Hearing on Modernizing Anti-Money Laundering Laws
Executives from the cryptocurrency industry, policy researchers, and national security experts testified before a House subcommittee on Thursday, offering insights on how to modernize anti-money laundering (AML) laws in the age of artificial intelligence and digital assets.
The House Financial Services Committee’s Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing on “Modernizing the BSA for Financial Crime in the 21st Century,” focusing on the Bank Secrecy Act (BSA), the 1970 law that mandates banks and financial institutions to report suspicious activity and large transactions.
The hearing took place as crypto firms, banks, and civil liberties groups advocate for a shift in the BSA’s focus toward actionable intelligence rather than the volume of reports, while the Trump administration is expanding its reach over non-citizen customers.
Ari Redbord, Global Head of Policy at TRM Labs, testified before the subcommittee, stating that North Korea stole over $2 billion in digital assets in 2025 and another $600 million in early 2026, while “pig butchering” networks defrauded Americans of more than $35 billion last year.
Redbord warned that AI-enabled scam activity surged by 500% over the past year, and illicit funds now move across wallets within 24 to 48 hours. This compresses response windows to the point where “retrospective reporting frameworks are structurally incapable of generating a response in time” because “the framework that helped us win yesterday will not be enough to win today.”
The Bank Secrecy Act is the foundation of U.S. anti-money laundering law, requiring banks and crypto firms registered as money services businesses to file suspicious activity reports, currency transaction reports for amounts over $10,000, and to verify customer identities.
Subcommittee Chairman Warren Davidson (R-OH) opened the hearing by describing the BSA as a “bloated surveillance machine demanding endless reports without delivering proportional results,” noting that institutions file nearly 5 million suspicious activity reports (SARs) and 21 million currency transaction reports (CTRs) annually.
Proposed Reforms and Concerns
Redbord proposed formal recognition for stablecoin financial intelligence units like T3 FCU, a collaboration between Tether, TRON, and TRM that has frozen over $450 million in illicit USDT since September 2024, and a “digital asset hold law” granting exchanges a statutory safe harbor to freeze suspect funds pending law enforcement review.
He also suggested that institutions should hold “the least amount of information that they need on an individual customer in order to make a decision” about illicit risk, warning that every new database is “a honeypot” for ransomware groups and state-sponsored hackers.
During the hearing, Cato Institute researcher Nicholas Anthony argued that the problem with the BSA was not inefficiency but surveillance itself, stating that “the history of financial surveillance has been a history of ever-moving goalposts” from tax enforcement to “fraud and immigration.” He presented options ranging from adjusting thresholds for inflation to repealing the BSA regime entirely.
John Court, general counsel at the Bank Policy Institute, supported reform rather than repeal, calling the Treasury’s proposed AML rule “a vast improvement” and advocating for higher reporting thresholds, simpler filings, risk-based oversight, and explicit approval for banks to use AI in transaction monitoring.
Atlantic Council Senior Fellow Carole House cautioned against significant cuts to the framework, noting that reducing the compliance burden should not come at the cost of “opening the door to adversaries seeking to harm Americans and U.S. national security interests.”
AI as a Point of Consensus
AI was a point of consensus among most witnesses. Davidson, Redbord, Carole House, and Court all supported the broader use of machine learning and AI in transaction monitoring. Redbord was particularly enthusiastic, telling lawmakers that “AI investigative tools can compress weeks of manual analysis into minutes” and calling for federal funding of AI-native investigative tools across various agencies.
The hearing occurred shortly after President Donald Trump signed an executive order directing regulators to strengthen customer due diligence and customer identification requirements under the BSA while expanding scrutiny around account ownership and financial risks associated with immigration enforcement. The order directs the Treasury to tighten BSA customer due diligence rules and flag risks tied to ITIN use, off-the-books wages, and foreign consular IDs, while also asking the CFPB to weigh potential deportation risks in lending decisions.
