House Financial Services Committee Calls for Smarter, Risk-Based AML/BSA Reform During FinCEN Oversight Hearing

In case you missed it, the U.S. House Financial Services Committee held a hearing this week, Oversight of the Financial Crimes Enforcement Network (FinCEN). to spotlight FinCEN’s implementation of the Bank Secrecy Act (BSA), ongoing anti-money laundering (AML) modernization efforts and the agency’s broader regulatory priorities.

FinCEN Director Andrea Gacki and lawmakers from both parties delivered a clear message: the nation’s AML/BSA framework must be modernized to better combat illicit finance by updating decades-old Suspicious Activity Report (SAR) and Currency Transaction Report (CTR) thresholds and advancing a risk-based supervisory framework that allows financial institutions to focus on identifying real criminal activity rather than overcompliance with onerous reporting requirements.

Rep. Warren Davidson’s (R-OH) opening testimony emphasized the outdated and egregious oversight of the BSA and its reporting requirements:

“The Bank Secrecy Act…has grown into a bloated surveillance apparatus, demanding endless reports without delivering proportional results… Reporting thresholds have never been adjusted for inflation, and worse, the U.S. Government Accountability Office (GAO) reports that only 5.4 percent of the CTRs are even looked at by law enforcement.“

“Under the Biden administration…FinCEN issued overly broad rules that treated every mom-and-pop shop around the country as a potential money launderer, forcing disclosure of personally identifiable information into a federal database that isn’t safeguarded against hacks or misuse.”

As the discussion continued, Chairman French Hill (R-AR) underscored the need to modernize the AML/BSA framework so financial institutions can focus on meaningful financial crime detection rather than excessive compliance burdens:

“As financial crimes grow more sophisticated, our framework needs to keep pace without imposing unnecessary burdens on American business…CTR and SAR thresholds are outdated and have produced millions of useless reports.”

Lawmakers on both sides of the aisle reinforced the need to modernize the AML/BSA framework, emphasizing that the current AML reporting framework often prioritizes regulatory compliance over meaningful oversight and protection for Americans.

Rep. Joyce Beatty (D-OH) emphasized the adverse effects of these regulatory hurdles:  

“Financial institutions, as you know, often report that examiners emphasize process over results and discourage innovation, which results in catching fewer bad actors.”

Rep. Zach Nunn (R-IA) urged the Treasury Department to focus reforms on criminals, not compliant businesses:

“I’d ask to implement rulemaking and encourage your team to make sure we narrow the approach by targeting criminals trying to exploit the financial system, not burying all of our law-abiding businesses in unnecessary paperwork.”

As the hearing concluded, FinCEN Director Andrea Gacki reaffirmed that BSA modernization remains a top Treasury priority:

“FinCEN is working hard to strike the right balance between burden and benefit to law enforcement when it comes to suspicious activity reports… This is one of the highest priorities that FinCEN has as part of the BSA modernization initiative.”

The hearing demonstrates that lawmakers from both parties recognize that the current AML/BSA framework is overdue for modernization. Rather than maintaining outdated reporting requirements that generate excessive compliance costs and limited law enforcement value, congressional leaders called for a smarter, risk-based approach that better targets illicit finance, reduces unnecessary burdens on financial institutions and small businesses and strengthens the effectiveness of the nation’s financial framework to protect Americans.