Money Laundering and AML Compliance
bitsaboutmoney.com
bitsaboutmoney.com
Ivan, immigrant from Belarus who drives a bus and likes to withdraw cash from his <5000 euro account? Get this living liability out of my bank! I won't run a whole department or risk getting fined because some no name pauper. But since we can't just ban him let's just ask for ridiculous documents like proving the nationality of his grandfather (real story btw) or criminal records, translated in English, by an official translator. Let's annoy him so much with retarded requirements he will leave by himself and if he fails to provide our totally not arbitrary evidence we write a polite e-mail stating that we are sorry but we won't run his account anymore.
That's basically AML compliance to you.
- Lawful evil AML companies
Additionally, if you're within the majority of people who deposit money and lose it all you're not going to even know this unless you do some active research about the casino.
I don't know the actual law is, but it could be that the customer is the one who committed the crime of illegal gambling. If that's the case, it doesn't matter if keeping his winnings is legal or illegal, if the gambler brings suit he puts himself in legal jeopardy and I don't think the courts will enforce contracts associated with illegal activities (e.g. a hitman can't go to court to force his client to pay).
Somehow I doubt that causes many problems in trying to collect from clients.
[1] Which, yes, actually happens. E.g.: https://www.wect.com/story/22122424/man-calls-911-to-report-...
What are the better options?
This is rare. It may be the effect. But plenty of financial institutions openly deny risky accounts; no need to needlessly spin wheels.
Your broader point is correct, however. Because of the risk, a lot will be demanded. Because of the reward, nobody is motivated to push back on compliance.
I have a funny passport so some institutions are often probing my life and the source of my funds. The criminal records translated to english (I’m not from an english speaking country, I don’t live or work on an english peaking country) happened to me.
I also had a chat with a polish woman who told me that UK banks required documents about her grandparents nationality when she went there for study circa 2014.
I am convinced xenophobia is alive and well through the financial system. Hell… even cheered by often progressive people who thinks the AML/KYC framework is protecting their lands from foreign barbarians.
also agree on the xenophobia -- but instead of culture this is turf wars over control of large dollar trade over time
It's really not. You don't make money by unnecessarily turning business away.
Go read patio11's AML article again. He gives examples. And says he has personally experienced it.
More importantly he explains why it happens. And expresses a wish for more scrutiny on how AML works in practice, because the common result has some bad effects.
Here is his explanation. Having regulators crack down on you is bad for business. Which they will do if money laundering is found. And money launderers actively want to bounce money between different organizations in different legal jurisdictions. Therefore if someone wants to send money to a different country, particularly if they look like they might be hard to find if regulators decide to ask hard questions, they get arbitrarily increased scrutiny. The result of which is indistinguishable from xenophobia. (Which may also be involved.)
Yeah, but it's not xenophobia: it's mandatory compliance activity associated with a framework that - if it did not exist - banks would not do. Motives matter. Xenophobia wouldn't be distributed in accordance with weak national finance controls etc.
But in practice it is set up and carried out by people who often have some level of personal xenophobia. Thereby generating an institutional cover for personal feelings. The extent of this is impossible to verify. But certainly more than zero. And, anecdotally, likely far more than zero.
That the policies are not simply distributed in accordance with weak national financial controls is demonstrated by the fact that Patrick McKenzie (US citizen) has encountered these problems multiple times while trying to get Japanese banks to deal with US financial institutions. Japan does not doubt that the USA has strong national financial controls. But "foreigner wanting to deal with foreigners" still generates heightened scrutiny and sometimes real problems.
US citizens have the opposite problem, FATCA, that makes overseas institutions allergic to doing business with them. I lived in Japan for four years and had absolutely zero problems with banking (including overseas fund transfers both inbound and outbound; getting credit cards; leasing a car), but I have a UK passport.
There was almost certainly something crooked though: The account had a monthly fee, but almost anyone can get an account with no fees if they know about them.
He points out that the US financial system is squeaky clean. Oligarchs wind up in prison because they think they can pull the crap in New York that they pull in London.
But outside the financial sector it’s the 100% opposite. Americas permissive corporate transparency lets assets vanish.
The best example: if you want to get a mortgage to buy a house you have submit to a financial strip search. But if you want to buy a house with bags of cash, you don’t even need to give your name.
What is this an example of? You are submitting a financial strip search because the lender wants to ensure the borrower can pay the debt, not to ensure they are a criminal or not.
And that is because prior to 2008, lenders were giving out loans to people with zero underwriting, hence the cascading defaults, and then financial crisis, which led to more regulations on proper underwriting.
The bank would report it, and in theory the feds could track down Periwinkle LLC.
But tracking down holding companies consumes precious resources, and would be strategic, not just legal, decision.
The US is obsessed with having a clean financial sector, but doesn’t care one jot or tittle about corporate transparency.
Better to make finance focus on ensuring there are quality, documented links where legally required... and then perform the judging elsewhere (e.g. legal system, FBI, journalism).
That the US (and especially certain states) permits opaque corporate structures is a different problem.
(1) is probably not good for that country, but do other countries care? To some extent, this is just colonialism by proxy: extracting wealthy inequitably from a foreign country. Historically, few third party countries take issue with that, when they're the winners.
(2) is where the more interesting point is. Does the country accepting the money net benefit, or net loss? Aka the London banking question in a nutshell.
I'd argue that if money is political power (it is) and corrupt money can't be firewalled (it can't), then it's net loss.
Inevitably and especially if we're talking lifestyle roots (e.g. property, establishing a home, etc), that corrupt money corrodes government and civil systems in the banking country. At minimum, because the wealthy corrupt people bring their expectations and behavior with them!
In practice though that’s exactly what happens. Banks have to look for transactions that are potentially illegal (including OFAC and AML). And the banks not only report but have to block some of those transactions or they become liable for the initial crime (if it existed at all).
And 9x/10 when you track down Perwinkle LLC you'll find that it's owned by a couple American brothers who own a successful regional HVAC business and everything they are doing is legal.
People love to act as if all this offshore stuff is frequently closely connected to illegal things but if you just randomly pull samples you'll be hard pressed to find anything that isn't just a case of someone completely legally doing what the law incentivizes. If there was actually anywhere near as high a crime to not-crime ratio as people imply every bureaucrat with political ambitions would be all over it.
There was a minor scandal a while back when it became clear Queen Elizabeth was using exotic techniques to hid her assets.
She wasn’t doing anything wrong. She just didn’t want people conflating her private assets with her royal persona.
Even Jeremy Corbyn (socialist, republican, then-head-of-Labour) didn’t criticize her for it.
She just didn’t want the public snooping in her private business.
I got a "no-doc" non-conforming FHA loan back then. They fucking strip searched me. It was not easy--I still have PTSD from it. That same loan is still available on the market.
You also need a citation on your reason for the financial crisis of 2008.
I had to walk away from my home BECAUSE of the financial crisis (after having paid down 90% of the principle). Was it triggered by defaults or the credit default swaps themselves? Sure, maybe some bad loans were floated,but the sophisticated, hot off of the regulation preventing it, people in New York started gambling on the plebs losing their homes. Well, a few plebs (really, over-leveraged affluent people) lost their homes, and a cascading effect of credit default swaps came due and spun out of control. The crisis was directly caused by Bill Clinton signing a bill that removed key regulation that would prevent the very thing that happened: Gambling on Wall Street.
So STFU.
It's unreasonable to blame one source for something that metastisized over years, involving most parties in the financial sector, until exploding.
Banks could have chosen not to do this business or to hedge their risk in a better way. Credit ratings agencies could have shown some independence and objectivity. Derivatives buyers could have done more due diligence on what they were buying. Home buyers could have looked at the market and said "This is way too hot, and the party can't go on forever."
Deregulation handed everyone rope, including us, and we all hung ourselves.
It stings when you get personally @+$#ed, and it feels good to blame massive, systemic failures on one source, but they're systemic failures for a reason -- because the entire system was culpable.
This is a general comment, nobody is saying every bank required zero documentation.
> I got a "no-doc" non-conforming FHA loan back then. They fucking strip searched me. It was not easy--I still have PTSD from it
I cannot imagine how bad some forms and id checks would have to be to give me PTSD.
> So STFU.
Not useful.
Then he is incredibly naive. See Wachovia and HSBC's US operations getting caught laundering for Mexican cartels
This stuff is unfortunately pervasive in the global financial system
That boils down to US conflict with Russia. Europe didn’t have a beef in this until the Ukraine invasion.
I’m not sure how much of it is current in light of the sanctions. The big example it uses (90% of the book) is Khazakhstan.
From what I’ve read more recently, many rich/middle class folks in Latin America are moving to the US. If their businesses so much as look at drug money, and then they so much as look at an American bank, they can wind up in a US prison for a long time.
So they just move to America to get away from drug gangs.
The US does not f*ck around with criminal financing.
Why doesn't it provide information in return? Well, only specific bank accounts are subject to FACTA:
- Accounts of individuals who are not US taxpayers.
- US deposit accounts of individuals and entities that are not US taxpayers to which US income flows.
And certain types are exempted from the data agreement:
- US corporate accounts, even when foreign companies hold these US accounts.
- Investment accounts and custodial accounts (of individuals and entities), even when they are a resident in the FACTA partner country. This is true, as long as the custody account doesn't have income flows into this accounts (eg dividends or interests). Example: A German has a custody account in the USA and holds German shares in it. This data won't be disclosed to Germany. You probably know where this leads to...
If you think you are now in the need for an American corporate account, don't worry, we got you covered! Delaware offers setups without the need to file yearly lists of managers, owners (shareholders), directors, or members.
In case this is not sufficient for you because tax evasion isn't enough, and you are doing some really shady business, don't look further than this weird US arm called “Puerto Rico”. It is common knowledge among wealthy (and fishy) Europeans and Russians to just park your money there. Banks like the Euro Pacific bank allowed you to keep your money safe, and even allowed you to trade stocks electronically through IBKR without any disclosure to anyone. (ok, maybe the EuroPac Bank was too well known for this because they had to close down, but don't worry, there are a bunch of alternatives like facebank).
Combining a PR bank account with a Belize company is also very popular for money laundering. You know, Stripe doesn't allow banana republics, but for whatever reason PR is allowed there.
The setup is to create a company in Belize with a heavenly tax rate of 0% and just laundering through it to your bank account in PR. This is mostly used for companies who straight up do illegal things, but you know, you can sell virtual stuff all day long and it scales infinitely.
My personal opinion is that the USA doesn't want to disclose anything to third parties because they know too well that too much transparency would make them unattractive as the financial centre of the world. While they want to nail down US tax evaders at all costs, they have little motivation to fuck around with the billions of foreign capital in the US by providing too much information/support to foreign tax authorities.
Well, only specific bank accounts are subject to FACTA:
...
Investment accounts and custodial accounts (of individuals and entities), even when they are a resident in the FACTA partner country. This is true, as long as the custody account doesn't have income flows into this accounts (eg dividends or interests).
Unfortunately, I don't have a reference, as I was told this by an advisor from PWC a few years ago. I guess you could contact any good tax consultant, tell him the details, and let him look into it. I have no idea about how 401K works in the US.
Investment accounts and custodial accounts (of individuals and entities), even when they are a resident in the FACTA partner country. This is true, as long as the custody account doesn't have \*US\* income flows (eg dividends or interests).
But, if you don't have the before mentioned US income to your account, you are exempted from data sharing.
SWIFT and Swiss don't just give up client data easily and yet they did due to US had exact names and details of every transaction, I recall some said fibre optic was tapped. too bad I left London soon after GFC there was a tonne of high quality gossip fun times.
Man, for that brief shining window we really had perfection.
And crime has definitely gone up because of cryptocurrency. I'm not sure how much it has affected the more traditional sorts of crime, as I don't think it's much of a help in turning dirty cash into clean assets thanks difficulty of exchange and the ledger acting as "prosecution futures". But ransomware has grown massively thanks to cryptocurrency. And ransomware gangs have grown correspondingly in size and sophistication thanks to having all that money to spend.
The US mafia declined because of the rico act and the fact that there was less racism and better integration of italian americans. The current ethnic crime groups of today are different.
IMO AML is security theatre, much like the post 9/11 flying regulations making everyone's lives worse, especially if your name is Mohammed sending money to family back home in the home country.
I look forward to your proving these two very numerical claims. But you can't just count existing criminal proceeds. That'd be saying, "The current level of speeding is so low that we can get rid of traffic cops." You have to measure the crime prevented, too.
AML is a boil the ocean way to prevent crime, except the ocean isn't being boiled because there isn't enough energy to actually boil the financial system. Instead it just annoys everyone with the financial equivalent of the ineffective TSA, where the TSA's own auditors bring everything and anything through with ease.
With all the money and human time used to prevent crime via AML, that could've been redirected to far more productive things. Especially in a country like the USA, where crime prevention issues are fairly obvious but not acted upon, such as robbery, murder, assault, rape, car break ins, property theft, damage, etc in California which aren't things effected much by AML either way.
Very little separates the state from an organised criminal enterprise. A particularly cynical person might point out just how comfortably well the operating logic of states and large multinational corporations fits into the world of organised crime. The only thing that separates the two is legality.
You want to enslave a bunch of people and profit off their labor in some far flung corner of the world to whom nobody is much paying attention? No problem, just don't do it yourself. Invest in cobalt mining or diamonds in Africa, or manufacturing in China. A territory is getting uppity? Support the governmental structure that wants to brutally repress them by buying from their corporations or investing in their treasuries. Want to promote some nightmarish theocratic brutality? Saudi Aramco stock is a steal these days. In fact, I'm having trouble coming up with something that organised crime has historically profited from, which you could not do in a white market context in the modern world by simply trading in the full breadth of financial instruments, particularly in concert with the state financial actors already promoting these very things.
The thing that really scares me though is that as I get older and more cynical and see the way people are responding as the boot stamps down harder on them, I find it harder and harder to care or see the above as something to get righteously indignant about. Why should I find the slavery of people abhorrent when they so clearly crave the lash?
Things like alcohol and marijuana have become legal, but I don't see much evidence that Budwiser/InBev is a mob front.
Real Estate provides a much easier method to move millions.
Very few transactions hit the CTR threshold at the time it was instituted. It was nearly $80000 in today's dollars. Computerization was also very new so doing anything useful at scale with the records was difficult for the government.
I'm not a lawyer but I read RECAP and have read the appeals from a lot of these cases and very rarely were financial records mentioned as investigative leads. They almost always relied on informants who were a part of the scheme and electronic surveillance to figure out how the crime worked. Even now, how many criminal investigations do you think start from SARs? Obviously we'll never know because they don't release that, but I don't think there's any reason to think it is a substantial fraction. Money laundering in most cases nowadays is just tacked on after they discover that someone used money from the crime they already knew about.
And the status quo where the banks take a bigger cut to pay for their big compliance departments and the government takes a bigger cut to pay for auditing those compliance departments is somehow better?
X-percent not in your pocket is X-percent not in your pocket no matter how you cut it. At least in the proposed "stop giving a crap" case nobody will be denied access to boring routine financial products because they have a 3rd cousin with the same name as a Turkish mob boss.
That is nothing compared to the costs of crime in high-crime/high-corruption societies. And looking at dollars alone doesn't paint a true picture. Criminal enterprises work through violence and add risk throughout the economy. E.g., if your business is doing well, a protection racket is not going to take 1% and call it a day. They'll take everything they think they can get. And if not, they break your leg. That serves as a strong disincentive to creating successful businesses.
Do the FDIC have disputes with the OCC? Probably. But unlike criminal gangs, they don't settle them with shooting wars in the streets.
Is it really though? How much was the US (or any other equally developed country) losing to crime and corruption prior to all this KYC/AML BS? Not that much. Letting a mobster have a bank account doesn't magically turn your country into Nigeria. If anything it makes your country better because the mobster doesn't have to store that value another way and then protect it (with violence). >Criminal enterprises work through violence and add risk throughout the economy
So like government but with less abstraction?
> But unlike criminal gangs, they don't settle them with shooting wars in the streets.
Only because they don't have to. Being an above the table enterprise they can just go to the government court system and get their (credible threat of) violence that way.
All this violence you're complaining about w.r.t. organized crime is just their (low buck, because due process and diffusion of responsibility sufficient to dissuade revenge are expensive) way of settling business disputes.
It really is. People flee high-crime/high-corruption countries for good reason. They also have demonstrably worse economies over the long term. KYC/AML efforts are only part of the difference, of course. But we've ended up with KYC/AML because it's one of the least intrusive ways of keeping crime in check.
If you think otherwise, I encourage you to go live in a high-crime/high-corruption country and let me know how much you're enjoying the "freedom".
I can honestly see that this could be the case. But I can honestly see that it might not be. A related situation would be occupational licensing: maybe it saves society money, maybe it costs society money; how certain are we that we are at the correct balance?
Well occupational licensing is the same way. If there was even a shred of a farcical bad-faith argument that it saved money they'd be happy to spout it. The fact that the proponents don't even have that and instead shove appeals to emotion in your face tells you everything you need to know.
They turn away millionaire accounts all the time. You need to have many hundreds of millions under management for them to do their diligence so you can open an account.
Most accounts under 10 million cannot even get cleared to trade high risk options. No way in hell they'll skip AML checks.
When Australian companies offer shareholder deals (like capital raises, offering shareholders a chance to get in first on favourable terms) there is usually a neatly printed prospectus that has a couple of pages in very explicit language saying "this is NOT FOR AMERICANS. Please do not show this to a US citizen. If you are a US citizen, you must disregard this booklet!".
It always strikes me as unfortunate just how badly the US is locking themselves out of otherwise quite good investment opportunities. I always assumed that these service refusals were due to AML laws using logic similar to what you describe. It is always the US. We're ok with Europeans, Asians, Africans and South Americans.
> Frustratingly, regulators will say “Well, that is the bank’s decision. We didn’t direct them to do that.”, even though the purpose and effect of AML regulations is causing a lot of behavior not specifically asked for. Banks will, meanwhile, say “Our hands are tied. Look at these enforcement actions. Clearly, this is an unacceptable level of risk.” And meanwhile, there is an actual person who has done nothing wrong and now finds themselves somewhere between greatly inconvenienced and frozen out of the financial system entirely.
Why is there so much opposition to "you can't have a bank account anymore because when you had one, one of your checks would bounce almost every week", but so little opposition to "you can't have a bank account anymore for something that doesn't constitute proof of wrongdoing"?
Do you have a specific policy you are concerned about that we could rationally talk about or only talk radio talking points?
I'm also banned at Zelle, but Venmo and CashApp and Paypal are all fine.
What a weird world.
Of course none of them will tell me why I'm banned. I have my suspicions.
In other words, you can't get people to care, and even if you could, they would have no idea what to demand.
Whilst the former problem is (according to other comments) largely affecting African Americans. There is huge momentum behind preventing institutions from consistently disadvantaging African Americans.
(Note I have no clue whether African Americans more commonly bounce checks and get debanked for it)
One of the most significant money launderers is a famous attorney from Shearman and Sterling in NYC.
From my experience, prominent financial executives attempted to engage in blatant laundering of drug money in BVI. These individuals were connected to the attorney and one is a public official appointed by 4 US Presidents.
This was 20+ years ago and I don’t know what they actually did, but I was in the room when they tried to do it. Outside the room hung a giant photo of George W. Bush golfing with the firm’s CEO.
They offered me $1 million in cash to fly with $100m at a time to Tortola. The financial structure was created by the attorney.
The hardest part is then trying to change a known-to-be-corrupt system, when those who write the rules always do so in their favour.
Here in Australia we have slid into the bottom 10 percent of global corruption index [0]
Politicians, lawyers, accountants, and realestate agents have conspired to repeatedly prevent AML from being introduced to Australia since 2002.
Whistleblowers get threatened with life-destroying jail terms.
Politicians "retire" then take up cushy directorships with numerous companies they previously wrote seemingly treasonous laws for (dozens of slap-in-the-face-blatant corruption yet it continues on with impunity or any punishment except for maybe losing an election or a gravy train contract).
[0] https://www.transparency.org/en/blog/cpi-2021-corruption-wat...
I thought our last 15 years of politicians were massively unaccountable and corrupted by self-created taxpayer slush funds plus lobbyist megabucks, corporate kickbacks and post-politics directorships.
I suppose politicians everywhere are essentially driven by the same human frailties, yet mostly worse than what I am seeing locally!
"What's shocking is not the illegality going on. What's shocking is what's legal. "
Dump the cash out of the airplane on the way and claim it never happened.
Key point is, no one truly looks at the efficacy of AML which makes it more theatre than crime-fighting tool (not that it doesn't fight crime, it just does not do so efficiently nor is it likely the best way to do so, let alone us defining broadly what crime actually is).
If these systems were re-designed from the ground up, AML procedures and policies would likely look quite different than they do today.
It's a bit like antivirus on PCs: it is sold to you as a scareware but in practice is snakeoil not really effective against any modern virus or trojan. You stil bear the cost of your PC slowing down 25%.
Here is a good Forbes post by David Birch on the topic:
https://www.forbes.com/sites/davidbirch/2021/05/03/im-anti-t...
I've had important projects canceled because executives go 'oh we already have $tool this project is a waste of time'. I demonstrate that $tool hasn't been updated in a decade, has 0 users, and is completely ineffective, and how the project will address these issues. They respond 'oh we already have $tool this project is a waste of time'.
Example, my flatmate worked at a bank doing AML looking into flagged transactions. One day they found a chain of 87 different bank accounts moving money, 1k at a time to obscure it's source. All were real people who had passed KYC. The money came in from another bank, then went out to another. So she calls up the AML teams at those banks - they found similar chains. The only reason they found it at her bank was because the chain got too big.
The intelligence community has access to information about every transaction with greater than $10k (lower thresholds for monetary instruments) with at least one party of the transaction identified for over 25 years.
People also miss the fact that FIU operations also often include 314(a)/(b) letters (subpoenas for financial information on specific individuals) alongside their AML operations. Same for OFAC Sanctions monitoring (obvious example is Russian customers and assets).
The 10k rule mentioned is totally a thing. I was at a company implementing AML for the first time, and the compliance team told us to add it, which I always thought was an inane. They came up with a variety of rules with just arbitrary figures in them, including the 10k rule. Didn't matter if you had previously been transacting 7k regularly before jumping to 10k, didn't take overall volume into account, didn't look for unusually high acceleration of transactions. Just a magic number pulled out of industry precedents.
The interesting thing was if you read the actual legislative requirements it was excessively vague, like "take reasonable steps to find suspicious transactions". Institutions don't build software if they don't have to. The goal always was to do the minimum to check the box, not actually find laundered money.
CTRs, on the other hand, have a limit of $10,000, and while it is aggregate, it's aggregated over a single business day. CTRs do not require suspicion. They are routinely filed for ordinary, legal transactions.
The magic number is not the bank's magic number, it's politician's magic number.
Hold a balance in a foreign bank? File a FBAR (foreign bank account report). Move large sums of money? Be prepared to document the source of the funds. I'm now practiced at preparing bundles of PDFs that show a "paper" trail.
BTW, filing a FBAR requires you to report the maximum balance in an account, something that most definitely is not reported on a bank statement unless you hold the balance for more than a month. This is hardly ever the case in an active account.
How we managed to live and fight crime without it for the previous millennia is a mystery.
It's often mentionned in HN, but in the same style, I cannot recommend enough "Money stuff" [1] which is Matt Levine's newsletter at Bloomberg. Highly entertaining.
[1] https://www.bloomberg.com/opinion/articles/2023-02-06/musk-g...
> I'd love to understand where his writing style comes from and how to emulate it.
In the "good old days" they made students memorize passages from great authors and reproduce them. The idea being that this process will force you to think about the structure of their sentences and vocabulary. I used to do this when I was a kid, but I don't think I did it enough to have an impact.
There were a few times when I almost sent him a tweet that he got some logic backwards, but after rereading, I realized that I had misread it, that it's right but confusing.
But maybe that is all the author tried to convey to the reader, just in an opaque way :)
That is a joke but not much of one; writing style guides to capture "What is... taste? How do we scale it?" is a project I've actually been involved with. This project brief has defeated many talented people, the least of which being me.
Princess Leia, before your execution, you will join me at a ceremony that will make this battle station operational. No star system will dare oppose the Emperor now.
The more you tighten your grip, Tarkin, the more star systems will slip through your fingers.
And then, they wonder why people are being driven to use Cryptocurrency...
For those of you who are offended by this characterization; how does burdening 8 billion law-abiding Citizens with impossibly complex and arduous KYC/AML requirements make sense -- when just one FTX incident exceeds the value of all legitimate remittance transactions on the planet for the entire year, and KYC/AML doesn't affect the likes of FTX, Tether, etc. in the least?
Perhaps you feel like you're "doing something". You are -- making every law-abiding free Citizen feel like a criminal and expend countless hours of life-energy, to do precisely nothing to solve the problem, while crippling the legitimate small business and personal enterprise of the entire planet.
Congratulations!
If only. Normal people are only buying crypto to speculate. They drive the price up to absurd levels and then write it all off as a scam when it corrects. Meanwhile good technology like Monero remains marginalized instead of replacing the USD as it should.
As for Monero -- don't complain, let's bring it mainstream by building something. Specifically: something that state-level interference can't stop, even if they're quivering in rage that it exists!
That's what us "speculators" who code every day on large-scale Cryptocurrency decentralized systems are doing...
But when I suggested that here I got called out for it. No idea why there was so much hostility.
You ended up proving my point. Normal people don't research or develop cryptocurrency technology, they buy and sell it on Binance. It's hard enough for people to understand BTC, the altcoin situation is next to hopeless.
> As for Monero -- don't complain, let's bring it mainstream by building something.
I've gotten paid anonymously in XMR for a small programming task. It was a wonderful experience, I wish everybody would pay me that way. The technology already already works. If anything still needs to be built, it's even stronger privacy guarantees against the perpetual government encroachment.
This is a social problem. How do we get people to drop USD and start using XMR instead? It's a form of the ages old circular logic problem of bootstrapping: nobody uses it to buy things because nobody accepts it, and nobody accepts it because nobody uses it to buy things.
Imagine you achieve your Crypto-dream, known mass murderers like the head of Wagner or Kadyrov will move money with impunity.
Current system is problematic, but I don't fancy the idea of money being conpletely untouchable by the system of justice
All this mandatory financial reporting for "anti-money laundering" purposes or whatever is just the financial arm of the global panopticon. You're defending total global surveillance and control. You're advocating giving up freedom for security.
I called my senator to look into it, but then I find out the Emperor has dissolved the senate.
TFA notes that "This will affect the typical user of the financial system precisely zero times during their lives." It is very much not a complex and arduous situation in most instances, only in very few edge cases. (Which patio11 wants us to pay closer attention to.) I had occasion to unexpectedly transfer $10k over ACH recently, and, while a few minutes on the phone with my bank confirming things was slightly annoying, I would describe it as neither complex nor arduous. I am confident that it did not trigger a CTR or SAR, given it was not a cash transaction, and I was happy to answer a few questions.
Stop And Frisk.
Nobody without something to hide should want privacy/encryption.
Forcing 8 Billion people to KYC/AML before buying a coffee or helping a relative isn't too much to ask.
Amirite? /s
I know, it is stupid and there are so many ways to fake this, but a bank cant possibly gibe a loan to someone without knowing where they live.
Else kim jong il could just walk in with his id etcetc.
At US Bank, you can’t deposit cash without an ID which is standard post 2018 or so. Yet go to a US Bank in a low income area, deposit $100 in a family member’s account and they will ask for ID, social security number and your job.
US Bank has been involved in multiple money laundering scandals leading to deferred criminal prosecution.
Many friends have times where they can’t withdraw their own cash, have had accounts closed, have been falsely reported for fraud without any recourse etc etc.
Also because financial fraud and identity theft is rarely prosecuted, regular Americans are bombarded with friction and hassle to transact.
People outside normal banking use Chime or prepaid bank cards, which promptly get banned from being used in a wide variety of businesses.
AML policies and the Bank Secrecy Act is a violation of the 4th Amendment. The BSA (a misnomer) has expanded in scope since the 70s and as money has inflated. It’s went from an adjusted $70,000+ to $600 today (or $85 in 1970s dollars).
And it seems the Supreme Court is going to act on the BSA sometime in the next year. It is a crime against the individual, a violation of civil rights and indefensible.
It is purely motivated by tax enforcement and controlling the population. It does not prevent or identify crime. There is an estimated trillion+ of trade based money laundering every year.
"This hasn't affected me, so it mustn't affect anyone!"
The grinding day-to-day slogging, through the mud of irrelevant and useless regulatory burden experienced by the "lesser" classes of civilization (and anyone actually trying to run a small business) is just astonishing.
Basically, many people just "stop". They can't navigate it, and know they'll never defeat it. So they just cease to try.
As for a SAR, lmao. It's illegal for them to tell you if you triggered it, how on earth would you know?
This applies here because both KYC and AML procedures are set up and carried out by private banks. Which makes it a private search, that fits squarely in the exemption.
In turn this begs the question of whether the government can encourage through intentionally vague regulation behavior that they cannot directly ask for. But given the courts we have, I suspect they will avoid answering this question.
Furthermore it is hardly the worst violation of the 4th that is common. I'm personally most incensed about civil forfeiture. Through the workaround of suing your stuff instead of you, all Constitutional protections are voided. The result is essentially legalized robbery by the government, carried out by the very law enforcement departments that directly profit from the proceeds. Given that the courts have repeatedly OKed this, why would you expect them to object to KYC and AML?
It is a public search carried with the dirty work portion of the search done by private entities directed by the state.
And, unbelievable as it may seem, the government won't be exactly wrong either.
Sure cute games can be made about the semantics of it, but that's why we have human beings as judges. It's blatantly obvious that when you threaten to toss someone in a cage for not doing something that you are imposing that on them, it's not voluntary and you are doing it on behalf of the imposer. If a human being judge truly can't recognize that then the whole system is broken and we need to start over.
https://www.bitsaboutmoney.com/archive/kyc-and-aml-beyond-th... goes into this. The primary concern for regulators is that you must have made statements to the bank that you can later be put in jail for lying about. And the bank must have approved procedures in place for identifying when transactions are high enough risk to decide to take verification steps.
On your comments about judges, you apparently have substantially more confidence in the common sense applied by the legal system than I do. Don't forget we now have a Supreme Court judge (Amy Barrett) who is on record, in a legal paper no less, saying that fiat money and the Fed are obviously unconstitutional, and judges should handle that by simply avoiding ever considering the question. (Read https://scholarship.law.nd.edu/law_faculty_scholarship/1304/ if you think I'm making that up.)
Does this sound like an excess of common sense?
If the practical imposition placed on you by regulators is that you in practice are needing to search paperwork to satisfy KYC, that's a government imposed requirement no matter what the actual law says.
[0] https://www.everydaynodaysoff.com/2010/01/25/shoestring-mach...
If it's that clearly untrue, presumably you can document this?
And I'll note that even if you can, it doesn't necessarily contradict what you're replying to, which was, "This will affect the typical user of the financial system precisely zero times during their lives."
With 330 million residents, millions of people could have KYC/AML problems and patio11 still could be right. I've never had a problem like that, and have only heard one person ever mention it. And he was an Australian trying to open a US bank account to get around certain Australian import taxes, so I suspect he was somebody who should have been having problems.
> burdening 8 billion law-abiding Citizens with impossibly complex and arduous KYC/AML requirements
Not sure if you read the article, but they just aren't a significant burden for most people. They could be better, sure.
And I think the "driven to use Cryptocurrency" example does not pair at all well with FTX. The massive wave of cryptocurrency failures from Mt Gox to FTX demonstrate beautifully why an unregulated financial system is a terrible idea.
The compliance costs in terms of effort/time/money expended per dollar of revenue affected is probably 10x to 100x for them, as it is for you. This has been my experience, and my observation across many life stories. I taught basic finance to hundreds of mid- to low-income families in the 2000’s.
So again - a “let them eat cake” admonishion.
And FTX was just a massive, traditional fraud. Literally nothing to do with Cryptocurrency, other than as the medium of the fraud.
Random charlatans stealing money from gullible and trusting marks.
The bulk of the legitimate cryptocurrency platforms continue working. A few that were obvious mathematical impossibilities implode - much like fraudulent businesses have for ages past.
I look forward to somebody demonstrating that. The author of the article, a domain expert, thinks otherwise.
> And FTX was just a massive, traditional fraud. Literally nothing to do with Cryptocurrency, other than as the medium of the fraud.
Other than the medium, the culture, the community, the domain, and the regulatory vacuum of cryptocurrency. So a great deal to do with it. And it's not as if it's an outlier for the space.
If it's really the burden you are concerned about, you might look again at cryptocurrency. The burden just to use it is relatively high. Then there are the higher caveat emptor burdens. And then we get to the vast, vast sums lost through volatility, exchange costs, user error, incompetence, fraud, and theft. Being upset about KYC/AML and not about that is a situation of motes and beams.
To a first and probably second approximation, crypto is only good for getting scammed and scamming others. There's a lot of overly credulous people in the field, which just attracts crime like a moth to a flame.
Selling worthless copies of GIFs to people by claiming they’re totally gonna appreciate in value: Crypto
Immutable, unforgeable and universally provable transmission of proof of ownership of real valuable consideration/property: Crypto
Perhaps one of these is a scam, and the other is a valuable business transaction?
Nah.
And as we're seeing in the great raft of crypto-related bankruptcies, judges don't take it seriously either. Just because somebody happens to hold the keys for tokens means very little to them. Something that appears quite palatable to the people who might get some of their investment back.
So in practice, it looks like digital ledgers are more of a "fantasy football" version of ownership tracking: taken very seriously by people who play the game while they're playing it, but not by anybody else, and also not when the game's over.
From MtGox to FTX it's been more than a decade of incompetence and fraud. I'm sure there are sincere people who were just excited about the technology who are devastated that the grifters and criminals rushed in to take advantage of their regulatory vacuum. But if they are truly sincere, they can't deny the massive problems in the space.
It was like that since at least a decade ago, since original Russian attack on Ukraine and I have not heard of any issues they run into with that approach.
The just went "no".
I’m disappointed this is the way patio11 chose to summarize why we’re reducing the usage/connotations of “white = good; black = bad” in various contexts.
JP Morgan for instance, sends Swift transfers that are not AML compliant. They don't give a toss and nobody will ever look into their practices.
But if you're a small merchand on an e-commerce platform, you'll get a horde of lawyers harrassing you with KYC.
+ inflation security (not stated in your "wish")
- electricity consumption (which will be halved every 4 years unless BTC price rises)
- volatility (to be seen)
Complete (instead of pseudo-) anonymity and low cost of transaction (< 1 ct) is likely to be achieved using Lightning.
Before he got busted by the Feds, he went to baseball games and posed for pictures, and "respectable" people might be seen with him. I don't think he'd ever have been invited to the White House, though.
As someone else here said: no, the "reputational risk" would doom him now.
How are we on a KYC thread, with people that actually do KYC, believing their koolaid
They see the accounts
They know the gaps in the regulatory framework, or should
They should know the pointlessness of this exercise but apparently the idealism (or a couple internal examples I’m unaware of) is convincing still and masquerades as reality
KYC is as strong as the weakest link in all financial institutions and all pooled accounts
I’m out
I have been in the industry for years. The author said nothing enlightening or important.