Trump and the Future of Financial Surveillance
Some fear that Trump's administration will undermine the capacity of state agencies to fight financial crime. But the real risk is much worse.
What was the last thing you purchased? Perhaps it was a ticket to see the UFC’s Power Slap competition.1 Or maybe you ordered Crème Brûlée-flavored dog macaroons for your Miniature Poodle.2 Regardless, it would tell us something about you. My bank records, for example, would tell you that I regularly take a train to The Hague during rush hour — and therefore probably work there. And they would also tell you that I have an alarming propensity to overpay for tacos in Amsterdam. Each of these transactions is a data point, a clue about our lives. They can indicate where we like to go and what we like to do. And, when combined with other data points, they paint a picture — albeit incomplete — of who we really are.
The state is often interested in these data points. These records — bank transfers, cash withdrawals, credit card purchases — can help identify criminal networks and disrupt the financing of terrorist organizations. But states can’t see every transaction.3 Nor do they possess a behavioral profile of each citizen.4 Rather, they rely on the private sector to perform these tasks. States have obligated banks and other financial institutions to create a risk profile of each customer. Once a risk-rating is established, these firms then monitor customer transactions and, where necessary, submit reports of suspicious activity to regulators.
But what exactly is suspicious activity? The industry has come up with some standard answers. One example is structuring, in which criminals split up their transactions into smaller portions to circumvent reporting obligations. But banks do not rely solely on these generic indicators. They also consider the specific characteristics of each client — country of origin, occupation, industry type, news media hits — to piece together whether their transactions pose a risk of criminal activity.
This can get dicey. We have previously discussed that EU banks are legally obligated to treat certain customers as high-risk simply based on their nationality. What this means in practice is that banks will, all else equal, more closely monitor the activity of Haitians than Austrians.5 The same goes for Politically Exposed Persons, a category which includes not just politicians but also their children. PEPs have often complained of being treated like criminals. And, in some cases, they have alleged being denied banking services based on their political views.6
Is this all about to change? There is now a new PEP in charge: Donald Trump. And unlike previous campaigns, Trump’s 2024 platform featured explicit commitments to protect Americans’ financial privacy. Further, many of his most influential backers — Elon Musk, the cryptocurrency community, the Heritage Foundation — have espoused deep opposition to state surveillance. This has led to fears that Trump will knee-cap state agencies, undermining their capacity to combat money laundering and disrupt the financing of terrorist organizations.7
But these fears are misdirected. Trump is well-aware that financial surveillance is a powerful tool of economic coercion.8 And he is not about to sacrifice his capacity to use it — particularly when it may prove useful to achieving some of the Republican Party’s domestic objectives. Are you an undocumented immigrant sending money to your family in Mexico? Did you pay for an illegal abortion? Do you donate to pro-Palestinian groups? You can learn a lot about a person from their transactions. The real danger, therefore, is not so much that Trump softens regulations or undermines state agencies. It is, instead, that his administration repurposes the U.S. surveillance apparatus against whom they deem “suspicious.”
Dick’s Sporting Goods
This would not be the first time the U.S. government has been accused of politicizing Anti-Money Laundering (AML) controls. In March, a Republican-led House Committee alleged that, following the January 6th, 2021 attack on the U.S. capitol, state agencies “commandeered financial institutions” to spy on Conservatives:
Following January 6, the FBI shared an intelligence product titled “Domestic Violent Extremists Likely Emboldened in Aftermath of Capitol Breach,” prepared by the FBI, DHS [Department of Homeland Security] and the National Counterterrorism Center (NCTC), with financial institutions to alert them to individuals that may fit the profile of criminal and domestic violent extremists (DVEs).
…federal law enforcement suggested that banks filter Zelle payments using keywords like “MAGA” and “TRUMP”…FinCEN [the U.S. Treasury Department’s Financial Crimes Enforcement Network] also distributed materials to financial institutions instructing them on how to use Merchant Category Codes (MCCs) to search through transactions to detect potential criminals or “extremists.” These MCCs use keywords to comb through transactions, such as “small arms” purchases or recreational stores such as “Cabela’s,” “Bass Pro Shop,” and “Dick’s Sporting Goods.” Americans doing nothing other than shopping or exercising their Second Amendment rights [to bear arms] were being tracked by financial institutions and federal law enforcement.9
For non-American readers, Cabela’s, Bass Pro Shop, and (until recently) Dick’s Sporting Goods sell the types of weapons you need to hunt defenseless deer, like American-flag themed semi-automatic shotguns. These are perfectly legal purchases. And from the Republican-led Committee’s perspective, considering such purchases as indicators of extremism constitutes a “weaponization” of the Federal Government against those with Conservative views.10 Further, they contend that it represents a violation of Americans’ right to financial privacy.
You can quibble with the details. The Committee does not emphasize, for instance, that the key words used to search Zelle payments also included KAMALA, PELOSI, and SCHUMER.11 One might also point out that the AML departments of banks are in the business of identifying risk. Thus it is normal to consider various factors which, while not illegal in themselves, increases the risk that a client may be engaged in criminal activity. There is, for example, nothing illegal per se about filtering your ownership of a Libyan munitions factory through layers of shell companies in Panama. Nevertheless, it is reasonable to consider these as risk factors.
But let’s not miss the forest for the trees. What the report demonstrates is that the AML regime can absolutely be repurposed to target specific groups. One presentation slide, allegedly created by KeyCorp and circulated by FinCEN, shows how invasive this process can become (see below). Did you recently purchase a VPN? Did you buy an online video game? Do you have any medical expenses or other excessive debt that might be driving you to take desperate measures? You can, I repeat, tell a lot about a person from their transactions.
Trump ostensibly shares the Committee’s concerns. While on the campaign trail, he promised to protect Americans’ financial privacy by vetoing the creation of a Central Bank Digital Currency (CBDC).12 Trump’s 2024 platform also pledges to “end the weaponization of government against the American people.”13 These messages are consistent with those expressed by the Heritage Foundation. Their Project 2025 manifesto — which ironically requires your personal contact information to download — calls for rejecting CBDC and ending the “…weaponization against Americans whom the Left perceives as its political opponents.”14
Donald Trump: defender of privacy. Restrainer-in-chief. Someone we can count on to ensure that the U.S. surveillance apparatus remains an objective force, one dedicated to the pursuit of financial crime — and financial crime only. What a nice idea.
“The Enemy Within”
But the CBDC topic is a red herring. The U.S. government already possesses the capacity to directly surveil cryptocurrency trading.15 The IRS, FBI, and Immigration and Customs Enforcement (ICE) are some of the biggest customers of Chainalysis, the world’s leading provider of cryptocurrency surveillance solutions.16 ICE has also purchased forensic capabilities from Coinbase, allowing it to monitor transactions and make use of “Historical geo tracking data.”17
There are valid uses for this software. It can, for instance, help identify crypto wallets associated with drug cartels. But this will provide little comfort to privacy advocates concerned about the implications of a CBDC. And, as the Dick’s Sporting Goods Affair (as I like to call it) demonstrates, these systems are ripe for ‘weaponization.’ Forensic software could, for example, be used to identify immigrants — legal and illegal —- through their use of crypto to send money abroad.
This would be hugely invasive. Much like filtering transactions based on purchases of firearms, it would subject many innocent people to surveillance — a clear violation of Trump’s promises to protect the crypto community’s privacy. But should we expect Stephen Miller, chief architect of Trump’s immigration policy and apparent fan of White Nationalist literature, to hold back?18 I think not. The evidence suggests that neither Trump nor his allies are concerned about the weaponization of government per se. Rather, they simply wish to redirect its aims:
“I think what Trump should do if I was giving him one piece of advice: Fire every single midlevel bureaucrat, every civil servant in the administrative state, replace them with our people” - J.D. Vance on the Jack Murphy Live Podcast (2021)19
“I think the bigger problem is the enemy within…we have some very bad people, we have some sick people, some radical Left lunatics, and it should be very easily handled by, if necessary, the National Guard or, if really necessary, the military.” - Trump on Fox News (2024)20
“One thing I do is, any student that protests, I throw them out of the country. You know, there are a lot of foreign students. As soon as they hear that, they’re going to behave.” — Trump’s reported comments on pro-Palestinian protestors at a donor event in New York (2024)21
We can also look at prior actions. In 2016, for instance, Trump called for the targeted surveillance of Mosques and the reinstatement of a Bush-era database of immigrants from Muslim-majority countries.22 And in 2017 and early 2018, federal prosecutors subpoenaed Apple for the phone records of at least two Democrats on the House Intelligence Committee — and their family.23 The alleged aim of the probe, driven by Attorney General William Barr, was to investigate leaks. But one targeted Democrat, Adam Schiff, characterized it as a Trump-directed abuse of power: “the weaponization of law enforcement by a corrupt president.”24
Trump is not, in other words, averse to weaponizing the government when it suits his objectives. Nor is he opposed to surveillance. And this has important implications for the future of the administrative state. Namely, it implies that fears of its demise — at least in the security arena — are overblown. The risk is not that Trump dismantles the AML regime or undermines law enforcement capabilities. It is, instead, that he takes the opportunity to redefine what the state considers suspicious.
And what is suspicious activity anyway? We never arrived at an answer. The truth is that what we consider suspicious — and what we consider “weaponization” — is inherently political. Therefore, the better question is not what is suspicious but rather who gets to decide. And on this, America has made its choice.
The true ethos of the 2024 presidential election.
Reasonably priced at $23.99 for six.
There are some caveats. The U.S., for example, has reportedly acquired the capacity to surveil SWIFT’s global database of inter-bank messages. This provides an unprecedented view of cross-border transactions. But it is unclear what level of contextual information accompanies this data. Determinations of suspicion are often based not just on transactions but also contextual factors like a client’s source of wealth narrative, source of funds, countries of operation, the ownership structure of their companies, etc. Neither the U.S. nor SWIFT (to my knowledge) possesses direct access to the information — it generally must be subpoenaed. There are many other areas where these complications can be discussed, like the SEC’s access to securities and options data. And the situation is more complex when we think about other countries. The main point is that while the U.S. government has obtained remarkable surveillance powers, there are important limitations to what information they can observe without enlisting the assistance of private firms.
Though some states, like China, are moving in this direction. Western states do construct databases of information on their citizens. But this is generally not equivalent to the type of risk profiles created by financial institutions to identify financial crime.
To be more precise, nationalities of what the EU terms “High-risk Third Countries” will, all things equal, be more likely than others to be automatically rated high risk and thus subject to enhanced due diligence measures.
As Chris Miller recounts in Chip War, one former White House official, reflecting on the Trump administration’s use of blacklists to deny the export of strategic goods to Chinese companies, commented: “Weaponized interdependence…It’s a beautiful thing” (p. 319).
Committee on the Judiciary and the Select Subcommittee on the Weaponization of the Federal Government, FINANCIAL SURVEILLANCE IN THE UNITED STATES: HOW FEDERAL LAW ENFORCEMENT COMMANDEERED FINANCIAL INSTITUTIONS TO SPY ON AMERICANS.
Ibid.
Ibid, p. 23.
'This I Do For Vivek': Trump Pledges To Oppose Central Bank Digital Currency At Pre-Primary NH Rally.
For more background, I recommend Andy Greenberg’s fabulous book, Tracers in the Dark.
Katie Rogers and Jason DeParle, The White Nationalist Websites Cited by Stephen Miller.
Mike Bedigan, Trump told donors he’ll deport pro-Palestinian protesters.
Katie Benner, Nicholas Fandos, Michael S. Schmidt, and Adam Goldman, Hunting Leaks, Trump Officials Focused on Democrats in Congress.