Under the Trump administration, Washington has taken meaningful steps to reform the outdated policies that have contributed to politically motivated debanking.
Under the guise of preventing financial crime, the Bank Secrecy Act (BSA) has resulted in excessive scrutiny, account closures, and other disruptions of lawful banking activities for customers while creating costly legal and compliance burdens for financial institutions.
How did we get here? In the course of complying with their legal obligations under the BSA, financial institutions are often compelled to err on the side of caution when reviewing the activities of their clients. They do this because even inadvertent omissions in their mandated government reporting could result in penalties and exorbitant fines. This leads them to report on, or even close, client accounts they would otherwise be proud to service.
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To be clear, financial institutions have long served as critical and responsible partners to law enforcement. The problem is that the federal government “deputized” banks with law enforcement responsibilities while simultaneously giving them vague guidance paired with the prospect of harsh penalties. This dynamic incentivizes institutions to overreport accounts out of an abundance of caution.
Positive reforms would move financial institutions away from “box-checking” enforcement and back toward the BSA’s original intent: to provide law enforcement with useful information on illicit financing to identify actual threats.
I know firsthand how the BSA, which was built and designed for the world of 1970, does not always reflect how criminal enterprises operate. I spent two decades working on national security and counterterrorism issues, including how extremist networks and criminal actors exploit emerging technologies and the financial system. Reforming the BSA does not mean ignoring those threats. It means modernizing the laws to enable law enforcement to more effectively target them.
The BSA of 1970 was formed out of the government’s concerns at the time about tax evasion, including the use of foreign bank accounts. It set various reporting thresholds that required banks to file reports, including Suspicious Activity Reports (SARs), which are triggered when “suspicious activity” is suspected, and Currency Transaction Reports (CTRs), which are triggered by certain transaction amounts near or above $10,000. Neither threshold has been updated to adjust for inflation, and both capture far more activity today than Congress could have anticipated more than half a century ago.
These dated thresholds and the ambiguity behind what constitutes “suspicious activity” create unnecessary noise, clouding truly suspicious activity and leading to unnecessary account closures or disruptions to operations. The scale of the problem is enormous. Financial institutions filed more than 28.7 million reports under the BSA in fiscal year 2025 — roughly 78,000 reports every day. Yet according to Nicholas Anthony at the Cato Institute, only about 275 IRS criminal investigations resulted from BSA reports, despite the tens of millions of filings. That is the core problem: the BSA system produces abundant activity but insufficient achievement. Rigid transaction thresholds often trigger CTRs, while vague and subjective judgments about what looks “suspicious” drive SARs. In both cases, financial institutions have powerful incentives to report first and ask questions later.
This week, the U.S. House Committee on Financial Services held a hearing on modernizing the BSA. This comes after federal regulators recently shared a joint notice of proposed rulemaking to modernize BSA program requirements for the financial institutions they supervise.
While the agencies overseeing BSA enforcement take meaningful steps to modernize, we need Congress to act to codify these reforms into law. Senate banking committee Chairman Tim Scott’s (R-SC) proposed legislation, the STREAMLINE Act, would do just that by raising outdated reporting thresholds — but more reforms are needed.
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Reforming the BSA should explicitly promote a risk-based approach. Banks should be empowered to direct compliance resources toward genuinely high-risk activity rather than treating every transaction the same. Congress should also mandate that law enforcement provide specific feedback to banks to improve the usefulness of their reporting while also revisiting the rules that prevent banks from giving customers meaningful explanations about account closures or freezes.
Congress and the Trump administration should launch a new era of clear, consistent, and risk-based oversight that supports both fairness and security. The goal should be simple: update the tools needed to stop bad actors while ending the costly mass-reporting regime that unfairly burdens lawful Americans and its financial institutions.
David Ibsen is executive director of Americans for Free Markets (AFFM).