It’s an old Western movie trope. The harassed sheriff needs help against Desperado D. Blackhat and his gang of gunslingers. He goes into the saloon, finds the gambler who was once the most feared crack shot this side of the Pecos, and makes him his deputy. Together, they run Blackhat and his gang out of town. If you thought that type of quick-and-dirty deputizing died with the Wild West, think again. Government is deputizing people all over the country to do its law-enforcement work. But unlike that gambler, they don’t get the chance to say no.
Take, for instance, FedEx. The delivery company has been indicted by federal prosecutors for not doing the Drug Enforcement Agency’s (DEA) job for it. The DEA alleges that FedEx knowingly shipped pharmaceuticals for online pharmacies that were based on invalid prescriptions, because it should have known “the principals, company names, shipping addresses and billing addresses that were initially connected to” a network of pharmacies closed down by the DEA in 2003. As a recent Wall Street Journal editorial summarized:
Translation: FedEx employees should have connected the dots. But if it's so easy, why didn't the DEA do it? The truth is that unmasking the bad guys would have required an extensive metadata analysis of customer data that is not FedEx's job.
The DEA also alleges that FedEx should have known its orders were based on fraudulent prescriptions from visiting the pharmacies’ facilities for inspection. That’s not something a shipping company is set up to do. It is something a law enforcement agency is set up to do, but the DEA didn’t do it. So by its indictment of FedEx, the feds are telling all other delivery firms that they are now forcibly deputized to do the DEA’s job in the War on Drugs. If they don’t play along, they need to show up in court.
Banking regulators have been playing a similar game. Under a campaign known as Operation Choke Point, they have been telling banks that if they don’t investigate their customers for “high-risk” activity, they will be subject to subpoenas and everything that implies. As a result, banks have simply been cutting off links to potentially risky customers on the simple basis of what business they are in. As Department of Justice documents show (which I document extensively in my recent report on the operation), the motivation for Choke Point was the feds’ lack of manpower to investigate the risky businesses themselves. So they deputized the banks to do their job for them.
If New York’s Department of Financial Services (NYDFS) has its way, bitcoin businesses operating in the state will be deputized, too. The NYDFS, supposedly concerned about fraud risk, is demanding that businesses that use bitcoin keep a public record of every transaction. This would destroy the currency’s appeal by undermining one of its most potent selling points: users’ expectations of privacy. As Jim Harper, global policy counsel for the Bitcoin Foundation, told Coinbase,
Surveillance of transactions is at odds with both bitcoin users’ and consumers’ privacy demands, and the level of privacy they could expect is similar to that dictated by deals between corporations and governments in the fiat currency realm.
There are many more examples, from gambling regulators forcing credit processing companies to stopping unlawful online gambling transactions—without a clear definition of “unlawful” in this context—to immigration authorities deputizing employers to confirm potential employees’ immigration status.
In each of these cases, the executive is essentially requiring businesses to deploy employees to work for the government, rather than the company. The justification, supposedly to protect consumers from fraud or other abuse by a third party, traditionally has been reserved to the government as part of its law enforcement powers. That’s why the term “deputizing” is so appropriate—the government is making businesses into its policemen. The only difference is it will charge them with a crime if they don’t agree. No wonder the easy way out is just to stop doing business with the third party at all.
This is a disturbing and unprecedented tendency. It’s time that we put a stop to it, before we all end up working for the government whether we like it or not. Next time, it won’t just be dodgy online pharmacies or payday lenders that are in the crosshairs, but anyone or anything the government of the day doesn’t like or understand. In a world where you can’t do business because the government has its nose in everything, innovation will grind to a halt much like the Western movie genre.