash for purposes of SARs and CTRs EOM

.

[louis-t]

26. Why wasn't rush busted?

He was withdrawing $9,900 a pop for oxycontin, wasn't he?

[housewolf]

3. That was my suspicion...

I talked and talked about it on the day Spitzer went down and everyone said "no, no, it's older banking regs..." etc. I never got over the feeling that it was a Patriot Act provision that was behind it. Thanks for the confirmation.

[pitohui]

15. the confirmation is bogus

i have actual personal experience in this regard and the constant big lie that SARs and CTRs were something created by the patriot act of 2001 is just that, a big lie

even a few moments of research would tell anyone who wanted to know the truth that the reporting requirement dates back to 1986

but people don't want to know, they want to confirm their own prejudices

there is no "saint reagan" not even if you read in newsweek that there is!

[housewolf]

21. I am sorry for any problems you may have had with an incorrect or injust SAR/CTR

I am aware that the banking regs regarding SARs & CTRs dates back to the 1960's. However, the specific info that lead the Feds to investigate Spitzer would not have been available to them prior to the Patriot Act.

more from the article linked above:

The Patriot Act gave the FBI new powers to snoop on suspected terrorists. In the fine print were provisions that gave the Treasury Department authority to demand more information from banks about their customers' financial transactions. Congress wanted to help the Feds identify terrorist money launderers. But Treasury went further. It issued stringent new regulations that required banks themselves to look for unusual transactions (such as odd patterns of cash withdrawals or wire transfers) and submit SARs—Suspicious Activity Reports—to the government. Facing potentially stiff penalties if they didn't comply, banks and other financial institutions installed sophisticated software to detect anomalies among millions of daily transactions. They began ranking the risk levels of their customers—on a scale of zero to 100—based on complex formulas that included the credit rating, assets and profession of the account holder.

Another element of the formulas: whether an account holder was a "politically exposed person." At first focused on potentially crooked foreign officials, the PEP lists expanded to include many U.S. politicians and public officials who were conceivably vulnerable to corruption.

The new scrutiny resulted in an explosion of SARs, from 204,915 in 2001 to 1.23 million last year. The data, stored in an IRS computer in Detroit, are accessible by law-enforcement agencies nationwide. "Terrorism has virtually nothing to do with it," says Peter Djinis, a former top Treasury lawyer. "The vast majority of SARs filed today involve garden-variety forms of white-collar crime." Federal prosecutors around the country routinely scour the SARs for potential leads.

One of those leads led to Spitzer. Last summer New York's North Fork Bank, where Spitzer had an account, filed a SAR about unusual money transfers he had made, say law-enforcement and industry sources who asked not to be identified because of the sensitivity of the probe. One of the sources tells NEWSWEEK that Spitzer wasn't flagged because of his public position. Instead, the governor called attention to himself by asking the bank to transfer money in someone else's name. (A North Fork spokesperson says the bank does not discuss its customers.) The SAR was not itself evidence that Spitzer had committed a crime. But it made the Feds curious enough to follow the money.

[FiveGoodMen]

6. 'Unintended' my ass!

[Hugabear]

18. That was going to be my response

Does it surprise anyone that they're using the Patriot Act to go after political opponents?

[debunkthelies]

19. The real reason

This Brasscheck video says it all: http://www.brasschecktv.com/page/291.html this is really why he's the only one who was outed.

[ladywnch]

8. well, since most of lawmakers never read the legislation they pass

I can only expect that beginning in 09 there will be a whole new lot of repugs who we'll be seeing in the news for the same things expect they will be gay prostitues involved. Most of those guys are closet cases.

[Buzz Clik]

10. Spitzer's weapon of mass destruction -- a guided muscle.

Thanks, Congress, for urinating on the Constitution.

[slackmaster]

11. That, plus his inability to keep Junior in his pants

:eyes:

[pitohui]

12. SARs were going out way before the patriot act and 2001

i should know, i had them go out on me in the 90s

this is something we can lay at ronald reagan's door, but for some reason it has become fashionable to pretend it only started in 2001, i can understand why politically but it is not honest and i for one am not going to play into the "saint reagan" meme

[raebrek]

17. BSA

Bank Secrecy Act

Congress passed the Bank Secrecy Act in 1970 as the first laws to fight money laundering in the United States. The BSA requires businesses to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters. The documents filed by businesses under the BSA requirements are heavily used by law enforcement agencies, both domestic and international to identify, detect and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion or other unlawful activity.

http://www.irs.gov/businesses/small/article/0,,id=152532,00.html edited to add this link.

SAR is a part of the Bank Secrecy Act (BSA)

Raebrek!!!

[jayfish]

13. "No one expected..."

:eyes:

Jay

[raebrek]

16. SAR

Money Services Businesses Can Help Fight Money Laundering

Suspicious Activity Reports (SARs) are one of the government’s main weapons in the battle against money laundering and other financial crimes since these reports generate leads that law enforcement agencies use to initiate money laundering investigations. Many individuals launder money to conceal illegal activity, such as drug trafficking, health insurance fraud, tax evasion, and even terrorism. It fuels criminal conduct, allowing drug dealers, smugglers, terrorists, arms dealers, and tax evaders to maintain control over their proceeds and ultimately to provide a legitimate cover for their sources of income. Law enforcement officials estimate that such individuals yearly launder 1 to 2 trillion dollars worldwide through different types of financial institutions and businesses.

One of the types of financial institutions money launderers use are the Money Services Businesses (MSBs) that issue, sell or redeem traveler’s checks or money orders, transmit money, or exchange currency. Since they are targets for money launderers, the Bank Secrecy Act requires MSBs to file suspicious activity reports with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Check cashers and sellers and redeemers of stored value are not required to, but may voluntarily file a SAR.


http://www.irs.gov/businesses/small/article/0,,id=154555,00.html

Hope this provides some insight.

Raebrek!!!

[sarcasmo]

20. Does anyone know the total dollar amount that gives them a red flag?

I wonder if it's 5 grand for a Democrat and 10 grand for a Repuke.

[ConcernedCanuk]

22. Patriot Act - enabling a SS - Gestapo for the USAmericans - get used to it

.
.
.

or just change the channel to watch your favorite soap.

Y'all are SO politically unaware down there,

and I fear it's spreading

into my country.

We got Harper.

[Solly Mack]

23. there was nothing "unintended" about the Patriot Act

[struggle4progress]

24. Hmmm. Spitzer routed some of the money through an institution he earlier investigated extensively

and they were looking for pay-back: so they were gonna blow the whistle on him if he sneezed in public

Dollars to donuts it happened this way: bank realized some money was going to an escort service, but that's really not a banking crime -- so instead they cooked up a different way to get the Feds involved: they breathlessly reported a number of perfectly allowable transactions, gasping omg! he might be structuring transactions to avoid reporting requirements! They only had to report enough total cash transfer to make their original "suspicion" sound credible, and they had to report enough transactions actually involving money routed to an escort service so that the Feds would be sure to see the escort service in even the most cursory investigation. Then *'s politicized Executive was guaranteed to kick in with its 5000 patriot-act wire-taps until they could hang him out to dry

A stupid waste of Federal resources on a call-girl case, motivated by a pissed-off bank and Republican "we're in power so we screw political opponents however we can" attitude, but there's really not much to say except WTF was Spitz thinkin?

[Earth_First]

25. I remember last year when we closed on our house...

we needed to sign a release in order to secure our bank draft in excess of $10,000.

[creeksneakers2]

27. I think there is more to what happened to Spitzer

Involvement by Roger Stone

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3048358&mesg_id=3048358

[superconnected]

28. This is sickening. They are now monitoring all of our bank transactions under the label of terrorism

Too much government control. They're using computers to filter it so don't even start the imbecilic argument of it would take too long to siff through the information.

This should be over turned.

[superconnected]

29. and wasn't sars a deadly fucking disease...