Press Releases

Yesterday, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions, led by Chairman Warren Davidson (OH-08), examined ways Congress can modernize the U.S. anti-money laundering (AML) framework.

On Modernizing Defense Technology to Combat Money Laundering:

Full Committee Chairman French Hill (AR-02) said, “All these things mean that technology is such a fundamental component, and using it for compliance and using it for smart work, I think, is so key. I would argue that the current Bank Secrecy Act regime for banks is not taking advantage, you know, of the fact that we have technology and we have a lot of new tools.”

Subcommittee Chairman Davidson said, “What we need to do is ensure that lawful actors are able to transact in a secure and private manner. And we can do that with technology. We can ensure that a financial institution has the least amount of information that they need on an individual customer in order to make a decision, a decision that they are not engaging with an illicit actor. And we can use technology to ensure that today.”

Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity Chairman Frank Lucas (OK-03) questioned witnesses on proposed rulemaking for the AML program, to which Mr. Nicholas Anthony, Research Fellow, Cato Institute, responded, “It's good because it's talking about starting modernization, starting to change the way that we go about this process. But one of the big problems is partly what … Ranking Member Beatty had mentioned, where FinCEN really hasn't upheld the Anti-Money Laundering Act of 2020. One of the core things that Congress asked it to do was, in collaboration with other agencies, provide data on how this information is used. It provides some reports, but not nearly to the letter of the law. And that information needs to be the foundation of all modernization processes. We need to be able to see where it works, where it doesn't, and where a gray area might be before we build. So, good that they're starting the process of modernization and giving banks the ability to change how they do business. But still, there's a lot of work to be done.”

On Reducing Regulatory Burdens and Redundancy:

Rep. Lucas questioned witnesses on what it would mean for banks and consumers if FinCEN modernized CTR and the SAR thresholds, to which Mr. John Court, Executive Vice President, General Counsel and Chief Operating Officer, Bank Policy Institute, answered, “Modernizing the thresholds would certainly help, right? Currently, we have thresholds that are way too low, that are creating just too much volume, too much noise. I would say further, though, that is probably on the margins, honestly, what the proposed rule is trying to do and what the AMLA instructed the federal government to do six years ago was to try to get the boot of the federal bank examiners off the neck of the people inside the banks who are trying to fight financial crime. And unfortunately, you've had six years where nothing was done. So, we've been living with the status quo. This proposal gives us the opportunity, hopefully for the first time, to redirect the regulation that instructs the examiners.”

Subcommittee on Financial Institutions Chairman Andy Barr (KY-06) said, “Banks in Kentucky have complained in particular about the redundancy of current customer information. One piece of feedback is we have to fill out forms on existing customers when they're opening an additional account, and being able to use the original information on customers should be sufficient.”

Rep. Young Kim (CA-40) questioned witnesses on collecting and reporting beneficial ownership information, to which Mr. Court replied, “Well, the ideal state would be that they would get feedback. But that's not the state that we have. We've talked at the hearing today already about the very, very low uptick that any of these CTR or SAR reports generate. We've also talked about how the real impetus for many of the SAR filings that are made are not that they contain information that would be useful to law enforcement, but that they're made because the bank lives in fear of its bank examiners and the criticisms and the zero tolerance for any even minute error, which can lead to sanctions.”

On Bad Actors Weaponizing Loopholes: 

Rep. Kim questioned witnesses on how bad actors weaponize loopholes to hurt human rights defenders, to which Mr. Anthony, replied, “We're seeing it growing more and more each year with bad actors like Russia, Nicaragua, China, and elsewhere, all coming in saying they recognize that the U.S. exported the Bank Secrecy Act to the rest of the world, got them all on the standard, and then they can use it for their means when they have their opponents or dissidents flee to other countries in exile, where the U.S. is supposed to be a haven for them, they're able to reach across their borders and use the financial system to target them. And we've seen that, like I said in my testimony, most recently with the Anti-Corruption Foundation. And this should be something that's really seriously concerning for us because effectively, the U.S. has handed this tool to authoritarians on a silver platter.”

Witnesses Echoed the Work of the Committee:

Mr. Court said, “One of the more delinquent elements of BSA modernization is in BSA reporting reform. In particular, reform of SAR and CTR requirements is urgently needed, as current frameworks are yielding limited law enforcement value in a majority of filings. We need to modernize SAR and CTR requirements so banks can spend less time on low-value, highly manual reporting and more time producing actionable intelligence for law enforcement.”

Mr. Ari Redbord, Global Head of Policy, TRM Labs, said, “We are living through a moment of profound technological transformation, and the single most important thing this subcommittee needs to understand is this: bad actors are early adopters of transformative technology. Criminal networks, rogue states, terrorist organizations, and fraud syndicates have always moved to exploit new technology before the legal frameworks designed to stop them can adapt. What is different today is the scale and speed of that advantage, and the specific power of the technology they are wielding. Artificial intelligence has fundamentally changed the economics of financial crime.”

Mr. Anthony said, “It has now been five years and FinCEN is still out of compliance with the law. Yet, in a painful bit of irony, FinCEN is issuing new rules telling banks how to comply with the law in its own attempt to modernize the Bank Secrecy Act. Modernization is welcome, but the first step should be understanding what is happening. The information regarding the effectiveness of the Bank Secrecy Act regime is critical for understanding what changes need to be made. Instead, Congress, financial institutions, and the broader public are stuck in the dark. As for FinCEN, the agency has been seemingly allowed to break the law with little to no consequences."

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