BILL REQ. #:  H-1416.1 

Read first time 02/12/2003.   Referred to Committee on Financial Institutions & Insurance.

     AN ACT Relating to the financial fraud alert act; adding a new chapter to Title 30 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

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 for the purpose of preventing, detecting, deterring, and assisting 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 fraud, false representation, scams, swindles, forgery, unlawful issuance of checks, drafts, funds transfers, and payment instructions, identity theft, robbery, theft, tax evasion, embezzlement, money laundering, and other financial related crimes.
     (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 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.
     (4) "Fraud alert network" means a program established by and among financial institutions and/or merchants for the purpose of preventing, detecting, deterring, and assisting 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, or an association or cooperative organization of such persons.
     (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 and/or merchants;
     (b) The sole purpose of the fraud alert network is to share information among financial institutions, merchants, and/or law enforcement for the preventing, detecting, deterring, and assisting 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 will allow participants to identify financial crimes, to identify persons suspected in connection with financial crimes, or to assist in the apprehension of persons suspected of financial crimes;
     (d) Information posted shall be accessible only to designated employees, and the distribution of information shall be limited to those employees, attorneys, and agents of financial institutions or merchants who have job-related duties relevant to the use of such information in connection with preventing, detecting, deterring, and assisting in the prosecution of financial crimes;
     (e) The fraud alert network has procedures reasonably calculated to ensure the security of the information obtained;
     (f) Users of the fraud alert network are informed that the information obtained may not be used to evaluate and make decisions about routine applications for loans, lines of credit, and credit cards; and
     (g) 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.
     (2) Washington law governs the operation of a fraud alert network. Participation in the fraud alert network in accordance with subsection (1) of this section, whether through furnishing, posting, publishing, or using information in connection thereto, shall provide immunity from civil liability and from liability for criminal libel and slander 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.
     (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) Knowingly provides false information to the fraud alert network;
     (2) Fails to maintain review procedures reasonably intended to remove or correct outdated, incomplete, or erroneous information furnished by it to the fraud alert network;
     (3) Fails to maintain procedures reasonably intended 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 routine 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, 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 not entitled to such information.

NEW SECTION.  Sec. 5   (1) It is the intent of this chapter to encourage the sharing of information consistent with federal law.
     (2) A fraud alert network is intended to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability, and is intended to be exempt from privacy disclosure requirements of the Gramm-Leach-Bliley Act of 1999.
     (3) It is intended that the Washington fair credit reporting act, chapter 19.182 RCW, does not apply to a 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   This chapter shall be broadly 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. 7   Information shared pursuant to a fraud alert network is exempt from public disclosure under chapter 42.17 RCW.

NEW SECTION.  Sec. 8   This act may be known and cited as the financial fraud alert act.

NEW SECTION.  Sec. 9   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. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state.

NEW SECTION.  Sec. 10   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.

NEW SECTION.  Sec. 11   Sections 1 through 10 of this act constitute a new chapter in Title 30 RCW.