FC: Why worry about the Financial Action Task Force, by Richard Rahn

[Declan McCullagh <declan@well.com>]

---

From: RWRahn@aol.com
Date: Fri, 6 Sep 2002 08:20:13 EDT
Subject: This week's commentary


The Washington Times
www.washtimes.com



Nightmare on FATF street

Richard W. Rahn
Published 9/6/2002
     Assume a friend came to you and said: "Do you know there is this 
international government organization that is trying to take away your 
right to protect yourself from criminals; is demanding that your lawyer, 
accountant, real estate agent, bank teller, jewelry store clerk and car 
salesman spy on you; and is going to take your personal financial records 
and give them to every government in the world including those of Iraq, 
Libya, Syria, Iran and Cuba?"
     Your first reaction might well be that perhaps your friend was smoking 
the wrong thing and watching too much science fiction.
      Unfortunately, there is indeed such an organization, and what your 
friend described is exactly where it is headed. The organization is the 
Financial Action Task Force. The FATF was originally set up by the Group of 
Seven (G7) leading industrial nations to make recommendations about how to 
reduce money laundering. It is staffed by unelected bureaucrats from 31 
countries who, in their quest for power and influence, appear to have 
forgotten that individuals have civil liberties, including the right to 
privacy and self-protection. Recently, FATF produced a paper to update its 
"Forty Recommendations," which in effect are used by high tax countries and 
many large governments to deny civil liberties to their citizens and 
coerce, under the threat of sanctions, small countries into giving up some 
of their sovereign rights.
      The core of the FATF proposals is to deny any individual or 
organization on the planet almost any financial privacy. In order to 
achieve this goal, the proposals demand almost unlimited 
information-sharing of financial data among governments.
     But mere information-sharing among governments is not good enough for 
FATF because, in its view, many governments do not collect enough 
information about their citizens. For instance, countries that do not have 
income tax systems most often do not collect income data from their 
citizens, but now FATF wants such reporting. Because it is not politically 
correct to note that the governments in some countries are criminal or 
corrupt and even sponsor terrorism, FATF does not distinguish between which 
governments should and should not receive information, and what limitation 
should be put on the information usage.
     The FATF demands that lawyers, accountants, real estate agents and 
those engaged in selling any expensive item such as jewelry and automobiles 
spy and report on their clients for "suspicious activities." In many 
countries like the United States, such activities by non-law enforcement 
personnel are considered (for good reasons) inappropriate and in many cases 
illegal or unconstitutional. The FATF seems unconcerned with such legal and 
civil niceties.
      A concerned coalition of leading public policy organizations issued a 
"Report on Financial Privacy, Law Enforcement and Terrorism" in May. David 
Burton, executive director of the coalition, noted last week in his 
response to FATF proposals: "Financial privacy can prevent kidnappers from 
identifying profitable targets. Financial privacy can allow people to 
protect their life savings when a government confiscates its citizen's 
wealth, whether for political, ethnic or other reasons. Financial privacy 
can be the difference between a business failing or succeeding. Financial 
privacy, in short, is of deep and abiding importance to the improvement of 
the human condition because many, perhaps most, governments are capable of 
routinely abusing private financial information."
      The FATF seems oblivious to the costs of its proposals, particularly 
in relation to the presumed benefits. It confuses useless information 
collection with effectiveness. It has no established metrics for ranking 
one proposal against another. It seems both ignorant of the benefits of new 
technology and hostile to it.
     For example, it wants to tightly restrict the use of private money 
electronic transfers including "smart" and mag stripe cards because someone 
might use them to launder money. What it misses is that a large percentage 
of all crimes, including thousands of murders each year, are committed when 
someone is trying to seize someone else's currency and coin. Electronic 
money is far harder to steal, and thus should be encouraged both for its 
economic efficiency and its safety.
     The FATF proposals will result in millions of needless property crimes 
and tens of thousands of murders that could be avoided, all to make it a 
little more inconvenient for a few money launderers.
     The folks at FATF are quite simply a danger to our liberties, 
pocketbooks and lives, yet they push on because of inadequate oversight. In 
the United States, the Treasury Department is supposed to oversee FATF, but 
it is clear that both the Clinton and Bush administrations' Treasury 
Departments have been AWOL when it comes to FATF. One gets the impression 
that certain Treasury officials may have put a higher premium on the 
junkets to Paris and Brussels with the fine wines and meals than protecting 
the American people from the international bureaucrats who dream up these 
dangerous ideas.
      Fortunately, the administration's economic council and its director, 
Lawrence Lindsey, have been concerned and have taken an active role in 
stopping some of the more outrageous proposals coming from international 
and foreign organizations, which would violate our privacy rights and 
severely damage our economy.
     Before joining the administration, Mr. Lindsey wrote, "There is no 
question the threats posed by international terrorists and drug cartels are 
serious threats to our national security and to our individual liberty. But 
it is also true that threats to our individual liberty by a potentially 
abusive government exist as well. As citizens, we must use what was 
recommended to us — eternal vigilance, over our government, not a one-time, 
fix-it solution — to make sure the right balance is being struck."
      September 11, in part, happened because international law enforcement 
was collecting too much information on too many people who posed little 
risk, while too little attention was paid to the small number that posed a 
very high risk. The people at FATF appear to have learned nothing.

     Richard W. Rahn is a senior fellow of the Discovery Institute and an 
adjunct scholar of the Cato Institute.




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