House panel urges updates to Bank Secrecy Act for AI, crypto

A House Financial Services subcommittee convened May 21 in Washington to hear testimony on updating the 1970 Bank Secrecy Act to address AI-enabled scams and rapid laundering of digital assets.

Crypto firms, banks, think tanks and national security experts urged Congress to revise the law’s reporting rules, clarify obligations for digital-asset platforms and expand use of machine learning in transaction monitoring. Witnesses described criminals using automated tools and said current reporting systems are too slow as funds move across wallets in 24 to 48 hours.

TRM Labs Global Head of Policy Ari Redbord testified that AI-enabled scam activity rose about 500% year over year. He cited more than $2 billion in digital assets stolen by North Korea in 2025 and roughly $600 million in early 2026, and said pig-butchering networks took more than $35 billion from U.S. victims last year. Redbord called the BSA “structurally incapable” of keeping pace and asked for new statutory tools, including a federal safe harbor that would let exchanges freeze suspect funds while law enforcement reviews cases.

Redbord recommended formal recognition for industry-led digital-asset financial intelligence units and pointed to a collaboration that has frozen over $450 million in illicit USDT since September 2024. He also urged limits on customer data collection, arguing firms should retain only the information needed to assess illicit risk to reduce concentrated targets for ransomware and state-sponsored hackers.

Subcommittee Chairman Warren Davidson criticized the BSA as a “bloated surveillance machine,” noting that banks and other institutions file nearly 5 million suspicious activity reports and 21 million currency transaction reports a year. Lawmakers and witnesses framed part of the discussion around shifting from high volumes of retrospective reports to fewer, more actionable alerts.

Speakers differed on remedies. Nicholas Anthony of the Cato Institute said the core problem is financial surveillance and proposed options from inflation-adjusted reporting thresholds to full repeal of the regime. John Court, general counsel at the Bank Policy Institute, rejected repeal and recommended targeted reforms, calling Treasury’s proposed anti-money-laundering rule “a vast improvement” and urging higher reporting thresholds, simpler filings, risk-based oversight and explicit authorization for banks to use AI in monitoring.

Carole House, a senior fellow at the Atlantic Council, cautioned against large cuts to the framework and said easing compliance should not increase national security risks. Most witnesses favored broader use of AI and machine learning. Redbord told the panel that “AI investigative tools can compress weeks of manual analysis into minutes” and requested federal funding for AI-native investigative capabilities across agencies including IRS Criminal Investigation, FinCEN, OFAC, the FBI, DEA, Secret Service and Homeland Security Investigations.

The hearing came days after President Donald Trump signed an executive order directing regulators to tighten customer due diligence and identification requirements under the BSA and to flag account risks tied to ITINs, underreported wages and foreign consular IDs. The order asked the Consumer Financial Protection Bureau to consider how lending rules intersect with immigration-related risks.

The Bank Secrecy Act requires banks and registered money services businesses to file suspicious activity reports, report transactions over $10,000 and verify customer identities. Witnesses said the act’s reporting-based design and the large volume of filings create backlogs that make it difficult for law enforcement to convert data into timely investigations as criminals use automated tools and crypto rails.

Lawmakers left the hearing with competing approaches: some pushed to reduce reporting burdens and narrow the law’s scope, while others sought modernization, clearer authority for digital-asset holds and investment in AI tools. The subcommittee’s next steps will inform possible legislative proposals to update anti-money-laundering rules for faster-moving technology and financial crime.