To Surveil, Or Not To Surveil: BSA Modernization Hearing Draws Mixed Proposals
The modernization of the Bank Secrecy Act could back fire into further BSA expansion, today's testimony suggests.
Today, the House Financial Services Committee's Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing on the modernization of the Bank Secrecy Act. Just two days after Trump signed an Executive Order to expand the law, experts testified today to the utter inefficiency of the law that places all Americans under surveillance without suspicion of a crime.
The BSA has become "a large, loaded surveillance machine demanding endless reports without delivering proportional results," the Subcommittee's Chairman Davidson said in his opening statement, explaining that banks file over 60,000 reports on customers per day – while only 5% of reports have even gotten looked at by law enforcement in the past 10 years.
"It seems to be one of the conditions: if you spy on your customers for us, we'll let you run a bank," Davidson said. Others disagreed – appearing to understand the modernization of the act as an opportunity for its expansion.
Proposed solutions spanned the use of digital identities and AI programs to more efficiently identify criminal activity, but also the adjustment of BSA reporting thresholds to inflation, as well as the requiring of a warrant to access US American's banking records.
L0la L33tz
Mixed Testimonies on the Shape of Reform
Mr. John Court of the Banking Policy Institute called the BSA "an outdated, inefficient framework" that deputizes banks with severe penalties creating radically perverse incentives [...] as front line AML enforcers."
"The Bank Secrecy Act was built for a world where illicit funds move over weeks," said Mr. Ari Redbord of TRM Labs. "This world no longer exists. The illicit actors and terrorist financiers we are trying to stop today are moving at machine speed."
The solution to stopping AI enabled crime is not to ban or stifle the technology, but to use it wisely by leveraging the same innovations illicit actors use for harm for good, Redbord continued, advertising TRM's combination of AI with blockchain- and open source intelligence and sanctions data.
The solution is the combination of this data into a single platform where, according to Redbord, "investigators can start with a single wallet address or phone number and within minutes have a living network map of connected entities, transactions, and criminal infrastructure that would have taken a team of analysts weeks to build."
In contrast, Cato Institute's Nick Anthony began his testimony by citing the Fourth Amendment, meant to protect US Americans from unjust searches and seizures. "It's as clear as thunder on a summer's night that we have a problem," Anthony said, explaining that banks spend $59 billion to comply with the BSA every year, while the over 28 million filed reports in 2025 only resulted in 275 opened investigations. "As the Grateful Dead might say," Anthony concluded, "if the thunder don't getcha, the lightning will."
"83% of Americans believe that the Government should need a warrant to access their financial records," Anthony added, "and 79% said that banks sharing records without a warrant is unreasonable. Yet financial surveillance is expanding." Under the Trump administration, reporting thresholds have been lowered to as little as $200 along the US Southern border, causing banks to go from filing 200 reports to needing to file thousands.
"The system is also being weaponized," Anthony points out, citing the Anti Corruption Foundation's classification as a terrorist group under Putin to have caused the organization's employees to be debanked in the United States.
"The Bank Secrecy Act is really the Bank Surveillance Act," Anthony ended his testimony. "It's time to fix it."
"National Security today is being fought in the economic domain," Atlantic Council fellow Carole House countered, describing the BSA as an essential tool to protect US Americans while advocating for the use of Digital Identities to remove compliance burden.
"The AML framework is among the most consequential national security tools that we have for defending that terrain," House said, urging the subcommittee that "we should not mistake dismantling its capability for reform. [...] Reducing visibility without replacing it with stronger capability is not modernization – it becomes strategic abdication."
L0la L33tz
"We're Here to Do a Little Reclaiming of Freedom Today"
Chairman Davidson did not appear particularly swayed by testimony advocating for the Bank Secrecy Act as a tool for good, while other members of the committee seemed to welcome BSA expansion.
"You described the BSA as a public good currently trapped in private silos," Davidson addressed House. "Can you explain what you mean by that? My bank records, my financial transactions, are a public good?"
"The BSA is a public good and the information being available," House answered, "so that citizens can have available recourse." "Is that what the constitution says?" Davidson asked. "I think there's a lot of authorities that...," House began responding, before being interrupted by the Chairman: "That's not what it says."
"Freedom surrendered is rarely reclaimed," Davidson continued. "And we're here to do a little reclaiming of freedom today."
Addressing TRM Labs' Redbord, Davidson asked how their model could function "while protecting privacy, vs. turning my bank records into a public good." "That's the most important and fundamental question," Redbord answered, claiming that we could "use technology" to protect the privacy of lawful actors, without further specification. But the vast majority of crime is traditional account based money laundering, not cryptocurrencies, Davidson pointed out.
While some of the witnesses advocated for the adjustment of BSA filings for inflation, Redbord said that the same thing could also be achieved "with technology," suggesting that Suspicious Activity Reports (SARs) could be modernized to include not just one transaction, but map out entire payment flows.
"We have surveillance that you won't believe," Rep. Vargas of California stated, asking House to respond to Anthony's findings that current reporting deserves adjustment for inflation. "This seems to have some credibility," he said.
"It warrants deep consideration as to where the threshold should sit," House responded, adding that cash transactions over $10,000 today are even more anomalous in a highly digitized economy, which must be accounted for – alluding to "the high value" of BSA reports to law enforcement. And BSA reports are of value to law enforcement, Anthony agreed – but they rarely kick off investigations, which is why law enforcement should be bound by warrants to access financial records.
Rep. Waters of California was one of the only Committee members addressing Trump's Tuesday Executive Order expanding the BSA for the purpose of deportations, calling it an "assault" on non-citizen customers of financial institutions.
As The Rage reported yesterday, the EO could put immigrants – documented or otherwise – at risk of discrimination, Waters suggested, while citing Cato Institute research showing that immigrants did not commit the vast amount of financial crimes.
For any reform, FinCEN needs to comply with the law and release official statistics on how effective BSA data actually is, Anthony pointed out. The Financial Crimes Enforcement Network has not provided any statements as to the efficiency of the BSA to date.
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