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Comment by Hermel | Hacker News Reader

Even according to the IRS's own estimates, laws like Fatca would never pass a cost/benefit test. The implementation costs of such bureaucratic monstrosities is in the range of hundreds of billions, whereas the benefit is a few orders of magnitude lower. The established banks do not complain much about it because the high fixed cost of compliance disproportionally affects small firms, thereby protecting them from being disrupted by innovative startups.

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So I know next to nothing about these regulations but what do you mean by "cost/benefit" exactly? Surely if these rules are meant to fight (directly or indirectly) organized crime then you can't just judge them on the amount of money saved? If you spend $10 millions to prevent $1 million to reach a terrorist organization, can't you consider it money well spent?

FATCA is about making non-US financial institutions report to the IRS et al about holdings of US citizens abroad. Worrying about terrorist cells in foreign countries made up of U.S. citizens is absurd.

FATCA is the stick used to dissuade tax evasion by US citizens. If people think they can evade taxes successfully, they will. Whether this impacts Bitcoin or other crypto is inconsequential.

if the terrorist organization is able to fund itself, then no, 10 to 1 is not money well spent. You'll lose in the long run.

Exactly. If we want to do a true benefit calculation, we have to look at alternate futures.

One important future to avert is where organized crime is rampant. Even if we look at only the economic costs, one study in Italy suggests mafia domination cost 16% of per-capita GDP. Given the US's $20 trillion GDP, that's quite a lot. And that's ignoring people's preference for security and safety. As an entrepreneur, for example, I think it's great that I don't have to worry about paying for "protection" to keep from having my business burned down or my legs broken.

We also have to look at terrorism. KYC/AML work to keep cash out of the hands of terrorists. Terrorism is, moral and human cost aside, very expensive. The 9/11 incident alone sees estimates in the $2-3 trillion range for total economic costs.

So even if KYC/AML really does cost hundreds of billions, which I doubt, it's a bargain compared to the problems it's meant to prevent.

[1] https://onlinelibrary.wiley.com/doi/abs/10.1111/ecoj.12235

[2] E.g., see https://www.brookings.edu/articles/the-world-after-911-part-... and https://archive.nytimes.com/www.nytimes.com/interactive/2011...

> One important future to avert is where organized crime is rampant... one study in Italy suggests mafia domination cost 16% of per-capita GDP. Given the US's $20 trillion GDP, that's quite a lot.

You’re making two separate, tenuous extrapolations here. Can you justify them?

I probably can. Did you want to ask some specific question? Better, do you you have a way of calculating path-not-taken costs for rampant organized crime that you think might be more effective?

I didn't see any calculation in the parent comment.

Are you asking me to do some sort of calculation? If so, could you spell out what and why?

The point of my original comment was to point out a couple of things we'd have to include in a cost/benefit analysis of KYC/AML regulation, not to actually do a proper analysis, which I would expect to run to hundreds of carefully researched pages.

Maybe I misread your comment. What did you mean by "Given the US's $20 trillion GDP, that's quite a lot"? What is "that" in this sentence referring to?

That "that" refers to the implied product of 16% times $20 trillion. It's meant to provide an order-of-magnitude notion of what rampant organized crime could cost an economy, so that people who had previously read "costs of such bureaucratic monstrosities is in the range of hundreds of billions, whereas the benefit is a few orders of magnitude lower" could more usefully think about what the benefits of crime reduction really are.

Exactly. You have provided no reason at all to think that repealing KYC laws (which were introduced by the Patriot Act in the 2000s) would transform the US into Italy, which is frankly just silly.

It also flatly contradicts the fact that the US didn’t lose 16% of its GDP to mafia activity before KYC laws were introduced.

Let's try this again: What makes you believe that repealing KYC laws (which were introduced by the Patriot Act in the 2000s) would lead to the same conditions as Italy? And how is this consistent with the fact that the US didn’t lose 16% of its GDP to mafia activity before such laws were introduced?

My American relative that was born in the USA and lived there for about 6 weeks finally did their US tax returns a few years ago.

No tax owing and received some hundreds of dollars in refunds from the IRS.

They even corrected a mistake resulting in an even larger refund (forgot to apply for some program).

All because of increasingly draconious laws for non-filers that conveniently ignore that most Americans abroad aren’t millionaires.

Cost: hundreds of US$, data entry and processing.

Benefit to US: ?????

He meant cost bebefit to organizations to implement it. Take HSBC for example, one of largest China/HK bank. They waited until Fatca kicks in, then realized it will be too complicated and expensive to implement, so what do they do? Within 45 days they kick out all us-citizen based accounts off their grid. All gone. Thats how foreign banks “comply” with Fatca. Arguably some politicians say it was actually mean to work this way so us citizens behave nice and just keep their freaking money in us banks. I know of 3 friends who had to sold their hong kong based business because noone there would open them banking account anymore so here it is american politicans screwing over american citizens having business on a foreign land.

Do you have a source for your hundreds of billions (hundreds of billions what?). Compliance costs are usually baked in personnel and IT costs.

KYC compliance: A form and proof of identity.

Actually it goes a bit further than that.

It means to determine the actual beneficiery of a bank account in addition to traceability of the funds used.

The bloke showing id may not be the actual owner of the funds and it's up to the bank to determine this.

FATCA has nothing to do with KYC / AML provisions.

It involves, simplified, reporting requirements of US account holders by foreign banks to the US authorities. It's main purpose is to avoid tax dodging by US persons.

I'm not arguing that it's a great law, since it's not. For example: it can make it extremely hard for US persons living abroad to open a bank account because foreign banks just don't want to bother with those onnerous reporting requirements.

It has nothing, whatsoever, to do with KYC / AML provisions, which are very rightfully imposed on financial instituions. And yes, I work for one.

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