Hacker News Reader

I hate banks as much as anyone but... The concept of "money laundering" is a fabricated offense that shouldn't even exist. It basically shifts the duties of law enforcement onto private businesses and individuals. The expectation for bankers or real estate agents to uncover criminals when the police struggle to do so is unreasonable and doesn't make sense. Sure they should cooperate with police investigations but they shouldn't be leading them. Additionally, private businesses are not subject to the same legal principles such as the presumption of innocence and due process, leading to countless individuals being denied access to basic banking services based on perceived risk[0]. To top it off, those laws are ineffective and very costly to implement[1].

[0] There is an estimated 1,400,000,000 unbanked people worldwide (a good chunk of which are denied access on the basis of risk and/or lack of satisfying identification).

[1] https://www.cato.org/blog/money-laundering-laws-ineffective-...

I don't think you answered the question. If I facilitate a drug cartel moving kilograms of cocaine, I'll be in jail until I'm very old. If a bank knowingly facilitates the same outcome through different means, why doesn't anyone at the bank face the same charges?

What you're saying is that even though money laundering is necessary for drug cartel operations, it shouldn't be a crime (or should be a much lesser crime). So if I carry the drugs across state lines, even if I put in the same abstract amount of effort to completing a drug trade as the folks at the bank laundering money, my crime is worse?

There is the obvious argument that neither of these should be real crimes. But the fact remains that today in the world that exists, one group of people that facilitate drug cartel operations are punished much more harshly than another group. The disparity in punishment is what the parent comment is remarking on.

You bring up a fascinating aspect of money which I like to contemplate about often.

Money is the pure abstraction in the sense that it hides just about everything that brought it into existence. If I look at two $100 bills they are exactly the same; theoretically and practically. And yet they couldn't possibly be similar, they could have originated in crimes, be parts of legitimate businesses, so on and so forth. But they still continue to exist as pure abstraction. One could get into all sorts of philosophical rabbit holes.

What sorts of arguments would have had at the cusp of using coins?

I think you'd find David Graeber's book Debt very interesting. There are a bunch of common assumptions about how money came into existence that simply aren't what happened based on the archeological record.

Coinage came a lot later than basic debt ledgers, and it was largely an organizational hack by rulers to feed and house their armies. They'd mint coins with their face as seal or whatever, and would issue these to the soldiers as payment, while also requiring all citizens to pay a tax in those same coins. Suddenly everyone is figuring out how to give the soldiers what they want without you having to organize any of it directly.

You didn't mention it explicitly so just in case you didn't know, what you are describing is called fungibility[0] and is indeed an important property of money.

[0] https://en.wikipedia.org/wiki/Fungibility

It is complicated, for many reasons. A very important one is that responsibility is very diluted.

- A bank executive opens an account to a seemingly legit company.

- The compliance department OKs the account opening.

- A bank teller receives 50k USD in cash every month.

- Another teller receives another 50k USD in cash every month.

- The head of the branch doesn't report strange activity.

- The AML system by the bank don't detect anything strange.

...

Every one of those steps, and many more, are needed for this kind of operation. Who do you send to prison? Do you make the CEO responsible even though she probably had no idea that this was going on? Or do you send the bank teller to prison, who was just doing her job, and maybe even threatened by the cartels?

Even if the branch manager was getting paid by the cartels in order to not file AML reports, the payments were definitely happening in cash, so the conviction would have to be made based on eye-witnesses rather than an actual paper trail (good luck with that).

Another important thing is that if you look at the report, they blame HSBC for failing to properly monitor the transactions, framing the institution more as a victim than an accomplice of the cartels. So in reality, it's the cartels doing the money laundering, the bank is just a gear in the whole system.

Then by that logic, the drug runner should not be jailed either, as they too are a victim rather than an accomplice. May be they too are being threatened by the cartel to cooperate, and so on.

Taken far enough, you really can't penalize anyone and things like sanctions don't work and have no teeth.

I think awareness, agency, and intent are also factors here.

In your and the OPs examples:

- CEO should have a large amount of agency and awareness of the situation, meaning they should be on the hook for severe negligence at the least. If intent can be proven, that should definitely result in criminal charges.

- A bank teller might have awareness if they personally handle suspiciously large transactions per month, but the amount of agency they have in the situation is low. They can either report it up their chain of command, do nothing, or work elsewhere. You might be able to demonstrate intent here if it’s the same teller and they don’t raise any alarms, but that’s also assuming nobody has valid reasons for regular 50k deposits and that the teller doesn’t fear for their job or wellbeing.

- Drug runner is a tricky one—how much agency do they have? Are they under duress? They likely intend to run drugs unless they’re in the know about their cargo. As other commenters posted, there’s also no official way to dilute responsibility here as the organization running drugs isn’t beholden to our legal system, so our theoretical drug runner is the only person available to punish.

It’s an interesting thought experiment. I’d like to hear thoughts on how folks think stuff like this should be prosecuted — what outcomes do we want to promote and what actions would promote those outcomes?

"Money laundering" and "drug smuggling" are two completely different things that can't be reasonably compared. A better analogy here would be shipping companies or taxi drivers being caught unknowingly transporting drugs. I'm pretty sure the USPS does that every day and I don't think any of their execs go to prison over that. Same for bus, taxi or airline companies. In the online world, the DMCA explicitly ensures that web hosts and platform operators are not on the hook for unknowingly hosting illegal content.

> Taken far enough, you really can't penalize anyone and things like sanctions don't work and have no teeth.

You're getting somewhere, actually. Crimes generally don't happen in a vacuum. In most crimes, the society around the perpetrator is complicit. Most people aren't born compelled to become delinquents. They're often driven by unfortunate circumstances and ignorance, situations that society shares part of the blame too. The criminal law just chooses the most unfortunate person as the "protagonist" to punish.

There are certainly "evil" people, but they're far less than the criminal law seeks to convict.

Do you make the CEO responsible even though she probably had no idea that this was going on?

You send the CEO to prison because they're responsible for what happens under them. CEOs always say they get paid so much because they're the ones bearing ultimate responsibility, so off to jail you go.

The first person who went to prison for the VW emissions scandal was the engineer.

As it should be. The hands that physically commit the crime (or the code) are usually the dirtiest.

Ah, yes, giving management that sweet plausible deniability.

Just create an impossible demand on your workers and then act surprised when they employ unethical practices to meet those demands. Just like Wells Fargo.

https://en.m.wikipedia.org/wiki/Wells_Fargo_cross-selling_sc...

That isn’t what I said. I said that the person who commits the crime should be the first one to go to jail. That implies others should follow.

Often times, the crime that's committed is because the boss told them to do it, then threatened the engineer when they initially said No.

Yes well that’s how a lot of crime happens. We don’t avoid prosecuting a triggerman, carjacker, or bank robber just because they got the order and were threatened for not complying. Even the Eichmanns that were just following orders went to Nuremberg.

> We don’t avoid prosecuting a triggerman, carjacker, or bank robber

Well we do give them massively commuted sentences for cooperating

But we still require them to cooperate and take responsibility instead of what most software engineers try to do which is blame management (like the prior poster I was replying to).

The fish rots from the head down.

That's completely unreasonable. The probability of any Fortune 500 CEO going to prison would basically be 100%. Should the US president go to prison whenever a government employee commits a crime as well?

The President isn't the CEO of America, Inc., and American government isn't a monolithic organization.

However, yes, if sufficiently illegal activities were going on within the President's cabinet, then yes, send the President to prison.

As for any Fortune 500 CEO going to prison, well, that risk would certainly incentivize the pursuit of good behavior from the top down, wouldn't it?

At some point it just makes the entire system untenable. Do you think, in such a world, you would ever hire anyone that you didn’t trust with your life?

In fact, you probably wouldn’t even hire anyone that wasn’t related to you.

Next time your bank account gets closed or an important payment gets held because the bank thinks there is something potentially dodgy, you will reflect on your comments about bankers going to jail if some drug dealer ever manages to get a payment through the banking system. Laundered money doesn't come with a "drug money" sticker, usually it comes from a business that is designed to look legit.

> Why aren't bankers who launder billions for drug cartels given the kind of multi-decade federal prison sentences

You mean like these 35 guys who went to prison? Including one who went for 23 years?

[1] https://money.cnn.com/2016/04/28/news/companies/bankers-pris...

This CNN article is about recovery fund fraud, not money laundering, and more importantly it highlights that only middle to small bank executives, and only lower level executives at too-big-to-fail banks, were punished.

Banking has achieved de facto regulatory capture. We see the same patterns over and over again of the consequences of high risk systemic behavior being born by taxpayers, but it's business as usual for everything continuing the status quo. Unless voters start creating pain at the ballot box, it'll just continue.

There's also unfortunately some practical issues with prosecuting finance crimes. The cases are long and difficult to articulate to a jury. The SEC, IRS, etc have limited resources by design of congress, and so prioritize slam dunk cases and plea deals. The exception seems to be if enough big investors get scammed.

In this particular case it’s because the UK Chancellor of the exchequer called the head of US treasury and intervened on their behalf (as did the regulatory body in the UK).

If a drug mule has powerful friends they’d probably get a lighter sentence too.

Aren’t most of the offenders located outside of the USA? The USA claims international jurisdiction on money laundering and bribery and such, but other countries don’t necessarily agree. The best they can do is fine a company a lot of money (which they pay up because otherwise they can’t do business in the USA), actual criminal prosecution against individuals would require a lot of cooperation in countries like China or Singapore who are unlikely going to provide that. Even London (where the top execs are based) is going to be a stretch.

"Why not a single banker was jailed over HSBC’s billion-dollar money laundering scandal" - https://inews.co.uk/news/long-reads/hsbc-money-laundering-sc...

don't forget art markets too!