A US senator has introduced a new bill that seeks to abolish current legislation on suspicious activity reports (SARs).
At the end of last month, Senator Mike Lee (R-UT) introduced the Saving Privacy Act, which will “end government abuse of Americans’ financial information”.
The bill aims to reduce the US government’s ability to collect data on the financial lives of citizens and businesses.
Over the years, according to Lee, US government agencies have been granted excessive powers of financial surveillance over law-abiding citizens.
These agencies are now collecting “vast” amounts of personal financial data “without just cause”, he said, based on powers that exceed those permitted by the US Constitution.
“The federal government has no business surveilling the financial activities of millions of innocent Americans,” said Lee.
“The current system erodes the privacy rights of citizens, while doing little to effectively catch true financial criminals.”
Lee’s Saving Privacy Act seeks to overturn some of the key legislation on financial crime reporting that US banks and payments firms are currently subject to.
For example, the bill would repeal the suspicious activity report (SAR) and currency transaction report (CTR) obligations of the Bank Secrecy Act.
The recordkeeping provisions of the Bank Secrecy Act would be retained, but US government agencies could only ask for these records when in possession of a valid a search warrant.
In Lee’s view, both the SAR and CTR reporting requirements have “failed dismally” to prevent crime, but have offered the US government a “dragnet” on citizens’ financial lives.
The senator pointed to the low success rate of SARs and CTRs as evidence that these forms of reporting have been “largely ineffective”.
In FY 2023, nearly 300,000 financial institutions filed 25.4m SARs and CTRs, but less than 0.3 percent of these resulted in criminal investigations by either the FBI or the Internal Revenue Service (IRS).
‘Unconstitutional’ databases
The bill would also repeal the Corporate Transparency Act — a bipartisan piece of legislation that was adopted in 2021 but only came into effect in January this year.
In an effort to curb illicit finance, the Corporate Transparency Act imposes beneficial ownership reporting requirements on almost all companies that do business in the US.
If a company is in-scope, the individuals who own or ultimately control it are required to declare their identities to the US government.
Generally, reporting companies must provide the names, dates of birth, addresses and a valid government-issued ID number of each beneficial owner.
Existing companies must report to FinCEN by January 1, 2025, while newly created companies must report within 90 calendar days of registering themselves as a company.
Another database that Lee’s bill would scrap is the Consolidated Audit Trail of the US Securities and Exchange Commission (SEC).
In the SEC’s own words, the CAT allows the agency to “track all activity throughout the US markets” by investors in US securities.
According to Lee, the CAT can record “every single stock market transaction as well as the personally identifiable information of the 61 percent of Americans who own stock”.
“These examples shine a light on an Orwellian financial security state that provides little meaningful contribution to preventing crime while simultaneously eroding Americans’ constitutional rights,” he said.
Unlike the Corporate Transparency Act, the Consolidated Audit Trail was created through SEC rule-making with no Congressional oversight.
If passed, Lee’s bill would prevent US government agencies from establishing any new databases that collect personally identifiable information of US citizens without Congressional approval.
A subsequent section of the bill would prevent the Federal Reserve or any US government agency from issuing, maintaining or holding a central bank digital currency (CBDC).
A single article in the bill would add these provisions to the Federal Reserve Act of 1913.
This article would also prevent the US government from offering CBDC to individuals or businesses via intermediaries, such as commercial banks.
Chances of success
The Saving Privacy Act is backed by Senator Rick Scott (R-FL) as an original co-sponsor of the bill.
Scott previously served two terms as governor of Florida from 2011 until 2019, after which he was term-barred from the position.
He then ran for and was elected to the Senate, where he represents Florida alongside Senator Marco Rubio (R-FL).
The bill, which also counts Senators Cynthia Lummis (R-WY) and Mike Braun (R-IN) as original co-sponsors, has been read twice and referred to the Senate Committee on Finance.
With less than a month to go before the US presidential election on November 5, the bill is unlikely to be considered by Congress until 2025.
Moreover, its chances of success will depend on the distribution of House and Senate seats under the incoming administration.