Rep. Lynch is Wrong on the Bank Secrecy Act
The Massachusetts Congressman claims the BSA is "highly useful" to combat terrorism. The data says otherwise.
Every year, Americans are subjected to more financial surveillance. It doesn’t require a new bill from Congress or even a secret program from law enforcement. Rather, financial surveillance increases every year because of an arbitrary dollar threshold set in the 1970s that has never been adjusted for inflation.
As prices rise, ordinary financial activity is increasingly swept into a system designed for criminals, not the public at large. Recognizing this quiet expansion of government monitoring, several members of Congress have proposed reforms to the Bank Secrecy Act. Their goal is modest: stop inflation from turning millions of law-abiding people into default surveillance targets. Yet some policymakers insist that even this limited reform goes too far.
The opposition rests on the claim that existing Bank Secrecy Act reporting is indispensable to law enforcement—a claim frequently repeated but rarely examined. For example, Representative Stephen Lynch (D-MA) said that Bank Secrecy Act reports tip off 87 percent of investigations. He argued that these reports are therefore highly useful for combating heinous crimes like terrorism.
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There’s a problem, though. Representative Lynch read the data backwards.
Bank Secrecy Act reports did not tip off 87 percent of investigations. It was 13 percent. We can dig deeper by going beyond press releases and looking at the Internal Revenue Service’s annual data book. With this data, it becomes clear that 13 percent is equal to just 370 investigations. Put in better context, that means US financial institutions spent $59 billion on compliance while filing 27.5 million reports on customers, but that only tipped off 370 investigations.
The bulk of the reports are not tipping off investigations. Instead, law enforcement is investigating crimes and then finding these reports after the fact. If the government respected the Fourth Amendment, the only difference would be the time and energy needed to tell a judge that a warrant is needed based on the investigation. Instead, the current system treats people like criminals by default.
Representative Rashida Tlaib (D-MI) opposed the idea of adjusting surveillance thresholds for inflation as well. She said the reforms need to go in the opposite direction by creating additional surveillance. She is certainly entitled to her opinion, but this statement contradicts her previous arguments. When it came to the fraud controversy in Minnesota, Representative Tlaib said her focus has been to “make sure that [the government is] not depicting every Somali American as fraudsters” and that fighting crime “shouldn’t be used as a way to target a whole community.”
Targeting the public is exactly what the Bank Secrecy Act does. The Bank Secrecy Act forces banks to report customers to the government for using “too much” cash or doing something out of the norm. In fact, in Minnesota, it goes even further. The Department of the Treasury announced lower financial surveillance thresholds for monitoring everyone in Minnesota (not just Somali Americans) and Secretary Scott Bessent said he hopes to soon implement capital controls to lock down money from leaving the country.
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Fraud should be condemned. Yet, there is no reason to target everyone when the fraud in question concerns the abuse of public funds. At the risk of stating the obvious, the government quite literally has a list of every person receiving government assistance. Increasing surveillance for everyone, at best, only adds noise to crowd out the signal. Representative Tlaib should have been one of the first officials to call out this financial surveillance given it is being “used as a way to target a whole community.” Instead, it seems that she is calling for more.
Looking back, Representatives Lynch and Tlaib make an interesting duo. Veterans in the policy space likely remember that they are the same policymakers who have pushed for the creation of a US central bank digital currency (CBDC). At the time, I was concerned because the proposal was marketed as “not a CBDC” despite being digital currency issued directly by the government and privacy-minded despite Representative Lynch telling the New York Times they were already building ways to limit what people can do with it. Given what the policymakers are saying now, it’s safe to say we may have dodged a bullet.
However, financial privacy continues to take a hit every year inflation is allowed to expand surveillance. Now is the time to stop this trend. Now is the time to end the practice of treating people as guilty until proven innocent. Now is the time to stand up to the Bank Secrecy Act.
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