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New Federal Law Provides Justice Department with Broad Access to Business Financial Records

21 January 2004

On Saturday, December 13th, while the world watched the day long, widespread coverage of the capture of Saddam Hussein, President Bush signed a new law providing broad and sweeping powers to the Justice Department and the FBI. The new law, entitled the "Intelligence Authorization Act for Fiscal Year 2004," primarily is focused on authorizing appropriations for various security initiatives and intelligence activities of the federal government. However, tracked into the Act is one minor "redefinition" of the term "financial institution" to now include not only banks but also casinos, car and boat dealerships, stockbrokers, credit card companies, real estate agencies, insurance agencies, jewelers, airlines, the U.S. Post Office and any other business "whose cash transactions have a high degree of usefulness in criminal, tax, or regulatory matters."

By redefining the term "financial institution," the law extends the provisions within the 2001 Patriot Act to the financial records of these additional businesses. Most importantly, the FBI now has the statutory authority to obtain client records from all of these additional businesses (including casinos) merely by requesting the records in a "National Security Letter." To get the records, the FBI no longer has to appear before a judge and show "probable cause" that the targeted individual is involved in a criminal or terrorist activity.

The new federal law is drawing criticism from civil libertarians who are almost certain to challenge the law based on the safeguards of the Fourth Amendment to the U.S. Constitution, which provides for judicial oversight of the issuance of subpoenas to avoid unreasonable searches and seizures. They are certain to argue without the safeguards of judicial oversight, such power may be abused by the FBI. Notably, the ACLU filed the Nation's first legal challenge to the USA Patriot Act here in Detroit last summer, taking aim at a section of the law that allows the FBI to secretly obtain records. The ACLU argues that these provisions violate the Fourth Amendment by allowing the FBI to search and seize records without a warrant and without showing probable cause. The ACLU also argues that a "gag order" portion of the law which prohibits those who are served with requests for such information from telling anyone that the information was requested, violates the First Amendment.

Supporters of the changes argue that it is necessary to prevent future terrorist attacks on the U.S. as part of the ongoing war on terrorism. They argue, in essence, that new times require new measures and that this step is necessary to safeguard our Nation.

As last year's news reports about William Bennett's alleged gambling habits pointed out, privacy should be a very serious issue to members of the casino gaming industry. Unfortunately, the industry now finds itself between a rock and a hard place. It has to comply with all laws, and no doubt operators will. Yet, it is certain to be criticized by those who feel the law is unjust and unconstitutional. It is important for casino operators to know what this new law allows the FBI to have access to and how best to comply, but at the same time protect their customers' privacy.

Hopefully, the FBI will show proper restraint in the application of the law while the courts sort the issues out and resolve them in the coming years. The litigation centered here in Detroit could go a long way in defining what is, and what is not, constitutionally permissible.

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com