Treasury Goes After ISIS Funding, Doesn’t Give a Hoot About Financial Privacy

Sometimes, silence resounds even louder than the drums of
war
kinetic military action. At the House Committee on Financial
Services hearing yesterday on the U.S. Treasury’s strategy for
disrupting ISIS funding, the silence was practically deafening:
Except for some token remarks on remittances to ISIS-controlled
territories, there was no mention of the costs that the Treasury’s
counterterrorism efforts would have on the financial industry and
the financial privacy of Americans.

Undersecretary for Terrorism and Financial Intelligence David
Cohen outlined the plans for carving away at the
estimated $2 billion in wealth at the terror group’s disposal.
Broadly, the strategy hinges on imposing sanctions on the
organization’s financial base—predominantly black market oil
sales—and restricting its access to the international banking
system.

While theoretically this might sound just peachy, the plan will
probably
prove ineffective for a variety of reasons, not least of which
the fact that ISIS is largely financially self-sufficient and
doesn’t rely on infusions of foreign support channeled through
international financial networks. Nonetheless, Cohen assured the
assembled congressmen that he’s been “working very, very hard” to
undermine the financial capabilities of ISIS.

But mum’s the word on what his efforts mean for those large
swathes of people engaging in legitimate business.

If history is any guide, the implications can’t be good. U.S.
efforts at wielding financial weapons to bring recalcitrant
individuals and organizations to heel have a habit of trampling on
the rights of many to catch the few—all at enormous costs in civil
liberties and treasure for intangible benefits.

Over the past several decades, legislation initially aimed at
curbing money laundering activities of drug dealers has morphed
into a powerful arsenal of rules and regulations for government
agencies to target large numbers of Americans for any number of
supposed crimes—Americans who often
don’t even need to be charged with a crime to have their
financial assets seized.

From the Banking Secrecy Act
of 1970 to the
Money Laundering Control Act of 1986 to the PATRIOT Act,
efforts to crack down on various targets have systematically
chipped away at the financial privacy everyone, all the while
burdening financial institutions with onerous regulatory
requirements. Thousands of individuals
have had their assets seized under these vague rules. Whole
industries have had their access to banking services restricted,
particularly under the Department of Justice’s
Operation Choke Point. Financial businesses have to fork over

billions in compliance costs in
order to stay on the right side of vague laws.

That the payout of this panoply of intrusions has been
negligible is driven home by the fact that ISIS is really quite
rich. More than one congressman at the hearing wondered aloud what,
exactly, we’re getting for all the money spent on counterterrorism
if we can’t stop an organization such as ISIS from getting
fabulously rich. Other than the feds breathing down our necks at
every turn, of course.

The conversation we should be having is whether the benefits of
our financial counterterrorism tactics outweigh the costs. But
legislators seem more willing to rattle their sabers and abrogate
civil liberties than to stop and ask: Is this really the best way
to fight terror groups? And if so, is it worth it?