Governments force banks to report your activity, assess whether you are suspicious and close your accounts when you step outside the norm. How? It dates back to 1970. President Richard Nixon had yet to be caught surveilling his political opponents. Instead, October 26, 1970 marks when President Nixon signed the Bank Secrecy Act and laid the foundation for a new regime of financial surveillance.
Since then, the American public has been forced to endure 55 years of ever-increasing economic surveillance. Congress should not let the Bank Secrecy Act have its 56th anniversary—at least not in its current form.
Often abbreviated as “BSA”, the Bank Secrecy Act was originally passed due to fears that the increase in air travel in the late 1960s would lead to Americans stashing their money in Swiss bank accounts. While it is questionable how realistic this fear was, Congress passed the legislation. At the time, it required banks to keep records of customers and report certain transactions.
The most infamous of these reports is the Currency Transaction Report (CTR). Simply put, transactions over $10,000 had to be reported to the government. There did not have to be a crime or a suspicion of a crime. Just crossing that threshold was enough to get on the government’s radar. (We’ll return to these reports in a moment.)
As times changed, so did concerns. Congress originally targeted tax evaders, but the Bank Secrecy Act was later expanded to also go after drug traffickers. Later it would again be expanded to go after terrorists. Most recently, Congress has weighed where and how to apply it to cryptocurrencies.
Yet it has not only been the goals that have changed. Congress has also steadily expanded who must report their clients under this regime. The list of so-called “financial institutions” includes things you might expect, such as banks and credit unions. However, it also includes car dealers, pawnshops, gold shops, currency exchangers, insurance companies, travel agencies, casinos and much more. Even the US Postal Service is on the list. In fact, Congress most recently added stablecoin issuers.
This ever-growing list of both targets and informants is partly why more than 27.5 million reports were filed against customers last year.
Now remember those currency transaction reports that I mentioned? These reports are one of the other reasons why so many reports are filed each year. One issue I didn’t mention before is that the $10,000 threshold was not indexed for inflation. It may seem like a small clerical error in legislative language, but the real world is huge.
In the 1970s, you could buy two new Corvettes for $10,000. The average American household didn’t even make that much money in a year. And people interacted with their bank less often as cash was used much more commonly. Today, $10,000 wouldn’t even cover 15% of the cost of a new Corvette. The average American household makes that much money in less than two months. And the digital era has meant that banks have records of most of our transactions.
The Supreme Court knew there was a problem with this regime. They just didn’t anticipate how quickly it would spiral out of control. Although they approved it in 1974, Supreme Court Justices Lewis Powell and Harry Blackmun warned that “A significant expansion of the rules’ reporting requirements … would raise substantial and difficult constitutional questions for [us.] At some point, government intrusion into these areas will implicate legitimate expectations of privacy.”
We’ve hit that point. In fact, that point has long since been crossed. Congress has prioritized ever-increasing financial surveillance over protecting people’s privacy for 55 years now. It’s time for that to change.
Congress has three main options on its plate.
At a minimum, all reporting thresholds required under the Bank Secrecy Act should be adjusted for inflation. For example, the $10,000 threshold should be adjusted to at least $77,000. Some members of Congress have introduced legislation in recent years to come close to this goal, but more support is needed to make this change a reality.
Yet adjusting the thresholds is akin to treating the symptom rather than the cause. The Fourth Amendment does not say that people have a right to be secure in their papers unless it involves a lot of money. So Congress should go ahead and eliminate the reporting requirements altogether. Law enforcement could still go after criminals in this scenario. They just had to get a warrant to prove they have a legitimate need for someone’s records.
Even then, eliminating half the regime would not solve all the problems. Issues such as know-your-customer requirements, transnational repression, de-risking and debanking are all related to these laws. Therefore, the third option for Congress is to repeal the entire Bank Secrecy Act regime. Let the banks decide what information they need, who they deal with and what risks they take. It would still be illegal to knowingly assist criminal activity, and law enforcement would still be able to obtain a warrant if an investigation warrants it.
Regardless of which path Congress chooses, reform is long overdue. It’s time to respect financial privacy and stop treating ever-growing surveillance as the norm. Reform must be done before the Bank Secrecy Act can celebrate its next major milestone. Fifty-five years is enough.
