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Ron Paul Dear Colleague Letter on Know Your Customer as Costly and Useless

Ron Paul Dear Colleague Letter on Know Your Customer as Costly and Useless
April 28, 1999

(J. Bradley Jansen was Ron Paul’s staffer for these issues at the time)

“A broad-based [Know Your Customer] monitoring requirement would be costly and generally useless for law enforcement purposes.”
American Bankers Association attacked this concept as long ago as 1994
when the Treasury Department was planning to issue a KYC regulation.

April 28, 1999
Dear Colleague,

The Law Enforcement Alliance of America reports that between 1987 and 1996, banks filed more than 77 million Currency Transaction Reports with the U.S. Treasury. From this, 7,300 defendants were charged in 3,000 money laundering cases, but only 580 were convicted. This is less then one/1,000 of 1%! More than 99.999% of those that had their privacy invaded were law-abiding citizens going about their own personal financial business, referring to a Journal of Commerce article, 10 December 1996, which cites Department of Justice figures.

Referring to the same 1987-1996 data, Larry Lindsey, former Federal Reserve Board member now at the American Enterprise Institute, (“Invading financial privacy,” March 20, 1999, London Financial Times) compared the usefulness of these reports to the “proverbial needle in a haystack” with a ratio of 25,000 reports to one case brought and 0.2 convictions. After quoting from the fourth amendment to the constitution, he added, “It would seem clear that the current money-laundering practices are the kind of blanket search that the writers of the constitution sought to prohibit. Somehow ‘probable cause’ does not seem to mesh with the one-in-25,000 odds that the currency transactions reports provide.”

Responding to justifications of such a gross violation of the Founding Fathers’ intent, Mr. Lindsey explained, “freedom has been buried under the kind of convoluted reading of plain English that George Orwell warned about…Logic that amounts to ‘criminals use money, therefore the use of money should be suspect’ sounds somewhat Orwellian.” He ended by saying he had no answer when a woman asked him, “You people in Washington think we’re all criminals, don’t you?”

Let’s tell our constituents loudly and clearly that we do not presume their guilt.
Cosponsor HR 516, the Know Your Customer Sunset Act, and HR 518, the Bank Secrecy Sunset Act. For more information, contact Bradley Jansen at 225-2831.


Ron Paul