Banks in the United States play a vital role in keeping the financial system safe by identifying and preventing financial crime, such as money laundering, terrorist financing and human trafficking. Some of the largest banks employ over 14,000 individuals, have invested over $2.4 billion, and use over 20 different I.T. systems to perform this task, per a 2017 BPI survey.
Under the Bank Secrecy Act, regulators require banks to dedicate significant resources toward two tasks: filing currency transaction reports and suspicious activity reports. While these tools are intended to aid law enforcement to prevent crime, data show that specific aspects have been ineffective and inefficient. Instead, real criminals evade detection while the honest customers bear the brunt.
Yet these reports rarely lead to actionable law enforcement cases.
- 170 million CTRs were filed by banks between 2014-2023, per the Government Accountability Office. On average, 0.44% of the 5.2 million CTRs that surveyed banks filed in 2017 warranted follow-up inquiries.
- 4.6 million SARs were filed in 2023. Just .5% of 2023 SARs were involved in FBI investigations.
- 500k+ structuring SARs were filed in 2023. Structuring occurs when someone appears to intentionally break up cash transactions to avoid the $10,000 CTR threshold. For example:
- $5k cash to a checking account
- + $3k cash for a credit card
- + $2k cash for a mortgage
If done in one day, these transactions would trigger a CTR. There’s no record of what percentage of structuring SARs yielded useful info.
The current approach is affecting innocent consumers.
Regulations require banks to file CTRs to report cash transactions that meet the $10K filing threshold, even if there’s no evidence of wrongdoing. And this creates cascading issues. In particular, more structing SARs and other SARs are getting filed even where the underlying transactions may be innocent. Multiple SARs lead to pressure from examiners to exit the customer in question, or risk severe penalties and billions of dollars in fines. The result? Banks may choose to close accounts —not because of proven misconduct, but because AML concerns have led to billions in fines at multiple banks.
The Anti-Money Laundering Act of 2020 is one potential solution.
Congress passed the Anti-Money Laundering Act of 2020. The act specifically directed Treasury to consider where the CTR framework had been made redundant or obsolete by SAR filing requirements. While those recommendations were required to be reported to Congress within a year of enactment, they were never adopted. The time to act is now.
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About Bank Policy Institute.
The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud and other information security issues.
