What Congress Asked Me About the Bank Secrecy Act

Nicholas Anthony

Testifying before Congress is never an easy matter. Time is limited, and tempers flare. Yet, during my testimony on the Bank Secrecy Act, I was asked some great questions by members of the House Financial Services Committee. I’ve copied my favorite ones below with light editing for brevity. 

The Questions from Congress and My Answers

Representative Juana Vargas (D‑CA): Instead of value, Bank Secrecy Act reporting is just volume. Proponents say it’s valuable, but would someone like to counter that? 

My Answer: The Internal Revenue Service’s Criminal Investigation division only started 275 cases because of a Bank Secrecy Act report. This news is shocking, considering 28.7 million reports were filed on bank customers. Yet, it’s even more shocking because the Bank Secrecy Act regime is built upon the idea that banks and other financial institutions must be forced to report their customers to the government because crime would otherwise go unnoticed. However, the available numbers suggest that most of the reported financial information is helpful only after criminal activity is noticed and law enforcement takes a closer look. If that is indeed the case, there is no reason to justify mandating that these reports be filed rather than requiring law enforcement to obtain them through the warrant process.

Representative Sean Casten (D‑IL): Does the Fourth Amendment give American citizens an affirmative right to hide illicit financial transactions? Does the Fourth Amendment preclude law enforcement from investigating crime?

My Answer: The Fourth Amendment does not give Americans the right to commit a crime, but it does put the burden of proof on law enforcement. Law enforcement must prove an investigation is justified before conducting searches and seizures.

Representative Frank Lucas (R‑OK): What progress does the April notice of proposed rulemaking make on the status quo? 

My Answer: It’s a mixed bag. Shifting the focus of the Bank Secrecy Act and its related policies from compliance theatre to risk-based policy is a welcome change. However, the changes proposed by FinCEN leave much to be desired. FinCEN is five years late in reporting key statistical information about how the Bank Secrecy Act is used. That data should be step one for figuring out where the law works, where it fails, and where there is a grey area. Instead, Congress, financial institutions, and the broader public are stuck in the dark.

Representative Young Kim (R‑CA): What is the most common reason that banks are reporting their customers under the Bank Secrecy Act? Is it suspicion of terrorism or human trafficking?

My Answer: No, it is neither terrorism nor tracking. The most common reason a Bank Secrecy Act report is filed is that someone approached the $10,000 threshold for a currency transaction report (CTR), or that a bank was unsure about where a customer obtained their funds. 

Representative Young Kim (R‑CA): Can you talk about how governments like Russia abuse the Bank Secrecy Act to go after human rights activists? 

My Answer: We’re seeing it growing more and more each year with bad actors like Russia, Nicaragua, and China. They recognize that the U.S. exported the Bank Secrecy Act to the rest of the world and got them all on this standard. And they recognize that they can use it for their means when they have their opponents or dissidents flee to other countries in exile. Although the US is supposed to be a haven, authoritarians are able to reach across their borders and use the financial system to target activists. We’ve seen that most recently with the Anti-Corruption Foundation. This trend should be something that’s deeply concerning for us because, effectively, the US has handed this tool to authoritarians on a silver platter.

Representative Bill Foster (D‑IL): Governments are increasingly launching digital ID. What do you make of digital ID?

My Answer: One thing that deeply concerns me about the digital ID proposal is that police officers who have been caught abusing government surveillance systems here in the United States. In recent years, several officers have used law enforcement resources to stalk their exes. License plate scanners, originally pitched as a tool to catch criminals, have become one of the most frequently abused law enforcement databases. Before adding another surveillance layer on top of the Bank Secrecy Act regime, we should take seriously what the existing layers have already enabled.

Conclusion

Hearings are just a small piece of the legislative process. There is still much to be done if the Bank Secrecy Act is going to be reformed. However, I’m thankful that Congress was willing to hear my stance and consider what true reforms would look like.