Recent lobbying from large US banks has ignited a heated public debate over an unlikely flashpoint: anti-money laundering reporting thresholds.
Michael Joseph, Product SME North America at Napier AI, recently detailed why AML thresholds won’t stop financial crime, and provided a description of what will.
Under current regulations, banks must file Currency Transaction Reports (CTRs) for any cash transaction exceeding $10,000. Major banks are now pushing to raise this CTR threshold to as much as $100,000, arguing that the current requirement creates overwhelming paperwork and administrative burden with little demonstrable benefit in catching financial criminals.
What are the origins of a half century-old rule?
The $10,000 currency transaction reporting threshold has a long history, dating back to 1970 when the Bank Secrecy Act was enacted under President Nixon. This threshold was set as a practical compromise between financial privacy and crime prevention – set high enough that most everyday citizens would not have their transactions reported, yet low enough to catch criminals attempting to move large sums of cash.
What’s remarkable is that this threshold has remained unchanged for over five decades. Had it been adjusted for inflation; today’s equivalent would be approximately between $68,000 and $75,000. A transaction of $10,000 in 1970 had the purchasing power of what would require nearly seven times that amount today – a number that’s held still while the world hasn’t.
Why are banks pushing to change the rule?
The current push to raise the threshold is part of a broader wave of deregulation enthusiasm. With a new administration emphasizing regulatory relief, banking institutions see an opportunity to reduce what they characterize as burdensome and ineffective compliance requirements.
Acting head of the Office of the Comptroller of the Currency, Rodney Hood, has publicly endorsed the idea, describing the current limit as “outdated and burdensome.” Banks are lobbying for thresholds of $75,000 or even $100,000, seeking what could amount to some of the most significant financial deregulation in recent memory – and perhaps a lighter load for the filing cabinets.
The compliance paradox
However, the debate misses a fundamental reality. Sophisticated financial criminals have long since adapted to threshold-based detection systems.
As many compliance professionals are keenly aware, financial criminals don’t neatly bundle their dirty money into tidy $10,000 increments just to make things easy for compliance departments. They structure transactions specifically to avoid detection thresholds, breaking larger sums into smaller amounts or using complex networks of transactions that individually fall below reporting requirements. This practice, known as “structuring”, has been a well-known technique for decades.
The more pressing concern isn’t where to place the line, but whether a line-drawing approach still holds up – and it’s looking shaky.
Here lies the paradox at the heart of current AML practices: institutions only adhering to threshold requirements satisfy regulatory demands, but fail to stop financial crime.
The path forward beyond binary thresholds
True risk-based compliance focuses on understanding customer behavior in context. Instead of asking “Did this transaction exceed $10,000?”, they’re asking “Is this pattern consistent with this customer’s profile and risk level?”
If now is the time to change regulations for the better, financial institutions should resist the temptation to focus narrowly on threshold adjustments. Instead, they should embrace a more fundamental shift towards truly compliance-first approaches that can adapt to evolving threats.
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