Statutory Immunity for Suspicious Activity Reporting: Real or Imaginary Protection for Financial Institutions?
| DOI | https://doi.org/10.1108/eb025905 |
| Date | 01 February 1999 |
| Pages | 346-350 |
| Published date | 01 February 1999 |
| Author | Ian M. Comisky |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 6 No. 4 — Analysis
Statutory Immunity for Suspicious Activity Reporting:
Real or Imaginary Protection for Financial
Institutions?
Ian M. Comisky
In 1997, an appellate court in the US issued an impor-
tant decision in the consolidated appeals of Lopez v
First Union National Bank of
Florida
and Coronado v
Bank Atlantic Bancorp., Inc.1 The decision raises provo-
cative issues concerning the scope of the immunity
granted to financial institutions providing informa-
tion to the federal government about their customers
under US laws. In order to understand the impact of
this decision, some factual background with respect
to each of the cases and the relevant case law is
required.
In the first of the two consolidated cases, Patricia
Lopez appealed the dismissal of her complaint
where she had alleged that First Union National
Bank of Florida ('First Union') had made improper
disclosures to the government. She first alleged that
First Union had received two electronic funds trans-
fers for her credit and had provided law enforcement
authorities access to the contents of the transfers based
on 'verbal instructions'. A year later, a US magis-
trate-judge issued a seizure warrant directing First
Union to freeze Lopez's account and, after conduct-
ing an inventory pursuant to the warrant, First
Union again provided the government access to the
contents of electronic funds transfers. The govern-
ment subsequently filed a civil forfeiture action
against Lopez with respect to certain funds, resulting
in an agreement to forfeit some of the funds while
returning to her the remainder. Following the resolu-
tion of the civil forfeiture action, Lopez filed suit
against First Union alleging violations of certain fed-
eral laws, including the Electronic Communications
Privacy Act (ECPA),2 and the Right to Financial
Privacy Act (RFPA),3 as well as violations under
the laws of the state of Florida where the matter
arose.
The appellate court began by reviewing the
statutory framework which formed the basis for the
complaint. In 1996, the American Congress had
clarified the existence of privacy for depositors by
enacting the ECPA which provides protection for
unauthorised interception of electronic communica-
tions.
The Act establishes conditions by which elec-
tronic communications services may divulge the
contents of the communications.4 It further estab-
lishes circumstances under which the government is
entitled to access to electronic communications,5
and provides a civil cause of action for anyone injured
as a result of violations of the substantive
provisions.6
Lopez alleged, in part, a violation of 18 USC
§2702(a)(l) which provides that:
'a person or entity providing an electronic com-
munication service to the public shall not know-
ingly divulge to any person or entity the contents
of the communication while in electronic storage
by that
service.'7
The court held that the allegations of the complaint
that First Union improperly divulged the contents
of an electronic communications service stated a
valid cause of action under this section of the Act
and the dismissal of this count of the complaint was
reversed.
Lopez further alleged a violation of
18
USC §2703
and §2511(3)(a). Section 2703 of the ECPA defines
the conditions in which an electronic communica-
tions service may disclose communications to the
government, providing that if the service has held
the contents for 180 days or less, it may only disclose
them pursuant to a federal or state warrant.8 The
appellate court upheld the dismissal of this count of
the complaint, holding that it was not violated
unless the communication was divulged 'while in
transmission' and stating that since a transmission
had not been alleged, no valid cause of action existed
with respect to this provision of the ECPA9.
The court then reviewed the claim under the
RFPA. The court noted the US Supreme Court
had held in United States v Miller that under the
Fourth Amendment to the United States Constitu-
tion, individuals had no expectation of privacy in
their financial records when these records were in
the hands of third
parties10
The court stated that the
Page 346
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