How Inflation Erodes Financial Privacy and keeps me employed


Mar 17, 2013
Keeping my overhead low, and my understand high

The more these reports and investigations are needed the more job security for us that do it


The hidden tax of inflation has been a little less hidden lately. From grocery stores to gas stations, people are seeing prices rise before their eyes. Yet it’s not just our wallets that are paying the price. For 50 years, inflation has helped the U.S. government increase financial surveillance under the Bank Secrecy Act by silently increasing the activities banks must report in their effort to counter financial crime.

One of the key requirements of the 1970 Bank Secrecy Act was that banks must report to the government any time a customer’s financial activity crosses any number of thresholds. For instance, banks are required to file currency transaction reports (CTRs) whenever a customer makes a cash transaction over $10,000 or multiple cash transactions in a single day that add up to $10,000.

The result of the law is that thousands of reports are filed every day against Americans for merely using their own money.

So what does inflation have to do with the reports? The $10,000 threshold was set 50 years ago. If it were adjusted for inflation all this time, the threshold would be nearly $75,000 today. So while it may have been politically feasible to set a “high” threshold of $10,000 in the 1970s when you could buy two brand new Corvettes for that price, the threshold should have been designed with an adjustment for inflation so it would change to reflect changes in the economy (Figure 1).

Without that adjustment, as JP Koning has described, “This means ever more invasions of privacy and higher costs of compliance.” Each year with inflation is another year that the government is granted further access to people’s financial activity.

More people are taking notice, though. The issue came up multiple times during a recent congressional hearing. Representatives Barry Loudermilk (R‑GA), Joyce Beatty (D‑OH), French Hill (R‑AR), Bryan Steil (R‑WI), and Roger Williams (R‑TX) all were right to express concern over what is at best an administrative oversight and at worst a planned expansion of financial surveillance without public notice.

Yet it is not just an issue of unjust surveillance and rising compliance costs. The artificially low threshold also forces the Financial Crimes Enforcement Network (FinCEN) to face an ever‐expanding workload––something the cash‐strapped agency cannot afford to engage in. “Finding a needle in the haystack is dependent on a number of things,” said Representative Steil at the hearing, “One of them being how big the haystack is. So if we can find a way to get the haystack down, I think it may actually put us in the position to more easily find the needle.”

The numbers seem to support the representative’s assessment. For instance, a 2018 Bank Policy Institute (BPI) study found only 3.85% of suspicious activity reports (SARs) and 0.44% of CTRs required some form of follow up by law enforcement (Figure 2).

After the hearing, former FinCEN Acting Director Michael Mosier pointed out that better statistics are needed. As BPI noted in the study, they used follow ups from law enforcement (e.g., requests for written summaries or other documentation) as a proxy to measure how many reports lead to investigations. So while it is one of the best available indicators, better data is needed to explain exactly how many SARs and CTRs lead to investigations, law enforcement taking action, unique criminal convictions, or additional charges on existing investigations.

With that said, other data appear to confirm that the flood of reports has not aided law enforcement significantly. In a 2016 study, Norbert Michel and David Burton found that money laundering investigations by the FBI had largely fallen between 2001 and 2011 despite the number of suspicious activity reports rising (Figure 3). This indicator is also only a proxy for measuring total investigations, but it should be enough, at the very least, to confirm that a serious review of the data is warranted––and that review should be taking place from both inside and outside of FinCEN.


Hale End
Jan 17, 2013
The Arsenal
this i can support CATO on. all laws like this should be adjusted for inflation. they should have been beating this drum long before that 70's $10K became the equivalent of $75K today.