5715-S AMH FII OSBO 3
By Representative Schual-Berke
SSB 5715 - H COMM AMD
By Committee on Financial Institutions & Insurance
Strike everything after the enacting clause and insert the following:
"NEW SECTION. Sec. 1. The legislature finds that financial fraud and crimes against financial institutions and merchants are increasing exponentially in Washington state. Until recently, these crimes cost businesses and consumers thousands of dollars in losses. They now cost millions of dollars. The legislature further finds that noncredit losses to financial institutions, and credit card, debit card, and check fraud against merchants impose danger to consumers and their financial privacy, and burden law enforcement and public prosecutors with crimes that are difficult to detect and prosecute. The growth in financial fraud also provides opportunities for organized crime and terrorist organizations, and undermines the stability and reliability of financial and other businesses upon which commerce and the economy rely.
The legislature intends to enable financial institutions and merchants, to the extent permitted by federal law, to exchange information to prevent, detect, deter, and assist in the prosecution of financial fraud, bank robbery, money laundering, and other financial crimes.
NEW SECTION. Sec. 2.
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.(1) "Designated employees" means security personnel of a financial institution or merchant designated by it to participate in a fraud alert network.
(2) "Financial crimes" means any act, including any anticipatory or completed offense, committed for financial gain, that is chargeable or indictable, regardless of whether the act is actually charged or indicted, as a violation of a state or federal criminal law prohibiting false representation, frauds and swindles in violation of chapter 9.45 RCW, forgery, obtaining a signature by deception or duress, criminal impersonation, false certification, unlawful issuance of checks, drafts, funds transfers and payment instructions, identity theft, improperly obtaining financial information, robbery, bank robbery, theft, scams, tax evasion, embezzlement, money laundering, use of proceeds of criminal profiteering, false representation concerning credit, false statement by deposit account applicant, false representation concerning title, forgery of a digital signature or other violation of RCW 9.38.060, burglary when it involves entering the premises of a financial institution or retail establishment, unlawful possession of payment instruments, unlawful production of payment instruments, unlawful possession of a personal identification device, unlawful possession of fictitious identification, unlawful possession of instruments of financial fraud, possession of another's identification, display or possession of a fraudulently issued driver's license or identicard, display or representation as one's own the driver's license or identicard of another person, unlawful factoring of a credit card or payment card transaction, or other state or federal law prohibiting a financial related crime.
(3) "Financial institution" means: (a) Any person doing business under the laws of any state or the United States relating to commercial banks, bank holding companies, financial holding companies, savings banks, savings and loan associations, trust companies, or credit unions; (b) any office of an international banking corporation, branch of a foreign bank, or corporation organized pursuant to the Bank Service Corporation Act (12 U.S.C. Sec. 1861-1867) or a corporation organized under the Edge Act (12 U.S.C. Sec. 611-633); (c) subsidiaries, affiliates, service corporations of the persons in (a) and (b) of this subsection; (d) third-party service providers that provide servicing, processing, account maintenance, or security for the persons in (a), (b), and (c) of this subsection; or (e) any group, organization, or association consisting primarily of the persons in (a) through (c) of this subsection, including, without limitation, the Washington bankers association, the American bankers association, and other associations of banks, savings institutions, and/or credit unions, whether inside or outside the state of Washington. However, a group or association in this subsection (3)(e) that obtains access to a fraud alert network may provide access to that network or to information received from that network only to persons described in (a) through (d) of this subsection.
(4) "Fraud alert network" means a program established by and among financial institutions and/or merchants to prevent, detect, deter, and assist in the prosecution of financial crimes, including a program in which information is shared by means of electronic posting.
(5) "Electronic posting" means the use of a web site or other form of electronic communication used to display information gathered in connection with a fraud alert network.
(6) "Merchant" means a person engaged in the business of selling, leasing, or distributing goods or services and has an existing contractual relationship or contract with a financial institution, and: (a) Has a physical presence in the state that consumers may patronize to make purchases of goods or services; (b) is physically located in the state and sells goods or services to residents of the state via the internet; or (c) is an association or cooperative organization of persons in (a) and (b) of this subsection.
(7) "Participant" means a financial institution or merchant that participates in a fraud alert network.
NEW SECTION. Sec. 3.
(1) This chapter provides immunity from liability for financial institutions and merchants who participate in a fraud alert network and who comply with the provisions of this chapter and the standards of use set forth in this subsection, as follows:(a) Access to the fraud alert network is private, and limited to financial institutions, merchants, and law enforcement agencies;
(b) The sole purpose of the fraud alert network is to share information among financial institutions, merchants, and law enforcement agencies to prevent, detect, deter, and assist in the prosecution of financial crimes;
(c) Information furnished to the fraud alert network consists of: (i) Descriptions of recent actual or suspected financial crimes perpetrated against or coming to the attention of the participant furnishing the information; (ii) descriptions, photographs, images, reproductions, fingerprints, identifying features, traits, habits, background, or other data related to identifying the person, persons, or groups suspected of committing, aiding, or abetting financial crimes; (iii) identifying information regarding methods of operation, devices, tricks, or schemes used by persons suspected of financial crimes; (iv) descriptions, photographs, images, or reproductions of writings, communications, checks, and personal identification used in connection with suspected financial crimes; (v) descriptions, photographs, images, or reproductions of vehicles, license plates, weapons, devices, or other things used in connection with suspected financial crimes; (vi) cautionary statements regarding suspects, for example a statement that a suspect is armed and dangerous; and (vii) other information that allows participants to identify financial crimes, to identify persons suspected in connection with financial crimes, to assist in the apprehension of persons suspected of financial crimes, or to contact others for further information;
(d) Information furnished to the fraud alert network may not consist of delinquent payment information, nor may it consist of other, similar evidence of a person's credit history, except in the exceptional instance where such evidence is an integral part of information provided under (c) of this subsection and is reasonably believed to be related to a financial crime;
(e) Information posted shall be accessible only to designated employees, and the distribution of information is limited to those employees, attorneys, and agents of participants who have job-related duties relevant to the use of such information in connection with preventing, detecting, deterring, or assisting in the prosecution of financial crimes;
(f) The fraud alert network has procedures reasonably calculated to ensure the security of the information obtained;
(g) Users of the fraud alert network are informed that the information obtained from the fraud alert network may not be used to evaluate and make decisions about applications for loans, lines of credit, and credit cards;
(h) Information furnished pursuant to the fraud alert network is limited to statements of fact that the person furnishing the information reasonably believes to be true. However, in exigent circumstances, information may be furnished without such reasonable belief if the circumstances creating an emergency are described, and cautionary advice is provided regarding the limited knowledge of the person furnishing the information; and
(i) The fraud alert network has an operator that: (A) Employs procedures to promptly correct and erase information that the operator learns is erroneous or was submitted or posted to the fraud alert network not in compliance with this section; (B) takes reasonable steps to limit access to the fraud alert network to financial institutions, merchants, and law enforcement agencies; and (C) denies access to the fraud alert network to persons who are not financial institutions, merchants, or law enforcement agencies or who do not abide by the provisions of this chapter.
(2) Washington law governs the operation of a fraud alert network. A participant or law enforcement agency that participates in a fraud alert network in accordance with subsection (1) of this section, whether through furnishing, posting, communicating, or using information in connection thereto, shall receive immunity from civil liability under the laws of the state of Washington and its political subdivisions and, to the extent the conflicts of law rules of any other jurisdiction refer to the law of the state of Washington, under the laws and rules of such other jurisdiction and its political subdivisions. However, this immunity does not apply to statutory violations.
(3) Any financial institution or merchant that makes a voluntary disclosure of any possible violation of law or regulation to a federal, state, or local government or agency in connection with information obtained from a fraud alert network is immune from civil liability for such disclosure or for any failure to provide notice of such disclosure to the person who is the subject of or identified in the disclosure, under the laws and rules of the state of Washington and its political subdivisions and, to the extent the conflicts of law rules of any other jurisdiction refer to the law of the state of Washington, under the laws and rules of such other jurisdiction and its political subdivisions, and under any contract or other legally enforceable agreement.
NEW SECTION. Sec. 4.
The immunity of section 3 of this act shall not apply to any participant that:(1) Provides false information to the fraud alert network that the participant does not reasonably believe to be true. However, in exigent circumstances, information may be furnished without such reasonable belief if the circumstances creating an emergency are described, and cautionary advice is provided regarding the limited knowledge of the person furnishing the information;
(2) Fails to maintain review procedures to remove or correct false, outdated, incomplete, or erroneous information furnished by it to the fraud alert network;
(3) Fails to maintain procedures to ensure that information obtained from the fraud alert network will be provided only to employees, attorneys, or agents who have job-related duties relevant to the use of such information;
(4) Uses information obtained from the fraud alert network to evaluate and make decisions about applications for loans, lines of credit, and credit cards;
(5) Uses information for a purpose other than preventing, detecting, deterring, and assisting in the prosecution of financial crimes;
(6) Uses, reproduces, distributes, publishes, forwards, shares, sells, or communicates any information obtained from the fraud alert network for a commercial purpose, such as for advertising or marketing; or
(7) Provides, sells, or resells access to the fraud alert network to a person who is not a participant.
NEW SECTION. Sec. 5.
(1) It is the intent of this chapter to encourage the sharing of information consistent with federal law.(2) It is intended that so long as the participants comply with this chapter, the provisions of the Washington fair credit reporting act, chapter 19.182 RCW, do not apply to the fraud alert network. However, if it is determined that the federal fair credit reporting act applies to a fraud alert network, the Washington fair credit reporting act shall likewise be applicable.
NEW SECTION. Sec. 6. (1) The fraud alert network and its participants shall notify the public regarding the existence of the fraud alert network and how it functions. Such notice shall include a description of the purpose of the network, how the network shares information, the types of information furnished to the network, how consumer complaints may be registered, and the procedures available to an individual for the correction or removal of incomplete, inaccurate, or erroneous information.
(2) The public notice required of the fraud alert network and its participants under subsection (1) of this section shall, at a minimum, include:
(a) A toll free telephone number maintained by the network that may be called by individuals in order to obtain the information required under subsection (1) of this section;
(b) An internet website maintained by the network that provides the public with the information required under subsection (1) of this section;
(c) Written pamphlets that are made conspicuously available at each place of business of a network participant, and which contain the information required under subsection (1) of this section as well as the toll free telephone number and website address of maintained by the network; and
(d) A conspicuously posted sign at each place of business of a network participant that notifies the public of the business' participation in the fraud alert network and which includes both the toll free telephone number and website address required under this section.
(3) The fraud alert network shall not begin operating until such time as the public notice provisions required under this section are implemented.
NEW SECTION. Sec. 7. (1) By January 1, 2004, and again by January 1, 2005, the organizing body representing participants in the fraud alert network shall provide a comprehensive written report to the house financial institutions and insurance committee and the senate committee on financial services, insurance and housing regarding the implementation of the provisions of this act.
(2) The written report shall include the following:
(a) The number of participants in the network, including the name of each participating entity;
(b) The standards or protocols established by the network to determine compliance on the part of a participant with the provisions of this act;
(c) A detailed description of the procedures which are adopted by the fraud alert network, as required under section 3 of this act, to ensure the security and accuracy of information furnished to the network, including procedures for the removal or correction of incomplete or erroneous information furnished to the network;
(d) A detailed description of the procedures adopted by the network by which an individual who has been reported to the network, or who is the subject of any information furnished to the network, may correct or remove inaccurate, incomplete or erroneous information;
(e) An accounting of how many actions the network has taken in the preceding year to correct or remove incomplete or erroneous information from the network, including how many such actions were the result of a request or complaint from an individual whose information has been entered into the network;
(f) The number of complaints about the fraud alert network received by each participant in the network, including a description of each complaint and what actions, either on the part of the network participant or the complainant, resulted from each complaint;
(g) A description of any adverse action taken by the fraud alert network against a network participant resulting from noncompliance with the standards and procedures established by the network as a condition of participation in the network; and
(h) The disclosure of the number of individuals whose names have been placed in the network database for suspected financial crimes and a description of the type of alleged illegal activity that led to such individuals being placed in the network database.
NEW SECTION. Sec. 8. This chapter shall be construed to encourage the sharing of information by financial institutions, merchants, and law enforcement for the prevention and prosecution of financial fraud.
NEW SECTION. Sec. 9.
This act may be known and cited as the financial fraud alert act.
NEW SECTION. Sec. 10.
If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state, the conflicting part of this act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this act in its application to the agencies concerned.
NEW SECTION. Sec. 11.
Sections 1 through 10 of this act constitute a new chapter in Title 30 RCW."
Correct the title.
EFFECT: The striking amendment has the following effects:
• Creates specified public notice requirementsthat must be followed by the network and its participants.
• Requires that the network provide comprehensive reports to the legislature in 2004 and 2005 regarding the functioning of the network and the implementation of the act.
• Deletes the section exempting law enforcement agencies from the requirements of the public disclosure act with respect to information received from the fraud alert network.
• Deletes the section stating the intent to exempt the network from the privacy disclosure requirements of the Gramm-Leach-Blilely Act.
• Deletes the emergency clause that would have made the act effective immediately upon passage by the legislature.