Treasury and DOJ Seek Greater Financial Surveillance Around Cryptocurrency

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    by Nicholas Anthony, Activist Post:

    The rise of cryptocurrencies has made a new generation of people aware of the need for financial privacy reform in America. It’s not only citizens who have taken notice, and not only calls for positive change that have been proposed. Government officials have slowly recognized that cryptocurrencies challenge the assumption that only governments are fit to issue money, and defy the 50-year-old financial surveillance regime born out of the Bank Secrecy Act.

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    Yet, government officials have read this challenge as a signal to double down, when they should recognize it as a signal that the American people want change.

    A prime example of US government officials’ taste for financial surveillance can be seen in the recent cryptocurrency reports written by the Department of the Treasury (Treasury) and the Department of Justice (DOJ). Two significant takeaways were the recommendation to expand the Bank Secrecy Act further, and the recommendation to push forward on central bank digital currencies (CBDCs).

    With those two objectives, the departments are united in connecting the past and future of financial surveillance.

    First, consider the recommendations to expand the Bank Secrecy Act. In its report, the Treasury called for expanding Bank Secrecy Act reporting, strengthening the Financial Crimes Enforcement Network (FinCEN), further deputizing the private sector as law enforcement investigators, and exporting US laws to other countries through “bilateral engagement.” Likewise, the DOJ called for expanding the laws barring financial institutions from notifying customers that the government is collecting their records, and lowering the reporting thresholds for international transactions.

    Regardless of how it’s achieved, there must be a full stop to expanding financial surveillance until this regime is proven effective. For years, FinCEN has said that it cannot provide data on the success (or failure) of its financial surveillance. Acting Director Himamauli Das openly acknowledged this issue to Congress, saying, “It’s clear that we need to do a better job in terms of communicating how effective FinCEN’s work is.”

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    Despite Acting Director Das’s claim that the program is effective, it appears to have high costs with little or no benefits. The current regime is estimated to have cost US businesses $26.4 billion in 2019. And while FinCEN has not reported any numbers regarding how many criminals the regime stopped, FinCEN has shared that it received 20 million reports in 2019. Separately, the Bank Policy Institute found in 2018 that law enforcement only followed up with banks on 3.85 percent of suspicious activity reports (SARs) and 0.44 percent of currency transaction reports (CTRs). Moreover, Norbert Michel and David Burton found in 2016 that money-laundering investigations by the FBI had fallen between 2001 and 2011, despite the number of suspicious activity reports rising significantly.

    The issue isn’t just one of government waste, though. As the government gathers more data, there continues to be a greater risk that it will use the data. For example, as noted by Lawrence White, “Innocent family businesses have been charged with structuring, and had tens of thousands of dollars seized by the federal government, merely for making repeated deposits or withdrawals below the $10,000 [CTR] threshold.” Moreover, Operation Chokepoint, Canada’s freeze on protestors’ bank accounts, and ICE’s recent collection of money-transfer data all showcase how this data is being used to target citizens.

    So, businesses are forced to spend billions of dollars to file millions of reports on Americans, merely for using their own money. And millions of these reports likely have nothing to do with actual crimes. With that in mind, it should be no surprise that a national survey by the Cato Institute found that 79 percent of Americans say it’s unreasonable for banks to share financial records with the government as required by the Bank Secrecy Act.

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