An interesting and important issue goes right to the curious information relationship chartered banks have with their regulators. The specific and immediate issue involves a new communications service used by several banks, called “Symphony.” It is a program that allows bankers to exchange ideas and information with each other via encrypted communications. And there is the rub. Some regulators seem to be concerned that this encryption will allow bankers to engage in illegal communications to which regulators would not have access because of the encryption.
Of course, the Constitution protects speech and communications. The Fourth Amendment, for example, declares people to be secure in their “persons, papers, and effects” and establishes some explicit standards for government authorities to use warrants to breach that security. It is true that people can engage in legal as well as illegal conversations. We do not require or allow government to be a party to all communications on the grounds that perhaps sometimes some communications by someone might break the law.
For most businesses, government authorities need to go through procedures such as securing warrants to have access to a company’s communications and other detailed information. For a long time however, the banking industry has, to a significant degree, given banking supervisors access to detailed information at banks that might otherwise require a warrant in the case of a nonbanking firm. That has been considered part of the conditions for having a government charter (which all banks have) as well as federal deposit insurance, which again all banks today are required to have.
How far does that exception for bank regulators reach? Does or should it include unlimited regulatory access to any and all communications by bankers with bankers, on the theory that some bankers somewhere at some time might perhaps maybe engage in illegal activity, without any prior reason to believe that illegal activity is actually occurring? To what extent are banks and bankers excluded from constitutional protections against warrantless access to their communications?
These and perhaps other questions may be tested by insistence by regulators that they be given “backdoor” access to encrypted communications via Symphony or other such services.
Here is an interesting article by Penny Crossman, from American Banker, “Note to Critics: Bank-Backed Message Service Not Backing Down,” dated September 1, 2015, discussing the Symphony issues.
* * * * *
Wayne A. Abernathy is the Chairman of the Financial Services and E-Commerce Practice Group, Executive Committee.