Chairman Rep. Patrick McHenry, R-N.C., right, accompanied by Ranking Member Rep. Maxine Waters, … [+]
On Thursday, September 12, my Cato colleagues and I are holding our second annual Center for Monetary and Financial Alternatives conference. This year’s theme is Financial Privacy under Fire: Protecting and Restoring Americans’ Rights, and it features a discussion with Rep. Patrick McHenry (R-NC), Chairman of the House Financial Services Committee.
As we argued in our 2022 policy guide, the privacy Americans should enjoy over their financial information has been in steady decline for more than 50 years, a trend that shifted into high gear after Congress passed the Bank Secrecy Act of 1970.
During the past few years, there’s been a flurry of activity around financial privacy. On the positive side, Rep. John Rose (R-TN) introduced the Bank Privacy Reform Act and Sen. Tommy Tuberville (R-AL) and Rep. Warren Davidson (R-OH) introduced their own versions of the Repealing Big Brother Overreach Act. These bills would implement much needed reforms to the Bank Secrecy Act regime.
On the other hand, central banks have continued flirting with issuing central bank digital currencies. These are typically billed as just another form of digital money, but that characterization is highly misleading. CBDCs are, at their core, instruments of control.
CBDCs pose major risks to financial privacy, freedom, the free enterprise system, and cybersecurity. In May, the House passed Rep. Tom Emmer’s (R-MN) CBDC Anti-Surveillance State Act, but it seems unlikely that the Senate will take up the issue anytime soon. (Several members, such as Sen. Ted Cruz (R-TX) and Sen. Mike Lee (R-UT) have introduced similar legislation to prohibit a CBDC.) It’s also unclear whether either presidential candidate will help stop CBDCs, although former President Trump has vowed to do so.
Our panelists will dive into why reforming the BSA and stopping CBDCs are so important, and much more. The decentralized nature of cryptocurrency, for instance, has implications for why Congress needs to reconsider the existing regulatory regime.
Overall, we’ll have more than a dozen experts at the conference, with four separate panels. We can’t cover everything—we’re not really diving into some important international issues, such as those relating to the Financial Action Task Force—but the audience will get much more than a superficial discussion of the core threats to financial privacy.
Financial technology is evolving rapidly, and it’s forcing policymakers to deal with how U.S. law treats financial privacy. But it has been a bumpy ride. In fact, long before these new technologies surfaced, few in Congress wanted to confront whether the Constitution provides the protections needed to limit government access to financial information.
Things seem to have shifted for the better at a House Judiciary Committee hearing on March 7, 2024, titled Hearing on the Weaponization of the Federal Government. Several members of the committee were upset that in the wake of the January 6 protests, law enforcement collaborated with several large financial institutions, allegedly conducting warrantless surveillance of Americans’ financial records.
For instance, a retired Federal Bureau of Investigation Supervisory Intelligence Analyst, George Hill, testified to the committee that Bank of America “voluntarily and without legal process” gave the FBI a list of names of “all individuals who used a BoA credit or debit card in the Washington, D.C. region between the dates of January 5 and January 7, 2021.” Hill also testified that BoA provided the FBI with a list of customers who used a BoA credit or debit card to buy a gun, “regardless of when or where it was purchased.”
More broadly, the committee discovered that the Financial Crimes Enforcement Network (FinCEN) and the FBI discussed—with financial institutions such as Western Union, Wells Fargo, Citibank, JPMorgan Chase, and Paypal—ways to obtain customer information “outside of normal legal processes.”
During the hearing, it appeared that several members were surprised that such warrantless surveillance was now the norm regarding financial institutions under the so-called third-party doctrine. Still, most seemed ready to restore Fourth Amendment protections to such information, reversing the trend that Congress set in motion with the BSA of 1970.
It remains unclear whether these efforts will succeed. But it is perfectly clear that the existing regulatory regime grants the government warrantless access to Americans’ financial transactions. And, as financial services have become increasingly digitized, the volume of financial records to which the government has unfettered access has grown exponentially.
Layer in a CBDC, and much more than just privacy is at stake. On September 12, we will be taking a deep dive into these issues. Please register to join us, free of charge, either in person or online.