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.

This is analytically confusing. The original focus is obligation to report unlawful conduct, not encouragement of voluntary denunciation. The claim is that too much obligation to assist law enforcement is threatening to liberty. Such a proposition is more easily discussed if it isn't conflated with voluntary acts of "collaboration."

From the point of view of the formalist, the issue might well be the obligation. From the point of view of the realist, the issue is only the enforcement. I have a general obligation to assist law enforcement, but it's unenforceable. Every person has an obligation not to lie to law enforcement officers in response to professional inquiries. That's theoretically enforceable; federal prosecutions under 28 U.S.C. §101 for false statements to investigators do sometimes occur; state ordinances against "interfering with officers" are sometimes invoked over lying to cops. But in realist terms, those obligations disappear where prosecutors use their discretion wisely, and for those segments of the population who have lawyers, and who are most likely to seek to shirk their supposed "obligation."

All of this would be important, of course, where the discussion didn't involve activities already under pervasive regulation by the state. But you're gearing up to make an argument about banking and telecommunications firms, where the very idea of independence from the state is bullshit anyway. Believing in the analytic importance of bullshit is a task only formalists can complete.

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.

The social implications aren't in how power organizes to perform the task. That's a detail. The real issue is whether the task of monitoring every detail of citizens' lives is to be performed at all. You're committing the cardinal formalist error: you're treating the forms rather than the substance as the focus of a social problem.

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.

This wasn't true before? At what time has power not done what it could to monitor the banking system? When have governments not spied on banks, and demanded their assistance in the functions of the state? Why is it different whether the legal form is "money laundering" regulation or simple taxation? You are persuading yourself of the existence of a social phenomenon on the basis of what it is called, not what it is.

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.

What was the rule under Lorenzo di Medici, do you suppose? Or under Ferdinand II in Sicily in the 13th century? Are you talking about realities, or about what it says in the books?

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.

Did you want to assume this, or show it? In the US, they don't face obligations, they face "requests for cooperation," for complying with which they now have total legal immunity. If the subject is formalist "obligations" talk, that's a dispositive difference that brings the conversation to an end. If one is realistic about the matter, and is concerned not with what things are called but with what they do, it's no meaningful difference at all.

You don't know what the rules are in any country in which the rules are secret. That would be pretty much every country. So you need to ask what actually happens. Formalism is pointless in dealing with the real phenomena of power; it's just a game meant to keep smart people busy not changing anything.

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)).

So it's more important to know what happens than it is to know whether something "appears" to be "perfect" on the basis of logic or argument. It's also important to remember that the credit card company is doing far more monitoring and controlling than "the state" is specifically concerned with. Blocking WikiLeaks is just one action out of hundreds of thousands per day in which the credit card network operator denies a transaction to prevent a fraud. Its data-mining of its customers is not created by the state; the state merely passively uses a tiny fraction of the surveillance and control processes the capitalist has built for himself, in order to destroy another "chartered freedom" or two.

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.

Note the formalist mistake of believing that the solution to a social problem, even one you have made up, is to be found in changing the words in the books. Your actual goal is to change something that is happening, or that might have eventually happened, in the world. You're going to do that by writing something in the statute book? Doesn't that require some demonstration that it makes the tiniest bit of difference what the book says?

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.

Why should this be said? It isn't the policy of the state. It isn't the reality. It isn't going to happen, never having happened before. Why should the statute book be made to lie about reality?

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.

Same question. Is this to pretend that "orders" are how these arrangements are made, so that every actual arrangement can be exculpated by the statute book because it wasn't "ordered"? Or is this to maintain so far as possible the naivete of the laws with respect to the actualities?

“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).

Good luck. And when you've gotten it, how do you plan to enforce all this?

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