The reports made apparent that federal agencies want even greater financial surveillance than what already exists. From the Bank Secrecy Act of 1970 to the Biden administration’s proposal to monitor bank accounts with balances of just $600 (subsequently increased to $10,000), the government, for decades, has been (all too often) successful in its efforts to chip away at financial privacy. Yet it appears the U.S. government’s taste for surveillance is a hunger that cannot be satiated.
Because it is illegal in cases with suspicious‐activity reports (SARs) and currency‐transaction reports (CTRs), for example, for financial institutions to notify customers when the government wants their records, many Americans are not aware that financial surveillance is expanding. However, the DOJ does recognize this fact, and to continue its efforts unseen, it has recommended expanding such laws to cover cryptocurrency services. Not one to waste an opportunity, the DOJ also recommended that the laws be expanded to a host of other areas completely unrelated to cryptocurrency.
Likewise, Treasury called for a strengthening of the Financial Crimes Enforcement Network (FinCEN), the bureau tasked with reviewing much of this financial surveillance. Were this domestic expansion not enough, Treasury also recommended exporting U.S. laws to other countries through “bilateral engagement” and the Financial Action Task Force (FATF), an intergovernmental organization created by the Group of Seven (G7) nations to combat money laundering.
Further, to strengthen enforcement across borders, the DOJ has recommended the adoption of FinCEN’s 2020 proposed “travel rule” amendments. This rule covers how financial institutions must collect, retain, and report information related to international transfers.
Interestingly, the DOJ appeared to be quite careful in describing the rule as simply clarifying that “the recordkeeping … regulations apply to transactions” involving cryptocurrency as well as traditional currency.
What wasn’t explicitly stated was that the rule in question proposed lowering the reporting threshold from $3,000 to $250 for international transactions. Considering how much Americans pushed back against the proposal to lower bank‐reporting thresholds to $600, it is not surprising that this detail was glossed over.
Whether it be through the Bank Secrecy Act, FinCEN, or some yet‐unwritten rule, the government should cease expanding financial surveillance until the effectiveness of these processes can be properly evaluated. But if the evidence that is already available is any indication, the Bank Secrecy Act should be limited or repealed, not expanded.
The reports sought not just a greater eye on the financial system, but also a greater hand in it. In a move that could create an even more direct line between the government and consumers, some of the agencies support issuing a central‐bank digital currency, or CBDC.
To be clear, the Treasury, much like the Federal Reserve, noted in its reports that it has not officially decided on issuing a CBDC. At a Brookings Institution event, however, Under Secretary for Domestic Finance Nellie Liang made it clear that the Treasury is committed to “promot[ing] further work on advancing a CBDC” — seemingly suggesting that the decision has already been made at the Treasury.
Much of the CBDC conversation in Washington appears to be motivated by a desire to gain control over the financial system before alternatives such as cryptocurrencies are widely adopted. That much was made clear by how the CBDC debates skyrocketed after Facebook published the Libra white paper outlining its own plan for a possible cryptocurrency. Although the idea never came to fruition, members of Congress mentioned it for years as a source of concern.
The reports largely paint a CBDC as having the ability to offer a laundry list of possible benefits. However, in reality, almost every benefit that will supposedly be offered by a CBDC is already being offered by the private sector.
In fact, the only advantage a CBDC might offer is to the benefit of the federal government, not the American people. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said it himself this summer: “I can see why China would do it. If they want to monitor every one of your transactions … [if] you want to impose negative interest rates … [and if] you want to directly tax customer accounts, you can do that with a central bank digital currency.… I get why China would be interested. Why would the American people be for that?”
So far, it seems that the American people are not impressed by the prospect of a future with CBDCs or the current financial‐surveillance regime. Of the 2,052 comments written to the Federal Reserve in response to its own report on CBDCs, more than two‐thirds of the comments were concerned or outright opposed to the idea of a CBDC. Moreover, a new Cato Institute survey found that 83 percent of Americans believe that the government should need a warrant to access financial records, and 79 percent of Americans say that it is unreasonable for banks to share financial records with the government.
It certainly seems that the recommendations offered in the recent reports are largely in the interest of the federal government, not in the interest of the public. The U.S. government’s taste for surveillance may be a hunger that cannot be satiated, but restraining the ability to act on that hunger is precisely why the U.S. Constitution exists.
This culture of financial surveillance and control may be unlikely to disappear, but the administration would be wise to remember citizens’ rights as it weighs the proposals in the reports.
