Bank of America: World Police

Fox News calls out the megabank's snooping

February 19, 2021 Exploring the transformation of value in the digital age Sponsored By: By Michael J. Casey Chief Content Officer NFTs, Snooping, Climate Change Welcome to Money Reimagined.    I'm on vacation. So this week's main-bar column comes to you from Executive Editor Marc Hochstein. In it, Marc draws deeply on his objective consistency to remind us that wherever you stand on the politically charged issues of our day, we all lose when our right to privacy is breached in pursuit of them.    Before I took two days off, my podcast co-host Sheila Warren and I got to record the first in a multi-part series on the nonfungible token craze. To explore why people in the art and entertainment world are so excited about NFTs right now, this week's stage-setting episode starts with a look at how human beings decide how to value something.  For this, we were joined by perhaps the perfect guest: Nanne Dekking, the former vice chairman of Sotheby's who is now the CEO of blockchain company Artory. This was an especially fun one! Check it out after reading Marc's insights. Tucker Carlson Is Right About Financial Privacy Illustration: Rachel Sun/CoinDesk Trigger warning: This column has something nice to say about Tucker Carlson.   On Feb. 4, the Fox News host broke a story that should concern all Americans, even those who normally blanch at his populist brand of right-wing politics. Indeed, the revelations should interest anyone who cares about the future of money, even if Carlson's TV broadcast could have used more context.   Since the Jan. 6 Capitol Hill riot in Washington, D.C., Bank of America has been helping federal investigators search for extremists by combing through its transaction records, "Tucker Carlson Tonight" reported, without naming its sources (standard journalistic practice with sensitive stories).   Specifically, the country's second-largest bank searched for customers who:   Transacted with debit or credit cards in Washington on Jan. 5 and 6 Paid for hotel or AirBnB reservations in the area after Jan. 6 Bought weapons, or anything else ("t-shirts included") from a "weapons-related merchant," between Jan. 7 and "their upcoming suspected stay in D.C. area around Inauguration Day" (Jan. 20) Made "airline-related purchases" after Jan. 6 – "not just flights to Washington, but flights anywhere, from Omaha to Thailand." Of the 211 customers who met the "thresholds of interest," at least one was interviewed by the authorities before being cleared of suspicion, Carlson told his more than 4 million nightly viewers.    "Bank of America is, without the knowledge or the consent of its customers, sharing private information with federal law enforcement agencies," he thundered. "Bank of America effectively is acting as an intelligence agency, but they're not telling you about it."   What else is new?   To seasoned observers of the financial services industry, including regulated cryptocurrency businesses, it's tempting to scoff, "no kidding, Columbo."    Banks have been providing customers' private information to the government without their knowledge or consent for decades under the 1970 Bank Secrecy Act and related anti-money-laundering (AML) regulations.    "For B of A, as well as any other regulated entity, it's not like we're sheriff deputies or an extension of law enforcement, but because we're regulated, we have regulatory obligations. That's how the regulatory framework was designed by our legislature and politicians," said Tim Byun, global government relations officer at crypto exchange operator OK Group and a former Visa executive and bank examiner. "The public and customers should and need to be aware of this."    Financial institutions routinely file suspicious activity and currency transaction reports (SARs and CTRs), hundreds of thousands each year, to the Treasury Department. These reports contain sensitive personal information about customers who may not have committed any crime. As CoinDesk's Ben Powers reported last year, they are stored indefinitely by a bureau that appears ill-equipped to guard them. A trove of them would make a comely prize for hackers. The SolarWinds breach only reinforced doubts about Uncle Sam's cyberdefenses.   After 9/11, the Patriot Act heightened banks' "intelligence agency" role decried by Carlson. Particularly pertinent here may be Section 314(a), which authorizes the government to share with financial institutions the names, addresses and other data about individuals and groups suspected of terrorist and money laundering activity, and in turn requires those firms to search their records and tell the authorities if they find a match.     On Fox, Carlson asked his viewers to put themselves in the shoes of the B of A customer. "The FBI hauls you in for questioning in a terror investigation, not because you've done anything suspicious, but because you bought plane tickets and visited your country's capital," he said. "Now they're sweating you because your bank, which you trust with your most private information, has ratted you out without your knowledge."   Don't tell a soul Illustration: Rachel Sun/CoinDesk Carlson's indignation is understandable – but so would any bank's reticence to notify customers they were being "ratted out." Tipping off a customer to an investigation by disclosing a SAR filing, for example, is illegal, and both the bank and the officer responsible may be held liable for lapses. "All banks have responsibilities under federal law to cooperate with law enforcement inquiries in full compliance with the law," B of A noted in its response to Carlson's questions.   Some details of Carlson's report were fuzzy. For example, he complained that B of A cast "an absurdly wide net," but it's not clear how absurdly wide. The broadcast didn't explicitly say whether the bank reported only those customers who met all four of the criteria described, or all who satisfied any one of them.    Also, while Carlson noted that B of A retrieved the information "at the request of federal investigators," it would be helpful to know the exact nature of the request: a warrant backed by probable cause and signed by a judge? A subpoena? An order by the shadowy, Kafkaesque FISA court? (Neither Fox News nor B of A answered requests for clarification by press time.)   Here's where the Patriot Act may come into play. Did B of A search its records in response to a Section 314(a) notification? If so, was this tool used because the suspects were considered domestic terrorists? (Remember, the law was written when the popular idea of a terrorist was Osama Bin Laden, not the QAnon Shaman.)    Does a search for broad types of purchases, rather than named individuals, fall under the scope of Section 314(a)? How much leeway did B of A have to push back against the Feds' demands, as Carlson implies it should have? Was law enforcement simply looking to supplement information already gleaned from public video footage, names to put to faces? It'll be interesting to see what further reporting finds.    But remember the big picture. Since the 1970s, courts in the U.S. have held that people have no reasonable expectation of privacy in information they voluntarily turn over to third parties. As a result, the investigative methods Carlson exposed, however shocking to Joe Sixpack, are pretty standard. Our financial transactions aren't protected by the Fourth Amendment of the U.S. Constitution.    Should they be? That's a question we ought to revisit in this digital age. Say what you will about Tucker Carlson, but he deserves credit for drawing public attention to the matter.    – Marc Hochstein Ethereum's Whales Signs of ownership concentration are emerging on the Ethereum network as participation grows in Ethereum 2.0's stake-based validation system. The number of ether "millionaires," or addresses holding 1,000 ETH or more, has dropped by 7% in 2021, as of Thursday, accelerating from 2020's 6% annual decline, according to data provided by Coin Metrics.    Meanwhile, at more whalish depths, populations are increasing. The number of addresses holding 10,000 units or more has increased by 8%, and Ethereum has added a single new "billionaire." Since the start of the year, the number of addresses holding 1 million ETH or more has gone from seven, to nine, and back to eight as of Thursday.    Let's be clear, these aren't uncharted waters for ether ownership concentration. The number of 10,000 ETH addresses hit peak in February, 2018, at 1,284. As of Thursday, it's 1,276. These shifts in ownership are taking place as staking grows on Ethereum, with 90,349 active validators on the network, up from 77,890 at the beginning of February, according to CoinDesk's Valid Points newsletter, which provides in-depth coverage of the Ethereum 2.0 roll-out.    Fears of ownership concentration in proof-of-stake systems are not new. And it's a little early for ETH bears to sound the decentralization alarm. For one thing, these are addresses. They don't even necessarily indicate entities, let alone what kind of entities. They could be exchanges or other service providers representing many smaller entities. However, with Ethereum governance set to be tied to asset ownership in a proof-of-stake system, they bear watching.     – Galen Moore, senior research analyst  SPONSORED BY AAVE Experience DeFi: Deposit, Earn & Borrow With Aave    Aave (fun fact: the name is taken from the Finnish word for "ghost") is a decentralized, open-source and non-custodial liquidity protocol where you can earn interest on crypto deposits and borrow assets. Deposit your preferred asset and you'll automatically start earning interest every second, based on the market supply and borrowing demand. Users can also swap any of their deposited assets in order to get the best yields on the market! Aave Protocol features access to innovative DeFi building blocks including flash loans and credit delegation as the first uncollateralized loan options in DeFi.  Check out Aave today: https://aave.com/ The Conversation: Bitcoin's Energy Use With bitcoin's price rise pushing crypto back into mainstream conversation, Twitter alighted on a long-simmering question this week. Is bitcoin's energy consumption – inevitably high because of its proof-of-work algorithm and decentralization – justifiable?    Meteorologist and climate journalist Eric Holthaus said it this way: But Yassine Elmandjra, an ARK Invest analyst, said a lot of bitcoin mining uses renewables these days: CoinDesk columnist Nic Carter said bitcoin's climate scolds fail to account for the dollar's own impact: And some said BTC could even restore stability to Texas' troubled grid, with mining facilities ("bitcoin batteries") helping to balance supply and demand: Lawyer Jake Chervinsky said bitcoin was healthier for criticism in any case: – Ben Schiller, Features editor Introducing First Mover, live daily on CoinDesk TV From the world leader in crypto news and events, the all-new CoinDesk TV covers the rapidly evolving world of digital finance and its role in the global economy. We cut through the hyperbole and confusion to explain what's happening in this fast-changing industry and why it matters to investors, companies and governments. First Mover, CoinDesk TV's flagship show, gives investors the top global market, business and regulatory news stories impacting digital assets. Hosted by CoinDesk's Christine Lee, Lawrence Lewitinn and Emily Parker, the programming features daily dispatches from reporters and partners around the world and high-profile guests including top newsmakers, influencers, analysts, traders and trend watchers at crypto exchanges. Watch First Mover every weekday at 9 a.m. ET on YouTube or CoinDesk.com. Relevant Reads: Adoption Everywhere Bidding up. In another sign of mainstream crypto acceptance, Christie's is auctioning its first nonfungible token. "EVERYDAYS: THE FIRST 5000 DAYS," by @beeple, is the "first purely digital work of art ever offered by a major auction house." CoinDesk's Jamie Crawley reports.    Meme message. Dogecoin, which has seen year-to-date returns of about 1,000%, is often seen as a big joke. But in this op-ed, CoinDesk Global Macro Editor Emily Parker asks us to take the project seriously, if only because of what it tells us about the moment. Increasingly, she says, reality seems to be "shaped by collective belief, rather than underlying facts." In other words, if a community wants a coin's price to rise, it will rise, irrespective of fundamentals.    ETF at last? Exchange-traded funds have long been seen as a prerequisite for Wall Street adoption of crypto, but they've fallen foul of regulatory approval. Is that about to change? CoinDesk's regulatory expert Nik De stirs the tea leaves, including a change in regime at the Securities and Exchange Commission, strong institutional interest in bitcoin and a newly-launched bitcoin ETF in Canada.    – Ben Schiller ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. 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