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Privacy So Many Issues & Way Too Much Time
by John Byrne, Senior Legislative Counsel, ABA
As we approach an election year in 2000, privacy will be a major issue. The Clinton Administration is expected to announce a major consumer privacy initiative and congress is already considering close to 80 bills that cover privacy in some fashion.
The key initiatives for now include a bill that would require that customers be given notice and choice about how their financial institutions share or sell "personally identifiable sensitive financial information"; one that will penalize, at the federal level, the practice of "pretext calling" by illegitimate information brokers; one that would ban, in some instances, the use of personally identifiable information by interactive computer services; and a bill supported by the American Civil Liberties Union that would allow individuals access to SARs filed by banks with FinCEN.
Privacy is Banking's Concern
Protecting customer information from prying eyes - both external and internal - has been a strong suit of the banker since the beginning of the industry.
Because of our critics, some of whom manufacture privacy concerns about the banking industry where none exist, we must make more clear the fact that valid privacy concerns are being addressed.
For example, ABA supported and congress enacted a measure to improve the federal laws regarding identity theft, now allowing prosecution of individuals who "knowingly" transfer false identification for the purposes of defrauding another person.
We need to view the privacy debate as an opportunity - both to defeat unfair and burdensome legislative and regulatory initiatives as well as a chance to better explain the valuable use of information. We know that information is a mechanism to deliver improved and tailored financial products and a method by which we can help prevent fraud from occurring in our institutions. Let's tell the world and avoid problems!
The Know Your Customer Battle
This publication has already covered the "KYC" debate. The agencies withdrew the December 7th proposal, in large part, because of consumer privacy fears. With the elimination of the proposal, will consumer fears remain?
Financial institutions will still be required to report possible violations of law under the "suspicious activity reporting" or SAR regulations.
In addition, bank examiners may still ask to see an institution's KYC policies since it remains part of the Bank Secrecy Act examination manual.
Finally, customers are now very aware of the KYC issue so questions may be posed to bank employees as to why the institution is still asking questions about certain transactions.
Good Time To Review
Now would be a good time for institutions to review both their privacy policies as well as their suspicious activity reporting procedures. Developing written procedures for SAR reporting can assist the institution as it trains employees and can minimize frivolous lawsuits based on invasion of privacy claims.
Reviewing one's privacy policies will better prepare employees to be able to respond to privacy related questions.
The more you explain your privacy policies to your customers, the less congress and the regulators will have to address. And an informed customer will be comfortable with the fact that banks are still the best protectors of personal data.
There is a year and a half until the 2000 elections - plenty of time for legislation to be passed. This is no time to rest!
Copyright © 1999 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 9, No. 4, 5/99
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