The Bank Secrecy Act of 1970 (BSA) and its later amendments, including the USA PATRIOT Act in 2001, require financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laundering and other crimes. The BSA now forms the basis of an extensive–and costly–regulatory framework. Yet, if judged by the standard of reducing predicate crimes, there is virtually no empirical evidence to suggest that the approach has worked. Instead, the evidence suggests that the BSA framework has proven a minor inconvenience for criminals but a major burden on law abiding citizens.
The historical record demonstrates that the BSA was enacted without careful study or forethought. Congressional hearings clearly show that the bill’s supporters had not fully considered whether the legislation included appropriate solutions to the supposed abuse of secret foreign bank accounts. Congress and Treasury then spent five–plus decades building on this shaky BSA framework to supposedly better deter criminals, but the evidence shows no net benefit to this approach. Rather, the expansion of the BSA has dramatically increased explicit compliance costs for financial institutions and diminished Americans’ constitutionally protected rights.
At minimum, the BSA should be amended to remove the reporting requirements that force financial institutions to act as law enforcement agents and allow the United States government to intrude into private citizens’ financial business without the protections guaranteed by the Constitution. Limiting the BSA to recordkeeping requirements will preserve relevant information for criminal investigations and allow federal resources to be more efficiently focused on catching criminals, while respecting constitutional safeguards. As the digital age takes hold, it is more important than ever that the United States lead the way in protecting individuals’ rights against government overreach and setting the standard for personal financial privacy.
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