Obligations to Inform and Duties to Spy – Banks and Telecommunication Service Providers as the Extended Arms of Law Enforcement

-- By PeterLing - 14 Nov 2012

Certain ancillary state tasks related to law enforcement have often been delegated to private entities in the form of obligations to inform. A typical example is the obligation of physicians to report injuries potentially related to violent crime (such as gunshot-related injuries) to law enforcement agencies, in order to facilitate investigations. Entrusting citizens or private entities with such law enforcement tasks, however, raises potential constitutional issues, even if they appear very minor in the above mentioned case of reporting a gunshot wound. It can probably be said that an overbroad delegation of law enforcement tasks, in particular reporting of illegal activities, to citizens is one characteristic feature of totalitarian states. The encouragement of denunciation and even generalized obligations to denounce were and remain typical of dictatorships both of the communist and the national-socialist types. Paragraph 225 of the Criminal Code of the German Democratic Republic made it a crime for all citizens not to denounce any felony committed or even merely prepared to be committed against the GDR or its “state order”. Francisco Franco’s Spain set up denunciation centers open to anyone after the end of the Spanish Civil War to facilitate the tracking of the regime’s opponents.

The recent decades have witnessed the emergence of an entirely new category of delegation of investigative law enforcement tasks to private entities, without any major debate on the involved constitutional or social implications. Two examples appear typical of this development.

First, money laundering legislations have transformed banks into the extended arms of attorneys general, by imposing on them duties to examine all wire and cash transactions above a certain threshold, to actively ask certain questions to their clients (in order to ensure the lawful origin of their deposits) and to automatically report certain “suspect” transactions to a state agency. In addition, there has been a recent trend to request banks to ensure that newly deposited funds had been taxed, forcing the banks to become agencies of the tax authorities. Second, lawful interception statutes created privately owned outposts of state police, i.e. telecommunication companies and internet service providers. Today, these companies face obligations to store all their clients’ communication history during definite periods of time and to actively wiretap certain communications on behalf of the law enforcement authorities. Neither money laundering nor lawful interception statutes are limited to imposing obligations to inform. Both sets of rules imply proactive spying by private entities on their customers. The statutes not merely encourage, but explicitly require certain private entities to investigate on citizens, their own clients, in most cases without any tangible ground for suspecting that a felony or any other socially harmful act has happened.

Of course, the described assistance to law enforcement authorities by private entities is not only very helpful to discover crime, but also a very powerful tool to stop it from happening, which creates enormous potentials for abuse. Credit card companies have been used for instance either outside of the legal framework to (successfully) block funding of certain (at least not officially unlawful) organizations such as WikiLeaks? . Credit card companies appeared also to be the perfect way to cut the funding of alleged copyright infringers online, even though the maneuver eventually turned out to be unsuccessful (see Perfect 10 v. Visa, 494 F.3d 788 (9th Cir. 2007)).

Difficulties of routinely delegating investigative and enforcement powers to private entities do not exclusively arise when it comes to the abuse potential, i.e. trying to stop activities that do not qualify as “crime”. As such, the fact that such tasks are carried out by private entities results in a lack of meaningful legal protection against any future use. Mandatory reporting to state authorities about money laundering or mandatory storage of telecommunication history leads to creating a thicket of data about persons, which can potentially be used in any framework unrelated to the original reason (assuming there was one) of collecting such data in the first place. It is maybe a mere irony of fate that the storage of intimate details of one’s life by a private service provider and the possibility to access them in an investigation unrelated to these details could recently put an end to the career even of America’s top spy, the director of the CIA.

It is not the point of this essay to argue that lawful interception should not be undertaken or money laundering statutes should be repealed. Both tools are too useful to be abandoned. It is also arguable that lawful interception of telecommunication would be much more difficult if not impossible without the assistance of the private companies involved in the telecommunication, as would be the enforcement of money laundering rules without the help of the banks involved in the payment streams. However, the potential for abuse could be strongly limited by introducing three rules into the relevant statutes. First, duties to spy without any suspicion of illegal activities should be abolished. Such duties include generalized storage of telecommunication history of all customers by service providers as well as duties to ask questions about the origins of bank deposits or reporting of transactions as long as they are merely based on the amount of money involved. Second, state-ordered surveillance by private companies should always be based on the actual suspicion that a serious crime has been committed and such “serious crimes” should be on a short and exhaustive list of crimes in a statute. “Serious crime” should neither include political crimes nor activities that are often used by rogue states to stop political opponents, such as tax evasion. Finally, none of the described spying by private entities should take place without an order issued by a court (as opposed to a subpoena issued by a governmental authority).

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