Terrorism is an issue I know, and its return through Hamas’s barbarous attack on Israelis is most unwelcome. So I’m not happy to report on a hearing in the Senate Banking, Housing, and Urban Affairs Committee this past week. The hearing, “ Combating the Networks of Illicit Finance and Terrorism ,” coincided with reading an astounding paper on combating illicit finance generally. The dream might be that a political body would not react autonomically to terrorism. But not all dreams come true. More financial surveillance, especially aimed at cryptocurrency, would be counterproductive.

Coediting a book on terrorism educated me about terrorism’s strategic logic. Here’s a dollop: The weakest geopolitical actors use terrorism to induce their opponents into wasting blood and treasure, weakening themselves, and undercutting their own moral authority. Politics being zero-sum, tricking an enemy into mistakes is a gain. The lesson? Don’t do things that aren’t clearly effective.

Israel’s delayed invasion of Gaza has run contrary to the terrorism script. Such judiciousness will have long-term benefits for Israel’s fullest security. But when the Senate Banking, Housing, and Urban Affairs Committee got together , little circumspection was on display. Atrocities intended to make the blood boil have indeed boiled the blood of elected officials, and the tone of opening statements angled toward doing anything to stop Hamas and other terrorist groups. But “anything goes” is how terrorism does its work. The subtle, essential alternative is to do what you can to thwart terrorists—and nothing more.

The Wall Street Journal helped put cryptocurrency in the committee’s sights, reporting just three days after the October 7 attack that Hamas raised $130 million in crypto. But the blockchain analytics firm on which the Journal relied debunked the claim : “There is no evidence to suggest that crypto fundraising has raised anything close to this amount, and data provided by Elliptic and others has been misinterpreted.” The firm reported contacting Sen. Elizabeth Warren’s (D-MA) office to say so.

The witness statements at the congressional hearing shed light on the real sources of funds for Hamas and other Iranian-backed terror groups. AEI’s own Danielle Pletka emphasized the recent release of $6 billion to Hamas’s patron, Iran. Oil sales are a massive source of funds for Iran that have recently increased. Both the US and Israel have provided aid and other payments to Gazans while Hamas has had the power to tax and extort money in Gaza. Funds come to Hamas in far greater amounts through conventional finance. The hearing opened as an educational look at an important issue. Cryptocurrency is something to watch, but blockchain transparency makes illicit funding difficult.

The latecomers to the hearing changed things. Sens. Warren, Raphael Warnock (D-GA), and John Fetterman (D-PA) asked canned and sometimes clueless questions about cryptocurrency, to mild pushback from witnesses showing that crypto was not particularly significant. It has been a long time since I expected dignity in congressional hearings, but I was briefly annoyed by the insult to victims of terror in the senators’ shunting aside the real issues in favor of their pet anti-crypto legislative projects.

But here’s the unhappy coincidence. In a well-placed broadside against laws requiring financial services providers to monitor their customers on behalf of governments, I recently found an article that really has the receipts. In “ Anti-Money Laundering: The World’s Least Effective Policy Experiment? Together, We Can Fix It ,” Ronald F. Pol points out that financial surveillance policy lacks any metric of success. Using criminal asset forfeiture as a proxy for harm reduction, the paper finds a probable “success” rate of between 0.09 and 0.16 percent. Global authorities may have confiscated between just $2.7 and $4.5 billion of the $2.9 trillion in illicit funds generated in 2017.

Compliance costs are vastly greater than the funds confiscated. They may range from $304 billion to $1.28 trillion—and that’s only private sector costs, not the costs borne by taxpayers for financial surveillance agencies. That estimate also doesn’t capture the nonmonetary cost of lost privacy or risks to individuals and democracies from having masses of private financial information in the hands of corporations and governments.

It gets worse. If, as shown in a New Zealand study, conventional law enforcement methods do 80% of the work and anti-money-laundering policy does the other 20, the global success rate of financial surveillance policy might be about 0.05%, or 1/20th of 1%.

In short, financial surveillance policy is a net loser. We make ourselves worse off by doing it. Following the strategic logic of terrorism to a tee, many on the Senate Banking, Housing, and Urban Affairs Committee want more of it.

This article originally appeared in the AEIdeas blog and is reprinted with kind permission from the American Enterprise Institute.