The Bank Secrecy Act & Financial Surveillance

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The Bank Secrecy Act (BSA) has long been a cornerstone of financial regulation in the United States. Congress first passed the Bank Secrecy Act in 1970 as the first laws to fight money laundering in the United States.

Originally targeting insured banks, its scope has widened over the years, now encompassing a broad category of entities termed “financial institutions.” This expansion, while seemingly straightforward, raises significant constitutional and legal questions.

The BSA grants the Secretary of the Treasury sweeping powers, including the ability to expand or narrow the range of entities under surveillance and to exempt certain parties from obligations. This expansive authority does not merely affect a niche sector of the financial world; it has profound implications for millions of Americans.

A closer examination of the BSA in light of current legal doctrines and statutory interpretation reveals a concerning ambiguity. The Act’s broad language poses the risk of criminalizing a wide array of everyday financial activities. Conversely, its vagueness creates uncertainty in its application, affecting numerous Americans.

There are three key powers delegated to the Secretary of the Treasury under the BSA:

  1. Broadening the Category of Covered Entities: The Secretary can expand the definition of “financial institution” to include businesses engaged in activities similar to those of defined financial institutions. This power, derived from § 5312(a)(2)(Y) and (Z) of the BSA, allows for significant discretion in determining which entities fall under this category.
  2. Exempting Entities: Under § 5318 of the BSA, the Secretary has the power to exempt certain financial institutions from the Act’s requirements, a provision that could exempt large sectors of the financial industry from oversight.
  3. Expanding Collected Data: The Secretary is authorized by § 5326 to broaden the range of customer data that financial institutions must collect, a power that, if exercised, could lead to the mass collection of financial records.

These powers, while potentially useful for regulatory purposes, operate without the typical safeguards of judicial oversight, raising constitutional concerns. Notably, the BSA does not provide for judicial review or appeal of decisions made under these provisions.

Recent scholarship in statutory construction discourages the finding of ambiguity unless clearly indicated by the statute. The BSA’s definition of a financial institution, while not ambiguous, is notably broad. This breadth could lead to due process challenges, as overly broad statutes can infringe on constitutional rights.

Furthermore, the Supreme Court’s recent focus on nondelegation and the major questions doctrine highlights the problematic nature of the BSA’s delegation of power. The Act essentially allows the Treasury Secretary to decide, without constraint, how and to whom the law applies. This lack of clear guidance or limitation is a departure from the constitutional principle that significant policy decisions should be made by elected representatives.

The implications of the BSA are far-reaching. It authorizes extensive warrantless data collection, involving the personal financial records of virtually every American with a bank account. This data is collected automatically, without judicial oversight or individual suspicion. Financial institutions are effectively transformed into extensions of federal law enforcement, monitoring their customers on behalf of the government.

Critics argue that this level of surveillance, conducted at the discretion of unelected officials, poses serious constitutional challenges. The Act’s broad language, ambiguous application, and unchecked delegation of power to the executive branch make it a controversial piece of legislation in the context of national financial surveillance.

As legal scholars and policymakers continue to scrutinize the Bank Secrecy Act, its future and the scope of its impact remain subjects of intense debate. One thing is clear: the Act’s influence on both the financial sector and individual privacy rights will be a topic of discussion for years to come.

Coin Center recently published an extensive report on the Constitutional infringements of the BSA which you can read here.

You can also follow our continuing coverage of the increasingly hostile State and Federal regulations here.


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Carl Parsson is the charismatic Chief Editor of Cryptosphere, an authoritative voice in the buzzing world of cryptocurrency and blockchain technology. Born and raised in the tech hub of Seattle, Washington, Eli's interest in digital currencies was ignited during his undergraduate studies at the Massachusetts Institute of Technology (MIT).