November 15, 2005

By John Dietz, Senior Advisor of Trustmakers

It’s difficult to say what’s most obtrusive in your professional life, but my vote would be compliance. Compliance, with its almost maniacal form filling, rule pumping, time wasting, new age vocabulary is coming full speed ahead into your work space. In the post 9/11 world, and many congressional hearings later, homeland security has left us with reams of paper so deep that the increase in production may be the second sole reason for global warming.

The USA PATRIOT Act has over 140 separate sections with 16 sections for banking alone. This amendment to the already existing Bank Secrecy Act has been a major concern for the banking industry. For the past decade, the only real obligation for the banks was the Suspicious Activities Report (SAR). Since 1996, when the SAR system was started, there have been 1.7 million reports filed with the U.S. Treasury Department. The difference today is the banking system has until January 1, 2008 to completely comply with the new code. This has created a bull market in a wide range of banking and non-banking related issues. Retired law enforcement members are being hired to handle consumer banking affairs. Yes, without your knowledge, you may be having your bank accounts looked at.

This is not unlike the Stasi, (short for “Staatssicherheit”) which was the former State Security Police of East Germany. At the height of its power, the East German Ministry of State Security employed nearly 91,000 people and had over 300,000 informants (known as “Inoffizielle Mitarbeiters,” or unofficial collaborators). This means that approximately 1 in 50 East Germans collaborated with the Stasi, which is one of the highest penetrations of any society by an organization. After the fall of East Germany, much of the material compiled by the Stasi (totaling 16,000 mailbags, or 33 million pages of reports) was found intact. Former East German citizens were astonished to find that friends, colleagues, husbands, wives and other family members were regularly filing reports with the Stasi!

A good friend—and fairly competent historian—is always reminding me that the rise and fall of nations are not so different. He is always quick to point out that anyone who thinks it won’t happen here is sadly mistaken. He may be a bit of a closet conspiracy theory guy.

I think the real difference between the Stasi and U.S. system are goals. The reason for the PATRIOT Act is much different from the Stasi. They are similar only in their exhaustive measures in gathering information. Technologically speaking, you would have to wonder what the Stasi would have done had they put there arms around the super computer that mapped the human genome. What a scary thing to comprehend.

The problem with building security is and always has been trade offs. The possibility of living safer for all of us is a great motivator; unfortunately, it comes with a price. Part of that price is compliance.

Time can only tell if the USA PATRIOT Act and banking secrecy laws will help. My suspicions are they won’t. People will find a way to do bad things because they always have.

Until next time,

John

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