What a delight to see the Privacy and Civil Liberties Oversight Board (PCLOB) taking a look at financial surveillance policy. It is as threatening to liberty and privacy as any other. Let’s hope its recent webinar-style panel discussion “Debanking and the Risks to Privacy and Civil Liberties” is an opening round on the problems created by this particular type of mass surveillance.
If you’ve never heard of PCLOB, you’re normal. If you associate it with oversight of post-9/11 communications surveillance, you’re a privacy and technology sophisticate! PCLOB was founded in 2004 to help oversee surveillance programs that got underway after the September 11, 2001, terror attacks. It was reconstituted as an independent agency in 2007. It is currently underpopulated, as two of the three Democratic members fired by President Trump early in the current term litigate that action. There is one member now serving on this five-member board.
But the staff have continued issuing materials in the absence of a quorum, and the recent session on financial surveillance was evidently put together with the support of sole member Beth Williams, who opened the session.
Lead by former US Ambassador-at-Large for International Religious Freedom Sam Brownback, the presentations in chief focused on debanking of religious groups. The list of business sectors, social subgroups, and individuals that have found themselves mysteriously denied services by the financial services sector grows ever longer.
Why does this keep happening? Framing the problem correctly will drive toward real solutions. Framing it poorly will not.
Maybe wrongful debanking happens because financial services providers exercising their public duty to prevent money laundering can deny services based on free speech activity. That was the thrust of President Trump’s recent executive order Guaranteeing Fair Banking for All Americans, and it makes some sense. A recurring theme in the PCLOB discussion was that additional regulation delineating acceptable and unacceptable debanking is in order. That, and greater transparency to victims of debanking, would help make things a little less Kafkaesque.
But that framing and solution quickly run into problems. Do we really want a financial services sector required to serve all comers? I actually want my local banker able to deny services to the Holocaust Deniers Club, to turn away the next North American Man/Boy Love Association, and so forth. The provision of services in every industry is an expression of values. The First Amendment doesn’t apply to the private sector for good reason. Our society must be shaped by interactions among legal equals, not by whatever political party wields government power from time to time.
For me, regulation of the terms of debanking would be “policy metastasis”—a bad policy setting in motion a host of responses that accrue as warp and bloat in various unlikely places. (Here’s another example.)
There are two problems here. The first is a financial regulatory system unconstrained by the rule of law. The second is the imposition of law enforcement responsibilities on private-sector entities that should not have them.
On rule of law, Lars Noah’s “Administrative Arm-Twisting in the Shadows of Congressional Delegations of Authority” is essential reading. When statutes give regulators so much discretion that they have ongoing, live-or-die authority over regulated entities, they can ask anything they want and expect to get it.
That is the case in financial services today. Regulators can do whatever they want to companies. Companies know that. Companies act in anticipation of regulator wink and nod, giving us a series of examples, in the United States and around the world, of financial services providers kowtowing to what they perceive government authorities to want—right on down to debanked religious groups.
Then there is the imposition of law enforcement obligations on private-sector entities. Businesses should thwart crime when they know about it, but that is a moral judgment, not a legal one. Businesses should be answerable to the community on their crime control efforts just like everyone is. They should not have a legal responsibility to police the use of their services as quasi-real police. The distinction is subtle.
But the double warp of (1) requiring financial services providers to be law enforcement agents and (2) having regulators oversee them in that role produces the many malignant behaviors described by panelists.
We’re talking about financial services, but the aphorism you’d expect doesn’t apply. Don’t follow the money. Follow the power. Overseeing deputized law enforcement is not a role for consumer protection regulators, but a breakdown in important distinctions among private and public responsibilities and a bizarre distension of government power indeed.
In my opinion, those two issues are the source of the problems that PCLOB has begun looking into. May the inquiry continue!
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