Under the Trump administration, Washington has taken meaningful steps to reform the outdated policies that have contributed to politically motivated debanking. Under the guise of preventing financial crime, the Bank Secrecy Act (BSA) has resulted in excessive scrutiny, account closures, and other disruptions of lawful banking activities for customers while creating costly legal and compliance burdens for financial institutions.How did we get here? In the course of complying with their legal obligations under the BSA, financial institutions are often compelled to err on the side of caution when reviewing the activities of their clients. They do this because even inadvertent omissions in their mandated government reporting could result in penalties and exorbitant fines. This leads them to report on, or even close, client accounts they would otherwise be proud to service.
AMERICA’S DIGITAL BLIND SPOT: WHY THE CLARITY ACT IS A NATIONAL SECURITY IMPERATIVE
To be clear, financial institutions have long served as critical and responsible partners to law enforcement. The problem is that the federal government “deputized” banks with law enforcement responsibilities while simultaneously giving them vague guidance paired with the prospect of harsh penalties. This dynamic incentivizes institutions to overreport accounts out of an abundance of caution.
