Last week’s congressional hearing with the Financial Crimes Enforcement Network (FinCEN) showed that there is much work to be done to improve the oversight of the agency and the anti‐money laundering (AML) regime in general. One problem that came up is how FinCEN and the AML regime rely on “deputizing” banks as law enforcement agents.

Currently, banks and other financial institutions are required to investigate and file reports to the government whenever a customer’s financial activity is deemed suspicious or crosses any number of minimum thresholds. Understanding the depths of these compliance requirements is no easy task: an entire industry of certification programs, courses, and consultants has been constructed around assisting the government from within the financial sector. Even so, many financial institutions still fall short. As Norbert Michel and Jennifer Schulp pointed out in their new working paper, FinCEN recently fined the Community Bank of Texas $8 million for having––in the agency’s view––an understaffed compliance program.