Feds Use Bank Loophole to Surveil Financial Data Without Warrants
The federal government is exploiting a loophole in the Electronic Fund Transfer Act to secretly gather and monitor Americans’ financial data, often without probable cause or a warrant.
In 1978, Congress passed the Electronic Fund Transfer Act, which aimed to protect consumers by requiring financial institutions to alert account holders before making certain account transfers. However, the legislation also created an exception for institutions that rely on “common carrier” rules, which allowed them to exempt transactions from the warning requirement.
In the 1990s, the Federal Reserve and other regulators formalized this loophole, permitting banks to surveil and store customer data without obtaining a warrant, simply by claiming that the information was being disseminated in compliance with “common carrier” standards.
Using this loophole, government agencies, such as the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), can now gather and monitor Americans’ financial data without the legally required oversight, including information on account transactions, routing and bank numbers, and other sensitive details.
The issue came to light when Eric Adams, a former banker and dissenter, filed a complaint against the Comptroller of the Currency, alleging that the agency was violating the Fourth Amendment’s protections against unreasonable searches and seizures. Adams argued that the “common carrier” exception was an unconstitutional end-run around the Constitution’s safeguards.
Adams’ case, now pending in court, may have far-reaching implications for how the government monitors and collects Americans’ financial data. If successful, it could force significant changes in the way institutions handle financial information, potentially reining in widespread government surveillance. However, if unsuccessful, the loophole may remain open, allowing the government to continue exploiting it to gather sensitive financial data without the required judicial oversight.
