The blockchain intelligence firm TRM Labs told Congress this week that the Bank Secrecy Act, a law written decades before artificial intelligence reshaped finance, is no longer fit for purpose. In a formal warning to lawmakers, the company said the current regulatory framework leaves investors exposed as criminals use AI to automate money laundering, hide transactions and evade detection at machine speed. TRM Labs is urging a tech-driven overhaul of the rules to keep compliance tools as fast and flexible as the threats they're meant to stop.
Why the Bank Secrecy Act falls short
The Bank Secrecy Act (BSA) dates to 1970, long before digital currencies and machine learning existed. It requires financial institutions to keep records and file reports on suspicious activity, but TRM Labs argues the law's manual, paper-based approach can't handle the volume or velocity of AI-generated transactions. Criminals now use algorithms to test anti-money-laundering systems, split funds into tiny pieces, and mimic legitimate trading patterns — all in seconds. The BSA, designed for a world of checks and paper trails, has no mechanism to detect or respond to that kind of activity in real time.
TRM Labs emphasized that the gap is not just technical but structural. The law treats each institution in isolation, while AI-powered crime networks operate across borders and platforms simultaneously. By the time a bank files a suspicious activity report, the money has often already moved through several jurisdictions and been converted into untraceable assets.
What a tech-driven overhaul would mean
TRM Labs did not propose a specific bill, but it urged Congress to rewrite the BSA with technology at the center. That would mean replacing static reporting thresholds with dynamic risk-scoring models, mandating real-time transaction monitoring systems, and requiring firms to share threat data instantly through secure, AI-readable channels. The company argues that regulators themselves need to adopt machine-learning tools to spot patterns across thousands of institutions — something human analysts can't do at the speed AI criminals operate.
The firm also stressed that such an overhaul would not just protect investors. It would also make compliance cheaper and more effective for banks and fintechs, many of which now spend millions on manual reviews that catch only a fraction of the suspicious activity.
What Congress heard — and what comes next
TRM Labs delivered its warning as part of a broader congressional hearing on financial crime and emerging technology. Lawmakers asked about the feasibility of updating the BSA without imposing new burdens on small banks. TRM Labs responded that a tech-driven system could actually reduce compliance costs by automating the most labor-intensive parts of the reporting process.
No legislation has been introduced yet. The hearing is one of several this year examining how financial regulators should adapt to AI. TRM Labs' testimony puts a concrete proposal on the table: stop patching the old law and build a new regulatory architecture designed for machine-speed finance. Whether Congress takes that advice — and how quickly — will determine whether the BSA survives as a paper relic or gets a digital future.
