In the realm of asset searches, professionals often inquire about the legality of probing into an individual's financial accounts. The consensus is clear: without proper authorization, such investigations are not only intrusive but also illegal. This article delves into the intricacies of the law, the exceptions to the rule, and the ethical way to conduct due diligence.
Asset search companies and private investigators are frequently approached with requests to search for bank, stock, bond, or mutual fund accounts belonging to individuals. However, the legality of such searches is bound by strict regulations to protect privacy and prevent deceptive practices.
Conducting unauthorized searches of financial accounts is not only a violation of privacy but also considered an unfair and deceptive business practice. Companies claiming to perform such searches are likely using false pretenses, which is illegal. Attorneys who commission these searches on behalf of their clients could face vicarious liability. State Attorney Generals have pursued legal action against asset search companies, resulting in injunctions and substantial fines for those conducting unauthorized bank account searches.
When fulfilling due diligence for clients, it is crucial to engage with reputable companies that understand the legal boundaries. Asset Searches Plus, Inc., for example, employs trained asset recovery attorneys to conduct lawful asset searches. They provide clients with permissible asset and liability information across all 50 states, ensuring due diligence is met within one to three business days.
The definitive answer to why bank account searches are restricted lies in the Financial Services Modernization Act, signed into law by President Clinton on November 12, 1999. This act makes it a federal crime to obtain bank account information under false pretenses, whether from banks or their customers.
The act encompasses all financial institutions, including stock brokerage firms, insurance companies, loan companies, credit card issuers, and credit bureaus. It applies to anyone using false pretenses and third parties who request information knowing that false pretenses will be used.
There are limited exemptions to the act. Exempt parties include law enforcement agencies, financial institutions, insurance companies conducting claims investigations, and state-licensed private investigators collecting delinquent child support with a court order.
The act outlines specific prohibitions against obtaining customer information through deceitful means and establishes administrative enforcement, criminal penalties, and the relationship to state laws. It also defines key terms such as "customer," "customer information of a financial institution," and "financial institution."
Violations of the act are subject to enforcement by the Federal Trade Commission and other federal agencies, with penalties including fines and imprisonment. The act also mandates annual reports to Congress on enforcement actions taken.
The act does not supersede state laws unless they are inconsistent with its provisions. State laws offering greater protection are not considered inconsistent.
Professionals seeking to conduct asset searches must navigate a complex legal landscape. Unauthorized bank account searches are illegal and carry significant risks. It is imperative to work with reputable firms that adhere to legal guidelines and respect privacy while providing necessary due diligence services.
For more detailed information on the Financial Services Modernization Act of 1999, you can visit the U.S. Congress website or consult the Federal Trade Commission for guidance on privacy and information security.
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