Collection of Suspicious Activity Reports by Government Declines in 2009
When the Patriot Act was passed in 2001, the bar above which financial institutions are required to send the U.S. Government “suspicious activity reports” regarding Americans’ financial transactions was dramatically lowered. The Patriot Act also placed new emphasis on the use of financial surveillance to keep track of PEPs. That acronym stands for “politically exposed persons” and refers to surveillance of political leaders. Adam Davidson explained the process two years ago:
Banks monitor every transaction. Every one, no matter how small…. The software is checking to see if maybe that $4 is part of a pattern…. The report goes to a bank’s compliance officer, listing all recent suspicious transactions. Every transaction is given a numerical score…. The computer makes the score based on who is making the transaction, where does he come from, who is he associated with, what else is he up to. Every bank customer has, somewhere, in some computer database, a risk assessment score….
It also checks a bunch of lists. Are you on a terror watch list? A list of criminals?… A PEP — banks really do use that term — is anybody with political power. That means a Nigerian General, a U.S. Senator, or, say, the Governor of New York. And any PEP — any Politically Exposed Person — is monitored more carefully.
Davidson’s quip about “the Governor of New York” refers to Eliot Spitzer, whose political career was ended in part due to his own hubris but also in part due to the exposure of his hubris by government surveillance of his spending.
Last week, the U.S. government’s Financial Crimes Enforcement Network released its latest “SAR Activity Review — By The Numbers,” a series of reports on the volume of suspicious activity reports beginning in 1996 and now complete through the end of 2009. Since 1996, the trend toward increasing numbers of suspicious activity reports from year to year went unabated — until now. In 2009, the number of suspicious activity reports actually went down slightly from the number of reports in 2008. This reflects a downturn in the last six months of 2009 — suspicious activity report collection in the first half of 2009 was at a pace to set a new record high.
What is the reason for the downturn in the volume of suspicious activity reports in 2009? Is it possible that the surveillance apparatus is ramping down its efforts in this regard? That’s possible. Another possibility is that this surveillance downturn reflects the effect of the economic downturn we’ve all been experiencing. People with less money may simply have fewer transactions, generating fewer suspicious activity reports to the federal government.
If a policy shift explains the surveillance downturn, we should continue to see a decline in suspicious activity reports in the next few years as surveillance heads back down toward pre-9/11 levels. If an economic downturn explains the surveillance slump, then as the economy revs back up we should see suspicious activity report levels rise again. Watch and see.
If the trend continues for the second six months of last year, 2009 will be yet another year seeing record high collection of Americans’ financial information without warrants. This new record rate for the government in collecting Suspicious Activity Reports has been met utterly without mention by the U.S. government’s press offices or by the professional media.