Crypto, Banks, Policy Experts Press Congress to Modernize Bank Secrecy Act

Crypto executives, policy researchers, and national security experts testified before a House subcommittee on Thursday on how to modernize anti-money laundering laws for an era of AI and digital assets.

The House Financial Services Committee’s National Security, Illicit Finance, and International Financial Institutions Subcommittee held a hearing on Modernizing the BSA for Financial Crime in the 21st Century, revisiting the Bank Secrecy Act, the 1970 law that requires banks and financial institutions to report suspicious activity and large transactions.

The hearing landed as crypto firms, banks, and civil liberties groups push to refocus the BSA on actionable intelligence over reporting volume, while the Trump administration broadens its reach over non-citizen customers.

TRM Labs Global Head of Policy Ari Redbord, testifying before the Subcommittee, told lawmakers that North Korea stole over $2 billion in digital assets in 2025 and another $600 million in early 2026, while pig butchering networks stripped more than $35 billion from Americans last year.

Redbord warned that AI-enabled scam activity surged 500% over the past year while illicit funds now move across wallets within 24 to 48 hours, compressing response windows to the point where “retrospective reporting frameworks are structurally incapable of generating a response in time” because “the framework that helped us win yesterday will not be enough to win today.”

What is the Bank Secrecy Act?

The Bank Secrecy Act is the backbone of U.S. anti-money laundering law, requiring banks and crypto firms registered as money services businesses to file suspicious activity reports, currency transaction reports for amounts over $10,000, and to verify customer identities.

Subcommittee Chairman Warren Davidson (R-OH) opened by calling the BSA a “bloated surveillance machine demanding endless reports without delivering proportional results,” noting institutions file nearly 5 million SARs and 21 million CTRs annually.

Redbord pitched formal recognition for stablecoin financial intelligence units like T3 FCU, a Tether–TRON–TRM collaboration that has frozen over $450 million in illicit USDT since September 2024, and a “digital asset hold law” giving exchanges a statutory safe harbor to freeze suspect funds pending law enforcement review.

Also, he noted how institutions should hold “the least amount of information that they need on an individual customer in order to make a decision” about illicit risk, warning that every new database is “a honeypot” for ransomware groups and state hackers.

During the hearing, Cato Institute researcher Nicholas Anthony said the problem with BSA was not inefficiency but surveillance itself, saying “the history of financial surveillance has been a history of ever-moving goalposts” from tax enforcement to “fraud and immigration,” while laying out options ranging from inflation-adjusting thresholds to repealing the BSA regime entirely.

John Court, general counsel at the Bank Policy Institute, backed reform rather than repeal, calling Treasury’s proposed AML rule “a vast improvement” and urging higher reporting thresholds, simpler filings, risk-based oversight, and explicit approval for banks to use AI in transaction monitoring.

Atlantic Council Senior Fellow Carole House pushed back on deep cuts to the framework, noting that reducing compliance burden should not come at the cost of “opening the door to adversaries seeking to harm Americans and U.S. national security interests.”

AI was a point of consensus among most witnesses.

Davidson, Redbord, Carole House, and Court all backed broader use of machine learning and AI in transaction monitoring. Redbord pushed hardest, telling lawmakers that “AI investigative tools can compress weeks of manual analysis into minutes” and calling for federal funding of AI-native investigative tools across IRS-CI, FinCEN, OFAC, FBI, DEA, Secret Service, and HSI.

The hearing arrived only days after President Donald Trump signed an executive order directing regulators to strengthen customer due diligence and customer identification requirements under the BSA while expanding scrutiny around account ownership and financial risks associated with immigration enforcement.

The order directs Treasury to tighten BSA customer due diligence rules and flag risks tied to ITIN use, off-the-books wages, and foreign consular IDs, while also asking the CFPB to weigh potential deportation risks in lending decisions.