Nicholas Anthony
The Bank Secrecy Act was enacted in 1970 to require banks and other financial institutions to monitor customers and report certain transactions to the government. It started as an attempt to go after tax evaders, but it has since been expanded to go after drug dealers, terrorists, and immigrants. Although the Bank Secrecy Act has created sweeping financial surveillance that intrudes on Americans’ privacy and imposes massive costs on banks, there is little data to show that it actually stops criminals.
Why Was the Bank Secrecy Act Created?
The Bank Secrecy Act was originally enacted in 1970 for two primary reasons. First, both Congress and the Department of the Treasury were concerned about tax evasion, especially through the use of foreign bank accounts. Second, law enforcement was frustrated by the requirements and the time needed to obtain a warrant.
In the decades since 1970, Congress has passed several expansions to the Bank Secrecy Act. In fact, while it’s common for people to refer to the “Bank Secrecy Act” or the “Bank Secrecy Act regime,” these terms are usually used to refer to a long list of legislation.
Bank Secrecy Act (1970)
Money Laundering Control Act (1986)
Anti-Drug Abuse Act (1988)
The Annunzio-Wylie Anti-Money Laundering Act (1992)
Money Laundering Suppression Act (1994)
Money Laundering and Financial Crimes Strategy Act (1998)
USA PATRIOT Act (2001)
Intelligence Reform and Terrorism Prevention Act (2004)
Anti-Money Laundering Act (2021)
What Reports Does the Bank Secrecy Act Require Today?
As it stands today, the Bank Secrecy Act requires banks and other financial institutions to file currency transaction reports (CTRs), suspicious activity reports (SARs), reports on foreign bank and financial accounts (FBARs), reports of international transportation of currency or monetary instruments (CMIRs), and Form 8300 reports.
Although the names are long (and confusing), the basic idea is that your transactions must be reported to the government when you have a cash transaction over $10,000, when you do something with your money that a financial institution judges to be suspicious, when you have an account with a foreign bank, and when you take more than $10,000 across the border.
Who Is Required to Report Customers Under the Bank Secrecy Act?
Financial institutions are required to file reports under the Bank Secrecy Act. While the term “financial institution” might make you think of banks and credit unions, Congress has applied the term to many businesses. For instance, both pawnshops and the United States Postal Service are defined as financial institutions. The list is regularly expanded, but it currently includes:
Insured banks;
Commercial banks;
Trust companies;
Private bankers;
Agencies or branches of a foreign bank in the United States;
Credit unions;
Thrift institutions;
Brokers and dealers;
Broker and Dealer in securities or commodities;
Investment bankers;
Investment companies;
Currency exchanges;
Issuers, Redeemers, and Cashiers of checks, money orders, or similar instruments;
Operators of a credit card system;
Insurance companies;
Dealers in precious metals, stones, or jewels;
Pawnbrokers;
Loan or finance companies;
Travel agencies;
Senders of money;
Any business that engages in the transmission of value;
Telegraph companies;
Car dealerships;
Anyone involved in real estate closings and settlements;
The United States Postal Service;
Any domestic government agency; and
Casinos with an annual revenue of more than $1,000,000;
While there are certainly a few designations that should raise eyebrows, Congress saved the best for last by effectively giving the Treasury the authority to name anyone as a financial institution:
Any business or agency that engages in any activity that the Secretary of the Treasury determines to be an activity that is similar to any activity in which any business described above is authorized to engage; or
Any other business designated by the Secretary whose cash transactions have a high degree of usefulness in criminal, tax, or regulatory matters.
Is the Bank Secrecy Act Effective?
While the government has long refused to provide comprehensive data, what little data we have suggests the Bank Secrecy Act is far from effective. More than 27.5 million reports were filed in 2024. That’s roughly 75 thousand reports a day. To comply with these requirements, financial institutions in the United States spent around $59 billion. Yet, despite these staggering numbers, the reports filed only initiated 370 criminal investigations at the Internal Revenue Service.
How Can the Bank Secrecy Act Be Reformed?
The Bank Secrecy Act poses many problems that are ripe for reform. Let’s consider just three options.
First, at a minimum, all of the thresholds for reports required under the Bank Secrecy Act should be adjusted for inflation. For example, the $10,000 threshold set in the 1970s should be adjusted to at least $80,000.
Second, going further, all of the reports should be abolished. Adjusting the thresholds is akin to treating the symptom instead of the cause. The Fourth Amendment does not say people have a right to be secure in their papers unless it involves a lot of money. So, Congress should go further and eliminate the reporting requirements entirely. Law enforcement could still go after criminals in this scenario. They would just need to obtain a warrant to demonstrate a legitimate need for someone’s records.
Third, in the most ideal case, Congress should abolish the Bank Secrecy Act as a whole. Even if the reports are taken off the table, issues like know-your-customer requirements, transnational repression, derisking, and debanking all tie back to this regime. Repealing this regime in its entirety would let banks decide what information they need, with whom they do business, and the risks they take on. It would still be illegal to knowingly assist criminal activity, and law enforcement would still be able to obtain a warrant if an investigation justifies it.
Conclusion
Financial privacy has largely disappeared under the Bank Secrecy Act. Worse yet, most Americans have no idea this system exists. Rather than continue the trend of expanding financial surveillance under the Bank Secrecy Act, Congress should seek to protect Americans’ rights and bring this regime to an end.