Today, the House Financial Services Committee convened for a National Security Subcommittee hearing, chaired by Warren Davidson (OH-08), to address the growing concern of investment fraud in the United States. The focus of the hearing was to analyze investment fraud and evaluate the existing tools and practices used to detect financial scams.
Warren Davidson, the subcommittee chair, began the hearing with prepared remarks. He acknowledged the witnesses' participation and outlined the urgency of tackling investment fraud. Davidson highlighted the Federal Trade Commission's report from earlier this month that stated U.S. consumers lost an estimated $5.7 billion to investment scams in 2024. He stressed that fraud perpetrators increasingly exploit loopholes in financial regulations, targeting vulnerable citizens, particularly seniors.
Davidson emphasized the importance of the U.S. maintaining its reputation for having robust financial intelligence capabilities. He asserted that "Safety and soundness are essential to preserve our own financial well-being," noting America's significant role in global capital markets and the status of the USD as the world’s reserve currency.
The Bank Secrecy Act (BSA), enacted in 1970, was highlighted as the cornerstone in the fight against financial crimes, including anti-money laundering and counter-terrorism financing. Davidson remarked on the necessity of reassessing the tools and methods traditionally used under the BSA framework, considering technological advancements and evolving financial crimes.
The subcommittee also discussed the role of Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) filed by financial institutions and maintained by the Financial Crimes Enforcement Network (FinCEN). These reports aim to flag potentially illicit transactions, but Davidson questioned their efficiency. He pointed out that inflation had not been adjusted for the $10,000 CTR threshold set in 1970, making the current system burdensome without yielding proportionate benefits. A Government Accountability Office (GAO) report indicated that only 5.4% of CTRs filed were accessed by law enforcement between 2014-2023, suggesting potential inefficiencies.
Davidson also criticized the Corporate Transparency Act, which the Trump Administration had muted, for requiring business owners to divulge beneficial ownership, potentially infringing on constitutional rights.
Expressing hope for legislative action, Davidson mentioned the need for better education on investment scams and enhanced tools for law enforcement to counteract fraud. He concluded by expressing anticipation for the insights from the hearing, underscoring the committee's commitment to addressing investment fraud while respecting civil liberties.