ICYMI: The Modernization of Federal Regulations is Required to Prevent Debanking

“Policymakers do not need to choose between security and fairness. A modernized anti-money laundering regime would strengthen both.”

In case you missed it, David Ibsen, a founder of the Counter Extremism Project and an expert in the impacts of sanctions and financial regulations, penned an op-ed in The Hill calling on Congress to modernize the outdated anti-money laundering (AML) laws and “Know Your Customer” (KYC) regulations to tackle the root cause of debanking—federal overreach and obsolete oversight structures—and restore the integrity of suspicious activity reports (SARs) to safeguard Americans’ access to the financial system.

A few days after Ibsen’s op-ed, President Trump signed an executive order (EO) that directs federal regulators and Congress to address rules and regulations driving debanking.

In his piece, Ibsen focuses on regulatory changes, spotlighting the outdated framework of federal reporting thresholds that have become regulatory landmines for financial institutions:

“Most Americans are unaware that any cash transaction over $10,000 triggers the creation of a Currency Transaction Report that is filed with the government… In today’s economy, $10,000 might barely cover the cost of a used car. Yet banks are still required to flag such transactions, regardless of context, producing millions of reports every year that offer little value to law enforcement.”

Ibsen also emphasizes how SARs have become a blunt instrument that it only muddies the water between true suspicious activity and normal transactions:

“Suspicious Activity Reports are yet another layer of government scrutiny… Former officials concede this avalanche of paperwork does little to advance public safety. In fact, it can create a burden for investigators seeking to identify and separate the truly suspicious activity from the mundane. When enforcement cannot separate the signal from the noise, it’s dangerous.”

He then outlines the key federal solution to combat unintended debanking, noting the need to modernize the anti-money laundering framework, and pointing to the Financial Institution Regulatory Modernization (FIRM) Act as a critical first step already underway.

“This legislation would increase transparency and accountability in how agencies issue guidance and conduct examinations of financial institutions and their customers. It would help ensure that banks are not penalized for serving lawful customers in politically sensitive sectors. It’s an encouraging start, but it will not be enough by itself.”

Further underscoring the urgency for federal action, Ibsen highlights how modernizing the AML would strengthen national security, foster coordination between regulators and financial institutions and lay the groundwork for a more balanced system:

“The single most impactful step policymakers could take today to address the unintended debanking of lawful citizens is to modernize the anti-money laundering framework. Modernization should ensure banks provide relevant and actionable information that truly helps investigators and allows financial institutions to replace box-ticking alerts and reporting with data analysis that spots real patterns of abuse.”

To read David Ibsen’s full op-ed in The Hill, click HERE.