How Unadjusted Currency Transaction Reporting Leads to Invasion of Privacy and More Compliance costs

Cato Institute | Nicholas Anthony | Jun 10, 2022

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.

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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 above).

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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.

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.

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