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Feds: Digital Cash Can Thwart Us
by Declan McCullagh
WASHINGTON -- A Treasury Department report warns that technologies such as the Internet and electronic cash could thwart the federal government's efforts to conduct surveillance of bank and credit card transactions.
The internal strategic plan predicts that technology may help law enforcement by allowing agents to assemble ever-growing databases of Americans' financial activities, but it can also provide more anonymity than ever before.
Treasury's Financial Crimes Enforcement Network (FinCEN) prepared the 36-page document, which was obtained by Wired News.
It says: "The development of new technologies -- such as electronic cash, electronic purses, Internet or smartcard based electronic payment systems, and Internet banking -- is increasing the ability of individuals to rapidly transfer large sums of money, and could pose a challenge for FinCEN and other law enforcement agencies combating money laundering."
A FinCEN spokeswoman declined to comment on the draft, saying the agency would make an official statement after the strategic plan is released publicly in early October.
Federal law requires U.S. banks, credit unions and other financial institutions -- over 220,000 total -- to forward regular reports on any "suspicious" behavior or large cash amounts to a mammoth FinCEN database located at the IRS' computing center in Detroit.
FinCEN hopes to expand its surveillance to include the insurance industry, pawn brokers and travel agents, and then use what it terms "artificial intelligence" techniques to analyze the stream of data.
"FinCEN has been working with data mining experts to design software that is tailored to meet the specialized needs of law enforcement," the report says. "Data mining is not a static, off-the-shelf technique but instead requires the testing of complex sets of algorithms to determine which will most creatively search and combine random pieces of data to reveal hidden links to criminals and their money laundering schemes."
A FinCEN source said the "artificial intelligence" techniques are straightforward: "They just enable us to sort through the vast numbers of currency transactions we receive. We're talking millions and millions of reports."
The reason for this complex and expensive system: illegal drugs. The Clinton administration has defended surveillance programs as a vital weapon in its ongoing campaign against illegal drugs and drug-related money laundering.
"It sounds as though FinCEN has walked into the digital age like a kid in a candy store with millions of dollars stuffed in his pocket," says Greg Nojeim, legislative counsel for the American Civil Liberties Union. "They just can't eat enough of our personal information."
Both economists and libertarian cypherpunks have predicted that digital cash will pose difficulties for law enforcement attempts at surveillance.
"Digital monetary and financial products are 'disruptive' technologies, in that their creation upsets the existing legal and public policy order as to how money and financial products and institutions are regulated and organized," Richard Rahn, author of The End of Money and the Struggle for Financial Privacy, told a House subcommittee this week. "Central bankers, treasury officials, law enforcement authorities and intellectual property administrators will by necessity have to adjust to a different world."
Even though FinCEN has come under fire from privacy advocates in the past, the word "privacy" does not appear anywhere in the agency's strategic plan.
"It's shocking that an agency under attack for violating privacy rights would omit any mention of privacy in its strategic plan," says the ACLU's Nojeim.
One reason for concern among civil libertarians is that FinCEN has been gradually expanding its surveillance net.
Businesses such as check cashers, money transmitters and currency dealers must now join banks in filing "suspicious activity reports," and have until the end of 2001 to sign up. Casinos will begin filing next year as well.
Hundreds of law enforcement agencies -- including the IRS, Drug Enforcement Administration, the Postal Service, bank regulators and state law enforcement -- share access to FinCEN's databases, sometimes via modem dialup.
The FBI, Secret Service, and U.S. Customs regularly download the data and import it into their own databases.
by Declan McCullagh
WASHINGTON -- A Treasury Department report warns that technologies such as the Internet and electronic cash could thwart the federal government's efforts to conduct surveillance of bank and credit card transactions.
The internal strategic plan predicts that technology may help law enforcement by allowing agents to assemble ever-growing databases of Americans' financial activities, but it can also provide more anonymity than ever before.
Treasury's Financial Crimes Enforcement Network (FinCEN) prepared the 36-page document, which was obtained by Wired News.
It says: "The development of new technologies -- such as electronic cash, electronic purses, Internet or smartcard based electronic payment systems, and Internet banking -- is increasing the ability of individuals to rapidly transfer large sums of money, and could pose a challenge for FinCEN and other law enforcement agencies combating money laundering."
A FinCEN spokeswoman declined to comment on the draft, saying the agency would make an official statement after the strategic plan is released publicly in early October.
Federal law requires U.S. banks, credit unions and other financial institutions -- over 220,000 total -- to forward regular reports on any "suspicious" behavior or large cash amounts to a mammoth FinCEN database located at the IRS' computing center in Detroit.
FinCEN hopes to expand its surveillance to include the insurance industry, pawn brokers and travel agents, and then use what it terms "artificial intelligence" techniques to analyze the stream of data.
"FinCEN has been working with data mining experts to design software that is tailored to meet the specialized needs of law enforcement," the report says. "Data mining is not a static, off-the-shelf technique but instead requires the testing of complex sets of algorithms to determine which will most creatively search and combine random pieces of data to reveal hidden links to criminals and their money laundering schemes."
A FinCEN source said the "artificial intelligence" techniques are straightforward: "They just enable us to sort through the vast numbers of currency transactions we receive. We're talking millions and millions of reports."
The reason for this complex and expensive system: illegal drugs. The Clinton administration has defended surveillance programs as a vital weapon in its ongoing campaign against illegal drugs and drug-related money laundering.
"It sounds as though FinCEN has walked into the digital age like a kid in a candy store with millions of dollars stuffed in his pocket," says Greg Nojeim, legislative counsel for the American Civil Liberties Union. "They just can't eat enough of our personal information."
Both economists and libertarian cypherpunks have predicted that digital cash will pose difficulties for law enforcement attempts at surveillance.
"Digital monetary and financial products are 'disruptive' technologies, in that their creation upsets the existing legal and public policy order as to how money and financial products and institutions are regulated and organized," Richard Rahn, author of The End of Money and the Struggle for Financial Privacy, told a House subcommittee this week. "Central bankers, treasury officials, law enforcement authorities and intellectual property administrators will by necessity have to adjust to a different world."
Even though FinCEN has come under fire from privacy advocates in the past, the word "privacy" does not appear anywhere in the agency's strategic plan.
"It's shocking that an agency under attack for violating privacy rights would omit any mention of privacy in its strategic plan," says the ACLU's Nojeim.
One reason for concern among civil libertarians is that FinCEN has been gradually expanding its surveillance net.
Businesses such as check cashers, money transmitters and currency dealers must now join banks in filing "suspicious activity reports," and have until the end of 2001 to sign up. Casinos will begin filing next year as well.
Hundreds of law enforcement agencies -- including the IRS, Drug Enforcement Administration, the Postal Service, bank regulators and state law enforcement -- share access to FinCEN's databases, sometimes via modem dialup.
The FBI, Secret Service, and U.S. Customs regularly download the data and import it into their own databases.
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