Part of a recent speech delivered by Under Secretary for Terrorism and Financial Intelligence John K. Hurley at the Association of Certified Anti-Money Laundering Specialists (ACAMS) Assembly Conference put a spotlight on FinCEN’s drive to modernize the Bank Secrecy Act (BSA) and its central role in shaping the future of Suspicious Activity Reports (SARs). His remarks underscored that the BSA, the backbone of U.S. anti-money laundering laws, requires urgent reform to remain effective in the face of evolving financial crime risks and to make SARs a sharper intelligence tool for law enforcement. This once-in-a-generation opportunity to update the system, led in part by FinCEN’s modernization agenda, has the potential to reduce waste, improve outcomes, and align compliance with real national security needs. The speech also captured the frustration of compliance professionals and the promise of reform: to move away from outdated processes and toward intelligence-led reporting that actually helps disrupt criminal enterprises.
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BSA modernization and its implications for SARs
The Bank Secrecy Act was enacted in 1970, making it one of the earliest and most significant pieces of financial crime legislation in the United States. At the time, the focus was on requiring banks to maintain certain records and report large cash transactions that could indicate money laundering or tax evasion. Over the decades, the BSA expanded to cover a wide range of entities and reporting requirements, particularly through the introduction of Suspicious Activity Reports in the 1990s. SARs became mandatory for banks and other covered institutions, creating a channel for law enforcement to receive critical information about potential criminal activity.
Today, SARs and Currency Transaction Reports (CTRs) are the primary reporting tools under the BSA. Financial institutions file millions of SARs annually, covering everything from structuring and fraud to cybercrime and sanctions evasion. However, sheer volume has become a major weakness. Compliance officers, wary of regulatory scrutiny, often file SARs defensively. This results in reports of marginal value that consume resources without advancing law enforcement objectives. Instead of acting as targeted intelligence, SARs risk becoming a compliance exercise detached from practical outcomes.
The modernization push aims to correct this imbalance. As Hurley emphasized, the ultimate “customers” of the AML system are law enforcement and national security agencies, not the regulators themselves. That means the reporting regime should produce fewer but more useful SARs. Modernization therefore seeks to streamline reporting thresholds, remove duplicative requirements, and provide clearer guidance on what is valuable. The vision is a system where regulators judge institutions on the quality of intelligence delivered, not simply on the volume of paperwork produced.
An important part of this shift involves reforming examinations. For too long, examiners have evaluated programs on subjective interpretations of process. Modernization aims to replace those subjective metrics with objective measures tied directly to outcomes. This creates space for institutions to innovate in how they identify and report suspicious activity, using their expertise and technology without fear of being penalized for departing from rigid templates.
Technology and innovation in the SAR reporting process
Technology is emerging as the driving force behind BSA modernization. Financial crime has evolved in complexity, with illicit actors exploiting global payment systems, cryptocurrencies, and sophisticated layering schemes. Traditional monitoring methods, reliant on static rules and manual review, are increasingly inadequate. Artificial intelligence, machine learning, blockchain analytics, and digital identity solutions offer a way forward.
AI-powered transaction monitoring systems, for example, can drastically reduce false positives by learning from historical SAR patterns and refining detection criteria. Instead of generating thousands of irrelevant alerts, these systems can prioritize cases with a higher probability of criminal conduct. This saves time and ensures compliance officers focus on the riskiest activity. Blockchain analytics tools, meanwhile, provide transparency into cryptocurrency movements, allowing institutions to detect typologies like mixers or cross-chain laundering that evade older monitoring systems.
Digital identity is another area where modernization intersects with technology. Financial institutions increasingly rely on biometric verification, digital IDs, and third-party data sources to confirm customer identities. This not only strengthens onboarding processes but also creates a more accurate foundation for ongoing monitoring and SAR decision-making. Hurley highlighted how even simple regulatory adjustments, such as allowing banks to obtain taxpayer identification numbers from third-party sources, can align rules with technological advances and reduce unnecessary burden.
Innovation must also be supported by regulatory flexibility. Compliance officers often fear that introducing new technology may expose them to examiner criticism if the approach differs from traditional methods. Modernization requires regulators to signal clearly that innovation, when effective, will be encouraged rather than punished. Financial institutions that lower false positives, escalate useful reports faster, and close intelligence gaps should be recognized for advancing the AML mission.
The modernization agenda also envisions stronger collaboration between institutions and law enforcement. Technology can facilitate near real-time sharing of intelligence, reducing the lag between detection and response. APIs and secure data platforms could allow for more efficient exchange of SAR information, making the reporting system both faster and more responsive to threats.
Reducing burdens while improving outcomes
One of the clearest themes of Hurley’s speech was the need to reduce burdens that consume compliance resources without generating meaningful results. Continuing activity reviews are a prime example. Under existing expectations, financial institutions may be required to review and file follow-up SARs on accounts that have previously been reported, even when there is no new evidence of suspicious activity. This repetitive exercise consumes massive amounts of time and money while offering little value to investigators. Reformers argue that such reviews should be limited or eliminated unless genuinely necessary.
Another issue is the pressure to document every single decision not to file a SAR. While prudent documentation can help institutions defend their judgments, examiners often treat the absence of such records as a deficiency. As a result, compliance officers spend disproportionate time justifying why they did not file, instead of investigating genuine red flags. Modernization would recalibrate expectations so that examiners assess the effectiveness of overall programs rather than scrutinizing individual SAR decisions in isolation.
The burden of reporting structuring activity in accounts known to be legitimate is another concern. Defensive filings often lead to an oversupply of reports about perfectly lawful businesses, generating noise instead of insight. Worse, banks sometimes “de-risk” by terminating relationships with clients deemed too costly to monitor. This practice undermines financial inclusion and pushes some customers toward less transparent channels. By modernizing reporting requirements, regulators can help prevent unnecessary debanking while ensuring that resources are focused on higher-value risks.
Reducing unnecessary burdens is not simply about efficiency—it is also about fairness and effectiveness. Every hour spent producing low-value filings or documenting non-filings is an hour not spent protecting the financial system. By modernizing rules and expectations, institutions can redeploy resources to strengthen detection, refine reporting, and support law enforcement priorities.
Toward an outcomes-based AML system
The ultimate goal of BSA modernization is to create an outcomes-based system. This means regulators and institutions alike will measure success not by process adherence but by how well the system produces actionable intelligence for law enforcement and national security. To achieve this, clear and objective performance indicators must be developed. These could include metrics such as the proportion of SARs leading to law enforcement action, the timeliness of filings relative to detection, and the system’s ability to identify activity linked to known typologies.
Outcomes-based supervision also requires aligning incentives. Compliance budgets are limited, and modernization must ensure that any cost savings from streamlined processes are reinvested into enhancing reporting quality. Regulators can encourage boards and CEOs to view compliance not as a drain but as a strategic safeguard for the institution. Reputational damage, fines, and regulatory sanctions from AML failures pose real risks, making strong compliance both a legal and financial imperative.
Modernization also acknowledges that criminals adapt quickly. Typologies evolve, methods shift, and vulnerabilities appear in new corners of the financial system. By focusing on outcomes, regulators can create a flexible framework that adapts to these changes without locking institutions into outdated approaches. This flexibility also allows institutions to use their creativity and expertise to build better solutions rather than simply complying with prescriptive checklists.
Hurley’s speech captured both the urgency and the opportunity of this moment. The BSA has served as a foundation for AML efforts for over 50 years, but its framework must evolve to meet today’s challenges. By embracing modernization, policymakers can reduce waste, harness technology, and refocus compliance on what matters most: protecting the integrity of the financial system and supporting law enforcement in combating financial crime.
Related Links
- U.S. Department of the Treasury – Financial Crimes Enforcement Network (FinCEN)
- Office of the Comptroller of the Currency – BSA/AML Information
- Federal Deposit Insurance Corporation – Bank Secrecy Act/Anti-Money Laundering
- Board of Governors of the Federal Reserve System – BSA/AML Supervision
- U.S. Government Accountability Office – BSA/AML Reports
Other FinCrime Central News About FinCEN Statements and Actions
- FinCEN’s 2025 Agenda Blends BSA Modernization, Beneficial Ownership and Digital Assets
- FinCEN’s Guidance on Cross-Border Sharing Strengthens Money Laundering Defenses
- FinCEN Provides 2025 Updates to Beneficial Ownership Reporting Deadlines
Source: U.S. Treasury
Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.
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