By Jon Christian Ryter
January 12, 2004
Within two months gold brokers and jewelers in the United States will fall under the purview of the Bank Secrecy Act of 2001 and will be required to report to the Treasury Department's Financial Crimes Enforcement Network [FinCEN] any time one of their customers buys $50,000 in gold or precious stones, or spends more than $10,000 in cash.
The twist in this regulation comes from Section 103.23 of the Bank Secrecy Act that forces gold brokers and jewelers to construe that separate purchases over a period of several days or weeks are, in fact, one purchase in the eyes of FinCEN. What was going to happen in late February or March, 2004 began to surface as a cyber-rumor in late November. By the middle of December the Internet was flooded with unsubstantiated rumors that gold confiscation was around the corner. A mid-level Treasury official addressing a jewelers' convention in November mentioned that the Treasury Department was writing the regulations that would enforce Section 359 of the USA Patriot Act, commonly known as the Bank Secrecy Act. The conspiracy dam ruptured, and the cyber-flood began. Only this time, the rumors were largely true with respect to a registry being created for gold brokers and diamond and precious stone merchants and their most profitable clients.
The Bank Secrecy Act of 2001 was written by the same FDIC and Fed officials who created the privacy intrusion regulations in 1998 that were innocuously promoted to the American people as a bank "service" referred to as "Know Your Customer." On the heels of the repudiation of "Know Your Customer" by America's financial institutions and privacy rights groups, Congress made two attempts--one in 1999 and another in 2000--to enact the Clinton Administration's proffered money laundering legislation that would have expanded law enforcement's access to personal information about your financial transactions (if there was sufficient grounds to suspect you might be engaged in some sort of unlawful activity due to the size of either the withdrawals from, or deposits into, your account at a bank, savings and loan, credit union or brokerage house). After HR 3886, The International Counter-Money Laundering Act of 2000 died on the vine, it would be September 11, 2001 before the American people would be frightened enough to blindly sacrifice a little bit more of their constitutional privacy for what they erroneously believed would be a safer America. On October 27, 2001 the Bank Secrecy Act piggybacked its way to passage as Section 359 of Public Law 107-56--the Uniting and Strengthening America by Providing Appropriate Tools Required To Intercept and Destruct Terrorism (USA Patriot Act of 2001).
Taking its time, the Paul O'Neill Treasury Department did not submit its draft outline of its proposed regulations and enforcement guidelines to the House and Senate Banking Committees for their purview until November, 2002. Dr. Ron Paul [R-14th-TX], the vice-chairman of the House Financial Services Committee, dashed off an angry e-mail to then Treasury Secretary O'Neill in which he said: "I am writing to express my concerns regarding the Financial Crime Enforcement Network (FINCEN)'s proposed new regulations implementing the USA Patriot Act's amendments to the Bank Secrecy Act [of 1970]. When they are implemented, these regulations will violate the constitutional rights of law-abiding citizens who purchase precious metals and hinder law-enforcement efforts to identify and apprehend terrorists."
"Under the rule," Congressman Paul continued, "dealers in precious metals who purchase or receive more than $50,000 in jewels, precious metals, precious stones, or jewelry are required to adopt an anti-money laundering program. The program must include the adoption of 'know your customer' type procedures. In addition, the dealers will also be required to report receipts of over $10,000 in cash."
When Congress enacted the Bank Secrecy Act, it required the Treasury Department to report within one year the need for any additional legislation to fully implement the money-laundering aspects of the Act. The Treasury Department made an additional request on September 26, 2002. They asked that a provision be added to the law, Section 103.23 that said: "...a person who transports, mails, ships, or receives; is about to, or attempts to transport, mail, ship; or causes the transportation, mailing, shipment or receipt of monetary instruments, is deemed to do so 'at one time' if...that transaction totals more than $10,000..." (and/or if) "...[shipment or delivery is spread out over one or more days] "...for the purpose of evading the reporting requirements..." is guilty of violating the law and is subject to its penalties which includes fines and imprisonment.
"Know your customer procedures" Paul continued, "require dealers to develop a profile of a typical money launderer. The profile is based on a list of legal transactions, which federal bureaucrats have determined are often engaged in by money launderers. Dealers are required to file a suspicious activity report whenever one of their customers matches that profile.
"Far from being the type of effective and focused program necessary to identify terrorists," the Texas Republicans said, "the 'know your customer' approach forces the government to look for needles in a haystack. This is because financial institutions file these reports regardless of whether they have any real evidence of criminal activity. For example, according to information obtained by my office, 99.999% of all Currency Transaction Reports are filed on law-abiding citizens. Aside from raising serious concerns about the government's respect for individual privacy, a system with this amount of "false positives" diverts valuable law enforcement resources away from the investigation of real terrorist threats to the harassment of innocent citizens.
"Furthermore," Paul said, "at a time when the economy is, at best, recovering from recession, I question the wisdom of imposing costly new reporting and record-keeping regulations on small businesses. Most jewelers and precious metal businesses are small 'mom-and-pop' operations that cannot easily afford to comply with burdensome record-keeping regulations. Many small dealers, in order to provide absolute proof that they are not dealing with terrorists, drug dealers, or other black marketers, will keep a database of all customers to share with the government. Thus, this regulation establishes a de facto database of every precious metals customer in the nation. Such a database would have great potential for abuse if a future administration decided to engage in another mass confiscation of gold, similar to the one that occurred under the Roosevelt Administration in the 1930s.
"Concerns over the loss of privacy," Paul noted, "are going to drive legitimate gold customers into the black market. Ironically, by expanding the illegitimate market for gold, these regulations will enhance the ability of international terrorists to use the precious metals market as a haven for money laundering while decreasing the ability of law enforcement officials to apprehend terrorists. Treating all precious metal customers as 'guilty until proven innocent' turns the fourth amendment on its head. Quite simply, the federal government lacks any constitutional authority to snoop on the transactions of law-abiding gold dealers and customers absent evidence that the proceeds are being used for money laundering. In conclusion, the proposed regulation expanding the money laundering provisions of the Patriot Act to jewelers and precious metals dealers will further bury law enforcement officers in false positive Suspicious Activities and Currency Transactions Reports, thus hindering efforts to identify and apprehend terrorists. This regulation will also burden small gold dealers and jewelers with new paperwork requirements, expanding the black market for precious metals and turning every law abiding gold coin collector into a criminal suspect. Therefore, I urge the Treasury Department to withdraw this regulation."
Ron Paul's e-mail fell on deaf ears. According to a source on Capitol Hill, John Snow's Treasury Department is hurriedly writing the regulations that will implement Big Brother's unconstitutional Section 359 of Public Law 107-56. The Treasury official confirmed that within two months the regulations will be codified and FinCEN will be prepared to enforce them.
Congressman Paul noted that "...financial institutions file these reports regardless of whether they have any real evidence of criminal activity...99.999% of all Currency Transaction Reports are filed on law-abiding citizens. Aside from raising serious concerns about the government's respect for individual privacy, a system with this amount of 'false positives' diverts valuable law enforcement resources away from the investigation of real terrorist threats to the harassment of innocent citizens."
After the passage of the USA Patriot Act, most States enacted enabling legislation that coincided with the terms and restrictions of that legislation. Within the USA Patriot Act was an amendment to the Currency and Foreign Transactions Reporting Act (31 USC Section 5311) which, like the Bank Secrecy Act could never have withstood scrutiny as a self-standing piece of legislation. The State of New York's enabling legislation amended that State's Official Compilation of Codes, Rules and Regulations, in particular, Title 3, Part 300.1(c) of the Banking Law Section 651-b, Part 406.3(g).dealing with suspicious activities reports and currency transactions reports. The State of New York decided to test that provision of the law and charged Western Union, which is the world's largest electronic transporter of small sums of unregulated money, with violating Part 300 of Title Three of the New York Banking Law dealing with currency transactions.
Stunned, but defenseless because Western Union did not construe the minuscule wire transfers from low income American wage-earners to pay overdue bills--or wire transfers from mom and pop to their children--came under the purview of suspicious wire transfer activity, the telecommunications giant bowed to the mighty State and agreed to pay a fine of $8 million for violating the Currency and Foreign Transactions Reporting Act.
Just as the United States government created the bootleg industry and the criminal activity associated with it by banning the manufacture or sale of alcoholic beverages, our government, by attempting to register the buying and selling of gold and precious stones by working class Americans, will inadvertently create am underground black market for gold and precious stones of sufficient size and financial strength that it will become a viable conduit for terrorists to transfer assets that can be used to purchase explosives or even human suicide bombers.
Uncle Sam seems determined to relive history. In 1933 the Federal Reserve, with the assistance of Franklin D. Roosevelt's Treasury Secretary William Woodin, wrote the Banking Emergency Relief Act of March 9,1933 that gave a fuzzy but nevertheless unconstitutional sense of legality to Roosevelt's seizure of the gold that had been lawfully withdrawn from the nation's banks by its owners. Three days earlier, on March 6, 1933--within minutes of his inauguration--FDR issued Proclamation 2039, closing America's banks. On March 8 Roosevelt extended the bank holiday.
On that same day, the Federal Reserve ordered all banks in the United States to prepare a list, to be delivered to the Treasurer of the United States, of any depositor who had withdrawn their savings in gold from the nation's banks and savings and loan companies. The Fed also instructed the banks to create a second list of those citizens who failed to redeposit that gold by March 13. Those Americans would be subject to a fine of not more than $10,000 nor imprisonment for more than ten years for "hoarding" their own life savings.
It is for precisely that reason that Americans who heard the rumors of another "gold registration" in November reacted with alarm. It is also the reason that wary, mistrustful American citizens will very likely risk fines and imprisonment to support an illegal underground gold market. And, it will likely be for the same reason that the U.S. government, convinced that terrorists are moving monetary assets around the country, and the world, in the form of portable wealth rather than traceable currency, they will make a move not only to outlaw the private ownership of gold, but to also ban the sale of loose diamonds and precious stones as well to unlicensed dealers.
When that happens, FDR's New Deal
will come full circle to meet George W. Bush's Raw Deal just about
at election time.
© 2004 Jon Christian Ryter - All Rights Reserved
Jon Christian Ryter is the pseudonym of a former newspaper reporter with the Parkersburg, WV Sentinel. He authored a syndicated newspaper column, Answers From The Bible, from the mid-1970s until 1985. Answers From The Bible was read weekly in many suburban markets in the United States.
Today, Jon is an advertising executive with
the Washington Times. His website, www.jonchristianryter.com
has helped him establish a network of mid-to senior-level Washington insiders
who now provide him with a steady stream of material for use both in his
books and in the investigative reports that are found on his website.
"...FDR's New Deal will come full circle to meet George W. Bush's Raw Deal just about at election time."