Kirk LaughlinIs the transmission of customer’s financial data to overseas call centers in violation of the Fourth Amendment, the Right to Financial Privacy Act and the Consumer Protection Act? According to class action suits filed against AmEx and BoA filed by Maryland attorney Joseph Hennessey it is, and he aims to put a stop to the practice. Hennessey, a partner with Newman McIntosh & Hennessey, LLP, has been down this road before when, in 2008, he filed suit against Acumen, an Indian Legal Process Outsourcing firm, and then President George W. Bush.
That action sought to discover if the way in which Acumen received and transmitted data electronically waived the Fourth Amendment protection in the US. It also alleged that the government was intercepting data sent by the US to a foreign national as part of its anti-terrorism campaign. Acumen filed a motion to dismiss, and Hennessey withdrew the complaint.
When we spoke to Hennessey today, he said that Fourth Amendment rights are waived at the US border, and this has allowed the US government to “do all sorts of things that would be prohibited in the US. Including things in the name of national security.” The suit against AmEx alleges that through its foreign outsourcing, AmEx has been providing the government, through NSA, access to the financial records of AmEx customers each time AmEx retransmits customer telecommunications and financial records to call centers located overseas. However, Hennessey contends that he has not alleged that their is active collusion between AmEx and the government when the financial institution transmits protected data to a locale where the US government, and foreign governments, are not constrained by US law.
“To be in compliance with the Consumer Protection Act,” advised Hennessey, “they would have to be transparent with their customers with respect to the consequnces of their election to transmit the financial records overseas. I would imagine that there would have to be some kind of disclosure that their choice of locale would waive Fourth Amendment rights.”
At the core of the issue: Can the government constitutionally intercept information bound offshore under the Fourth Amendment.
Hennessey clarified that the complaint doesn’t allege what the government is actually doing. “That’s besides the point,” he said, “AmEx and BoA actions absolve the US government and other governments.” The statute allows for a penaly of $100 per violation and, in the the petition, the plaintiffs have asked for that relief and an injunction against AmEx and BoA to cease outsourcing to foreign locations.
Steve Semerdjian, a Partner with Loeb & Loeb LLP in New York City, reviewed the complaints and found that, “It is actually a very novel approach. Basically what they are saying -and it cascades from this fact- is if the data was not sent outside of the US, if the financial institution did not offshore this information, the government could not constitutionally intercept the information under the Fourth Amendment.
The next jump is that they are violating the Financial Privacy Act, which is geared toward government action saying the government can’t access the financial records of an individual unless they meet certain requirements. It also says that the financial institution can’t provide the information unless the government has met the requirements. What the claim is trying to say is that there is no protection of the data and that they have given access to the government. I think it is a bit of a stretch because they are not really giving access to the government.”
Semerdjian adds that the data is not actually sent offshore. “Most financial institutions will keep their data in the US and give the vendor limited access. If they do transmit any data, it is highly encrypted.” Additionally, the institutions use private connection and are not transmitting information via the internet.
The Consumer Protection aspect of the arguments flows from the same concept. The Act states that a company cannot represent that the services have a characteristic they do not. Sending the data offshore, according to Semerdjian’s interpretation of the filings, is not a characteristic the institutions describe and they are in violation of the Act.
And the status of the foreign national does not protect the disclosure of the data. “If that’s the case, they have to prove several things. They have to show that US is monitoring this information, and that it isn’t protected by US law, and the government can actually access the information.”
Semerdjian sees that the ramifications could be huge, “It seems that all financial institutions have offshored in some form or another. If BoA files a motion to dismiss, and they lose, there could be lawsuits filed against all financial institutions.”
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