Bank Secrecy Act overhaul works its way through Congress

In May, the House Financial Services Committee approved the COUNTER Act to modernize and reform the Bank Secrecy Act. The bipartisan bill (H.R. 2514) sets out to curb money laundering and illicit financial activities. It awaits a vote on the House floor. 

Introduced by Rep. Emanuel Cleaver II (D-Mo.), the bill would implement a number of changes and additions to the regulations within the BSA, which dictates banks’ responsibilities to help the government detect illegal financial transactions. 

The COUNTER Act gives the U.S. Department of Treasury more tools to help thwart illegal transactions by “codifying an information-sharing program between law enforcement, financial institutions, and the Treasury Department, with the goal of better ensuring the detection and capture of illegal activity. In addition, the bill will provide needed relief to small banks and credit unions by updating outdated regulations weighing on these smaller institutions while still reinforcing our national security,” the bill’s summary reads. 

“Since the last significant anti-money laundering reforms in 2001, the national security threats our country faces have evolved profoundly,” Rep. Cleaver said. “As nefarious actors adapt to the new world of virtual currencies, dark web marketplaces, and illicit technologies, it is absolutely critical that Congress, the banks, and our laws adapt with them. That’s why I think we’ve been able to gin up a lot of bipartisan support.”

The Conference of State Bank Supervisors immediately released a statement applauding the bill’s passage. According to the “Community Banking in the 21st Century,” 2018 Research and Policy Conference, 40 percent of banks ranked BSA compliance risk as important and 22 percent rated it as very important. Key to CSBS’s approval is the coordination of various bodies which it believes will reduce the burden of compliance on banks while improving the quality of information provided to law enforcement.

“To ensure an effective program for the benefit of the country, it is critical for all regulators to have a seat at the table,” CSBS said in a letter to House Financial Services Chair Maxine Waters (D-Calif.) prior to the committee’s consideration of the bill. 

The CSBS reports that in 2018, state-chartered banks filed 234,262 SARs and state-licensed money services businesses filed 873,203 SARs. 

The bill also prompts the government to develop financial technology and artificial intelligence to pick up the trail of bad actors, including developing innovation labs.

“The importance of reforming our banking regulations and bringing them into the 21st century is vital to consumers, community banks and our national security,” Rep. Cleaver said. “Perhaps of more importance is showing the American people that Congress still has the ability to come together and get things done in a civil and constructive manner on behalf of our constituents.”

Signed into law in 1970, the BSA was overhauled after the attacks of 9/11. The COUNTER Act would be the largest reform to the BSA since then.

 

Bill focuses on the money trail of human trafficking 

On May 28, newly seated Congressman Bryan Steil (R-Wis.) introduced his first bill: H.R. 2149, the Exposing the Financing of Human Trafficking Act. The bill has 17 bipartisan cosponsors.

“Understanding where this money comes from and where it’s going gives countries the ability to crack down on these crimes,” Rep. Steil said. 

The International Labor Organization estimates that more than $150 billion in illegal profit is made from forced labor each year. 

The United States currently uses the Trafficking in Persons Report issued by the U.S. Department of State to engage foreign governments to combat human trafficking. This bill requires the existing TIP process to evaluate a foreign country’s efforts to investigate human trafficking. Aid and resources of various kinds would then be allocated to these countries with greater precision based on need.