Almost a year on and where do we stand ?

Well it appears nothing yet has changed and we still see the privacy issue raised yet again thru local mags and forums its been a year since the PATRIOT bill was introduced and yet we still see no outcome…

November 7, 2003
The Honorable Pat Roberts The Honorable John D. Rockefeller, IV

Chairman Ranking Member
Senate Select Committee on Intelligence Senate Select Committee on Intelligence
211 Hart Senate Office Building 211 Hart Senate Office Building
Washington, D.C. 20510 Washington, D.C. 20510

Dear Chairman Roberts and Ranking Member Rockefeller:

We are writing to express our concern about a provision of both the House- and Senate-passed
versions of the Intelligence Authorization bill that significantly expands the reach of the FBI’s
power to obtain information using “National Security Letters.” As you know, National Security
Letters are unusual devices. They are issued to businesses by FBI agents to compel the
disclosure of personal information without judicial approval. National Security Letter authority
has for some years been available for three specific categories of information deemed
particularly useful to foreign intelligence, counterintelligence and international terrorism
investigations: financial records, credit reports, and communications transactional/billing
information. Each one of these categories was separately justified by the Executive Branch and
in each case the reach of the NSLs was fairly narrowly defined by Congress.
The pending authorization bills would greatly expand the National Security Letter provision of
12 U.S.C. §!3414, the section of the Right to Financial Privacy Act that authorizes the FBI to
issue National Security Letters to banks to obtain financial records.
The sections at issue are Section 334 of the House version (H.R. 2417) and Section 354 of the
Senate version (S. 1025) of the Intelligence Authorization Act for FY 2004. These sections
amend the definition of “financial institution” for purposes of 12 U.S.C. §!3414.1 The proposed
new definition is not crafted for intelligence purposes. Instead, the changes sought would
incorporate the far broader definition of “financial institution” that is used in the money
laundering laws, 31 U.S.C. §!5312(a)(2). That definition includes many entities that are not
strictly “financial” institutions, such as:
• a broker or dealer in securities or commodities;
1 The current definition of “financial institution” for purposes of the NSL authority in the Right
to Financial Privacy Act includes banks, savings banks, card issuers as defined in 15 U.S.C.
§!1602(n), industrial loan companies, trust companies, savings associations, building and loans,
homestead association, credit unions, consumer finance institutions. 12 U.S.C. §!3401(1).
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• a currency exchange;
• an issuer, redeemer, or cashier of travelers’ checks, checks, money orders, or similar
instruments;
• an insurance company;
• a dealer in precious metals, stones, or jewels;
• a pawnbroker;
• a travel agency;
• a telegraph company;
• a business engaged in vehicle sales, including automobile, airplane, and boat sales;
• persons involved in real estate closings and settlements;
• the United States Postal Service;
• a casino, gambling casino, or gaming establishment with an annual gaming revenue of
more than $ 1,000,000;
• any other business designated by the Secretary whose cash transactions have a high
degree of usefulness in criminal, tax, or regulatory matters.
Moreover, because of the way the definitions work, the records that would have to be disclosed
would not be limited to actual financial records. Under the Right to Financial Privacy Act,
“financial records” are defined as “any record held by a financial institution pertaining to a
customer’s relationship with the financial institution.” 12 U.S.C. §!3401(2). Thus, if a travel
agency is a financial institution, the new authority would cover any records held by the travel
agency, even if the records do not relate to financial matters.
Accordingly, under the proposed language, National Security Letters could be used to compel
disclosure of any records – not just truly financial records – from such entities as travel agencies,
Western Union, real estate agents, the Postal Service, insurance companies, casinos, and car
dealers.
The new proposed definition is too broad and essentially grants the FBI part of the administrative
subpoena authority it has been seeking, in the leaked “PATRIOT II” draft as well as other
proposed legislation, but without the public debate that we believe should occur before granting
that expanded power. If it can be shown that there are additional financial entities that need to be
added to the definition of “financial institution” for purposes of tracing the financial transactions
of suspected spies or terrorists, we would have no objection. However, we do not believe that
the NSL authority in the Right to Financial Privacy Act should be expanded as broadly as it
would be if the definition were amended by reference to the money laundering law. In addition,
whatever other institutions are added, the definition of financial records should be limited to
documents that are truly financial in nature.
We are particularly concerned about this expansion of the National Security Letter authority
because Section 505 of the USA PATRIOT Act has already loosened the standard for issuing
NSLs. Before the PATRIOT Act, NSLs could be issued only if the government had specific
facts giving reason to believe that the records being sought pertained to an agent of a foreign
power. The particularized suspicion requirement was eliminated by the PATRIOT Act. After
the PATRIOT Act, records can be compelled on the ground that they are “relevant to” or “sought
for” foreign counter intelligence purposes, and as we read the language the FBI does not even
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have to specify whose records they want. Given that NSLs are issued under a low standard with
no judicial approval, we believe any expansion of NSL authority beyond the existing categories
of records – financial, credit, and communications transactional/billing – is inappropriate.
We urge you to remove or modify the proposal to expand the definition of “financial institution”
for purposes of the National Security Letter authority in the Right to Financial Privacy Act. In
particular, we recommend that you:
(1) add to the definition of financial institutions for NSL purposes under the Right to
Financial Privacy Act only those specific entities that the government shows have
financial records of particular use to foreign intelligence, counterintelligence or
international terrorism investigations; and
(2) limit the disclosure of records to those that relate to the financial relationship between
the individual and the business.
We would be happy to discuss this matter further with you or your staff. Thank you for your
consideration.
Sincerely,
James X. Dempsey Lara M. Flint
Executive Director Staff Counsel