Davidson: We Must Continually Assess The Effectiveness Of The Tools And Techniques Traditionally Used To Secure Our Financial System
Washington,
April 1, 2025 -
Today, the House Financial Services Committee is holding a National Security Subcommittee hearing, led by Subcommittee Chair Warren Davidson (OH-08), to explore the growing threat of investment fraud in the United States, as well as analyze tools and practices used to "follow the money" when it comes to investment scams.
Read Subcommittee Chair Davidson’s opening remarks as prepared for delivery:
"I want to welcome our witnesses. Thank you for participating in our hearing today, devoted to analyzing investment fraud in the United States and reassessing the effectiveness of the tools used to combat fraud.
"Earlier this month, the FTC reported that U.S. consumers lost $5.7 billion to investment scams in 2024. Criminals are increasingly finding ways to bypass U.S. financial regulations to scam Americans into draining their life savings for the sake of their own illicit gain.
"This type of organized fraud transcends both state lines and political divides. These scammers prey on everyday Americans, often our most vulnerable senior citizens.
"The United States is supposed to have the world’s most capable financial intelligence capabilities. We are focused on national security issues, but also need to use these resources more effectively to protect our citizens.
"Safety and soundness are essential to preserve our own financial well-being. Beyond our own population, America’s capital markets are home to more than 50% of the world’s invested capital. The USD is the world’s reserve currency.
"Since its enactment in 1970, the Bank Secrecy Act has served as the cornerstone for all anti-money laundering, counter terrorist financing, and know-your-customer compliance measures at U.S. financial institutions. The BSA’s regulatory framework is intended to defend and secure the U.S. financial system from crime.
"However, considering the ever-changing landscape of technology and financial crime, we must continually assess the effectiveness of the tools and techniques traditionally used to secure our financial system.
"Today, we will take the time to learn more about investment fraud and how financial institutions and blockchain analytics firms contribute in combating this pervasive issue. As investment fraud losses grow in the United States, it is important to consider changes that can be made to enhance the reporting environment as it relates to fraud and other financial crimes.
"Suspicious Activity Reports (or SARs) and Currency Transaction Reports (or CTRs) are tools used by financial institutions to flag transactions over a certain monetary value that could be related to illicit activities.
"These reports are filed by financial institutions, maintained by FinCEN, and used by law enforcement agencies over the course of their investigations.
"A SAR is filed by a financial institution on any customer transaction over $5,000, while a CTR is filed on any cash transaction involved more than $10,000. Based on CPI, $10,000 in 1970 would be more than $81,000 today.
"These numbers have never been adjusted for inflation, so the reporting burden keeps growing with no obvious improvement of effectiveness. FinCEN estimated that an average total of 12,600 SARs and 57,000 CTRs were filed each day for fiscal year 2023.
"According to a December 2024 GAO report, law enforcement agencies accessed only 5.4% of total CTRs filed to FinCEN between 2014-2023. Not very efficient.
"It’s long overdue for Congress to reconsider these clearly outdated thresholds set during a different period of the American economy.
"Even as we update old laws, it’s important to consider other updates. Thankfully, the Trump Administration has muted the disastrous, and unconstitutional, Corporate Transparency Act requiring business owners to report the beneficial ownership to FinCEN.
"Presumably, operating a business or even a homeowners association, means you are engaged in illicit finance. Meanwhile, our Constitution says that when the government wants to know private information, they need probable cause (or reasonable suspicion) to get a warrant or subpoena.
"Surely we can minimize the financial harm suffered by Americans exploited by scammers without infringing on their civil liberties or adding ways to make ordinary Americans criminals.
"As we consider legislative solutions to maximize the effectiveness of our financial intelligence architecture, I'm hopeful that we will increase and improve nationwide education on investment scams. I'm also hopeful that we'll equip law enforcement agencies with better tools to go after criminals that are continually operating unseen.
"I look forward to the insights gained on these issues from today’s hearing and I yield back."
