Utah Senator Proposes Bill To Reform Financial Privacy

Senator Mike Lee of Utah has introduced the Saving Privacy Act, officially titled the bill to amend the Right to Financial Privacy Act of 1978 to preserve the confidentiality of certain records, and for other purposes, to roll back financial surveillance in the US banking system.

The Bill repeals the Bank Secrecy Act’s Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) requirements while maintaining record keeping requirements, repeals the Corporate Transparency Act, strengthens Fourth Amendment protections, bolstering warrant requirements in the Right to Financial Privacy Act of 1978, repeals the SEC’s Consolidated Audit Trail (CAT) database, and requires congressional approval for any new databases that collect personally identifiable information of U.S. citizens.

The Bill additionally prohibits the creation of a Central Bank Digital Currency, requires congressional authorization for financial regulations deemed major rules, institutes penalties for federal employees who illegally seek constitutionally protected financial information, and establishes a private right of action for US Americans and financial institutions harmed by illicit government activity.

"Did you know that the federal government is spying on Americans’ purchases, credit cards, and bank accounts, even if they are innocent of any crime?", writes Lee on X (formerly Twitter). "These actions are deeply unconstitutional, a violation of your 4th Amendment rights, and enable political persecution."

"Government surveillance efforts have been largely ineffective, as demonstrated by the dismal success rate of suspicious activity reports (SARs) submitted to the Financial Crimes Enforcement Network (FinCEN)," states Lee in a press release on the Bill's introduction. "In FY2023, financial institutions submitted 25.4 million SARs and currency transaction reports (CTRs), yet less than 0.3% of these reports resulted in relevant IRS-CI and FBI cases."

The Bill amends US Codification governing access to financial records to require a search warrant to access financial information. The proposed amendment reads: "no government authority may have access to or obtain copies of, or the information contained in the financial records of any customer from a financial institution unless the financial records are reasonably described and such financial records are disclosed in response to a search warrant."

The Bill proposes to strike ten sections of US Codification governing records and reports on monetary instruments transactions, namely the sections governing reports on domestic coins and currency transactions, records and reports on foreign financial agency transactions, reports on foreign currency transactions, reports on exporting and importing monetary instruments, search and forfeiture of monetary instruments, structuring transactions to evade reporting requirement prohibited, records of certain domestic transactions, reports relating to coins and currency received in nonfinancial trade or business, and beneficial ownership information reporting requirements.

The Bill repeals 13 subsections on exceptions of US Codification on the right to financial privacy which govern access to financial records through government agencies and amends the section with a subsection on access to financial records, which reads that "notwithsdanding any other provisions of this title, the Federal Government may not access the financial records or information of an individual in a manner that is prohibited by the Fourth Amendment to the Constitution of the United States with respect to the records in question."

The Bill terminates the SEC's Consolidated Audit Trail, a central database which allows the SEC to track all US market activity, and establishes that "no Federal agency may establish a consolidated audit trail, central repository, or other centralized database that collects personally identifiable information of citizens of the United States, unless a duly enacted law of the United States specifically provides the Federal agency with the authority to take that action."

The Bill introduces criminal penalties for financial privacy violations, reading that "any agency or department of the United States or financial institution knowingly obtaining or knowingly disclosing financial records or information contained therein in violation of this title shall be fined in any amount not exceeding $5,000, or imprisoned not more than 5 years, or both together with the costs of prosecution, and if such offense is commited by any officer or employee of the United States, the officer or employee shall, in addition to any other punishment, be dismissed from office or discharged from employment upon conviction of such offense."

For civil penalties, the Bill replaces paragraphs limiting liabilities to $100 regardless of the volume of records involved, actual damages, punitive damages and the cost of the action with increased liabilities of no less than $1,000 per violation by day, reasonable attorney's fees and litigation cost, and compensatory damages.

For CBDCs, the Bill proposes to amend the Federal Reserve Act with a text reading "no Federal reserve bank, the Board, the Secretary of Treasury, any other agency, or any entity directed to act on behalf of the Federal reserve bank, the Board, the Secretary, or other agency, may mint or issue a central bank digital currency directly to an individual [...] or a digital currency intermediary, offer related products or services directly to an individual, or maintain an account on behalf of an individual."

The Bill is cosponsored by Senator Rick Scott of Florida and has been referred to the Committee on Homeland Security and Governmental Affairs. In 2022, Lee introduced a Bill of the same name to adjust Bank Secrecy Act reporting requirements for inflation.

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