In the Old South, a black man seeking to eat at a restaurant or shop at a whites-only store might have been told, “Your money’s no good here.” In other words — “We don’t care if you have money to spend, YOU aren’t welcome here.” Thankfully, those days are over.
But an increasing number of Americans are hearing something with a similar meaning when they try to open a bank account. I’ve written before about how the Foreign Account Tax Compliance Act (FATCA) has resulted in thousands of Americans abroad being told by foreign banks to take their money and leave. Now we’re being told the same thing here at home — by American banks on American soil.
You already know your financial freedom is at threat from wealth confiscation by the government. But now there’s another reason you should convert it into gold, or gems, or stamps, or foreign real estate … in fact, you may have no choice.
The reason is that our old friend, the U.S. government, has adopted a “stop and frisk” policy towards private financial transactions. Just as the New York City Police routinely (and unconstitutionally) stop, question, and frisk certain categories of residents going about their business on the streets of that city, Uncle Sam is now doing the same to tens of thousands of “suspicious” bank accounts — perhaps including yours and mine.
New Program Threatens Your Financial Privacy
The Financial Fraud Enforcement Task Force (FFETF), a group including representatives of the Department of Justice, the Federal Trade Commission and the Federal Deposit Insurance Corporation, has launched its own version of stop-and-frisk with a program called “Operation Choke Point.” Under it, the Feds “frisk” banks by sending a blanket subpoena for financial information on all clients who could “potentially” be up to no good. If they find something suspicious, they investigate those clients further. No crime need be committed; it’s the exact reverse of innocent until proven guilty.
The theory behind Operation Choke Point is the same as “stop and frisk”: by casting a wide dragnet over banks and their customers, innocent as well as guilty, ne’er-do-wells will find it increasingly difficult to launder money or commit fraud. So how do the Feds determine the size and shape of their financial dragnet? The same way the NYPD does: by “profiling” all bank customers and targeting those classes they consider suspicious.
The FFETF looks at the size and frequency of transactions, especially when cash is involved; the percentage of transactions that result in a refund to a third party; and the type of business the account-holder conducts. That last criterion is critical.
To understand why, consider that there are entire industries — perfectly legal lines of business — that find it almost impossible to get banking services in the U.S. because the banks are afraid of what the Feds might do. Marijuana growers and retailers in Colorado and Washington. Anyone involved in Southern California’s pornographic film industry. Small businesses all over the country that operate primarily in cash. Escort services in Nevada. These are all licensed, regulated, tax-paying enterprises — and all are routinely told by banks, “Your money’s no good here.”
To that profiling list and in addition to the pattern of transactions I mentioned earlier, Operation Choke Point has added online merchants who transact small amounts by credit card, online gambling enterprises and payday lenders, with more inevitably to come.
Of course, the FFETF isn’t telling banks not to open accounts for these businesses. That would be illegal! Instead, they and other regulators, such as the Financial Crimes Enforcement Network (FinCEN), are careful to leave just enough uncertainty in their rule-making to keep the banks nervous and off-balance. That way the banks do the Feds’ dirty work for them — by refusing to do business with entire classes of enterprises and individuals for fear of “getting into trouble.” It’s the same way the IRS has convinced millions of Americans that moving their money offshore to establish financial freedom is somehow “wrong.”
Establishing a Frightening Precedent
What a nifty trick! By insinuation and vague threats, the Federal government is able to force tens of thousands of legitimate account holders out of the financial system. As I said above, this is exactly what FATCA does to American account holders who dare to do business with foreign banks.
Mine may be an old-fashioned interpretation, but I’m pretty sure the United States was founded precisely to escape this unaccountable, high-handed approach to governance. The Financial Fraud Enforcement Task Force — and FATCA, FinCEN and the rest — interferes in the private affairs of U.S. residents without following the due process of law, or involving the judiciary, the only branch of government empowered to determine guilt or innocence.
The men who gave their lives at Concord, Bunker Hill, Trenton and Valley Forge, who we honored this past weekend, would surely not have done so had they known this would be the result of their sacrifice. But as I said in my contribution to Sovereign Investor Daily last week, tyranny has a way of starting small and growing in reach until it ensnares those who are convinced they have “nothing to worry about.”
So next time the cops start violating the rights of the weak, as on the streets of New York City, or on America’s borderlands, remember that they’re just setting a precedent that will ultimately be used against you.
Offshore and Asset Protection Editor
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