SEC Commissioner Calls for Review of Personal Data Collection in KYC/AML Procedures

SEC Commissioner Hester M. Peirce has called for a review of the way financial institutions collect and store personal information as part of Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) procedures. In a speech at the 2026 SIFMA Digital Assets Conference in New York, Peirce stated that the current system relies on collecting vast amounts of personal data to identify potential money launderers or other illicit actors. This approach is like searching for needles in a haystack, where the haystack grows exponentially larger as more data is collected. Peirce argued that this method has become outdated and inefficient, with significant costs associated with monitoring and reporting suspicious activity. Furthermore, there is a risk of personal data being hacked or leaked, which could compromise sensitive information and even lead to unintended misuse by authorities. Instead, Peirce suggested exploring alternative approaches, such as using zero-knowledge proofs and attribute-based credentials, which would allow individuals to prove their identity without revealing sensitive information. These technologies are already in development, but regulatory frameworks need to be updated to enable their adoption. By doing so, financial institutions could reduce the burden of collecting and storing personal data while maintaining robust KYC and AML controls.