KYC. No, Thanks
blog.kycnot.me
blog.kycnot.me
You may as well say, "KYC might deter a large fraction - let's say about 99% of these malefactors"
There's no evidence provided for these numbers. It's one thing to make an assumption which is counter to your argument - "Even if 99% of criminals are deterred, it creates an unconscionable burden upon those whose identities are stolen" or etc.
It's quite another just to assume your own argument. Let's assume cops prevent 99% of crime - it's worth their brutality or whatever. Let's assume cops prevent 1% of crime - we would be better off with 1% more crime and no cops or whatever.
It's absolutely pointless.
The article goes on to immediately compare KYC with widespread facial recognition. Why are these equivalent?
They could at least try to engage with arguments for KYC - that large financial institutions should not be making life easier for criminals. Historically, a bank obviously knew their customers - they had to open the accounts in person, talk with the bank manager, etc.
They're both violations of people's privacy.
>There's no evidence provided for these numbers
And KYC proponents provide no empirical evidence that KYC has actually led to a measurable reduction in organised crime. The onus should be on them to demonstrate why it's effective enough to justify the violation of citizens' privacy that it entails.
This is meaningless.
You get to weird places if you try to wrap an entire worldview around privacy the way people do expression or self-determination, because privacy does not have that standing.
Having worked in an industry with strict kyc requirements and worked for a well known payment processor, if they were only catching 1% then some truly absurd amount of business is fraudulent.
Oh wait, they don't. Just ditch it and let anyone move money around with no controls. I'm sure that would work out fine.
It did, for thousands of years. The only thing that's new is the ability to track every penny and person from cradle to grave and the incessant and ever-growing desire for those in power to control those who aren't.
Not to mention that if the gold is banked then it probably didn't need transport because it was being transported too and from a bank.
no tax, no control (look at The Emirates).
However, as it gets easier and easier to accrue wealth on behalf of others, the taxing schemes are probably needed, and so is the control.
and for thousands of years the rich did pretty much what they wanted, and the rest of us lived barely above subsistence level.. fair taxation is one of the building blocks of modern society
That's like saying going without vaccinations, clean water, or adequate medical care "worked out fine" for thousands of years.
Sure, the human race survived. Many individuals even thrived. But I don't think it's really disputable that life with them is massively better than life was before we had them (or, in fact, than life is now for the far too many who still lack them in a reliable way).
because they could avoid paying their taxes?
https://www.unodc.org/documents/data-and-analysis/Studies/Il...
> Globally, it appears that much less than 1% (probably around 0.2%) of the proceeds of crime laundered via the financial system are seized and frozen.
https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1...
> the confiscation rate might be 0.07 percent. In other words, despite ubiquitous money laundering controls, criminals retain up to 99.93 percent of criminal proceeds.
and KYC isn't only for money laundering, it's also for tax fraud
This is true, but it's also not the point. KYC isn't about protecting individuals - it's about protecting the system (financial and geopolitical) as a whole.
Can it be defeated? Of course it can. But it's not the sole line of defense against these sorts of things - it's part of a broader system comprised of internal bank security procedures, government monitoring and after-the-fact investigation of financial crimes.
I don't mean to say that everything written here is wrong, but this is a complex topic that has meaningful tradeoffs of security vs. being free of surveillance and convenience. This sort of blind CRPYTO GUD GUBMINT BAD writing that doesn't even pretend to attempt to understand its topic at any meaningful level of depth doesn't exactly contribute to the discourse.
At the cost of individual privacy.
Isn't this what laws are for? Selling porn is legal, yet payment processors decide what you can sell online. And to think they don't decide which company can process payment or not, effectively decides who wins. This is where decentralization and CRPYTO GUD comes from. I don't want a few companies deciding what I can sell online, especially if it's legal, and they hide behind KYC/AML laws afterwards.
Just looking at credit card processing fees where we essentially have a rent-seeking fee that will continually increase and is not even refunded to the merchant when a customer returns something. That's the power the government gave to these financial institutions with these laws.
The government truly made them judge, jury, and executioner. They can stop you from collecting payments at any time, hold your funds, and don't have to provide reasons. Forget appealing their decision since it's final most times.
In the end, the government let this industry "self-regulate" itself and crypto gives users a different option.
The difference between my comment and yours, as well as my comment and the initial post, is that I acknowledge the complexity. You look only at the bad - you don't seem to understand the reason that KYC exists or the value that it provides (and yes, despite the negatives, there is value to KYC rules).
Let's not even get started on the fact that banks have worked with criminal organizations to help them circumvent KYC/AML laws so the people that are money laundering have the know-how on how to not get caught in the net.
The cost of having KYC/AML laws is having a few institutions decide who can sell and what they can sell. The government gave them that power so it's their prerogative to use or abuse it to help themselves. Crypto is simply providing an alternative for people that have been unjustly stopped from processing payments.
> Crypto is simply providing an alternative for people that have been unjustly stopped from processing payments.
It's also a useful tool for terrorists. This is a point of fact.
To be clear, I'm not saying we should get rid of it, just that this is the overly simplistic argument for doing so without considering the positive. Crypto isn't some outright evil, and neither is KYC. Both are parts of complex solutions to complex problems.
Decentralized, each user takes on more risk, but the benefit is that no one party is deciding who can do business and who can't. That burden is left on the buyer to decide if the seller is legit and the smart contract can be the source of truth.
The difference is that people who support decentralized systems are not trying to get rid of centralized systems altogether. They understand their necessity, but also realize decentralized systems can add some needed competition. That will improve centralized systems in the future as well.
No.
Financial institutions are bound by their agreements with the card associations, of whom you may have heard; one of their logos is on every card in your wallet. They, as private entities, have the prerogative under current US law to decide who may and may not use the payment rails they own, and this was the original genesis of rules disfavoring porn and other such relatively 'sketchy' businesses - not for moral reasons, or not overtly so, but for the high rate of expensive and complicated chargebacks those businesses generate. The associations can and do deny payment access to businesses or even institutions which generate too many chargebacks, and are thus forced to implement the associations' desires regardless of their own inclinations.
That's been true since long before the USA PATRIOT Act of 2001 gave rise to KYC/AML regulations in their modern form. If you want to argue against one or the other, you help yourself by ensuring you don't conflate them.
Meanwhile, if the description I gave of Visa and Mastercard sounds a lot like how Ma Bell could've been fairly described before a then much spryer Uncle Sam caught up to them, this is not by accident.
Before you say payments rails are not a public utility, understand that’s a part of the problem. If they were a public utility, the people would have rights. In the old days, the government would nationalize the payment rails like they did the railroads and private roads. Sadly, that won’t happen in today’s age. I’d be happy with the government having their own payment rails anyone can use. The government can go after people actually doing illegal things instead of blanket banning (and then approving) and handing that power to a 3rd party. Since that won’t happen, crypto will have to do.
It's not even so much 'as the government has instructed'. The laws around the associations grew around the associations, with much generous assistance and advice from their own paid lobbyists - much as with the darlings of the modern tech industry, in their day the associations were 'disruptors,' too.
When I say 'under current US law,' what I really mean by it is 'until the Sherman Act is applied as written'. It would be nice to think that might happen in my lifetime, but it has been some years since I could reasonably consider myself young.
Everyone knows that criminals lie on these forms and _that is the point_. They now have an easy to prosecute charge just waiting for them if they ever attract the attention of the authorities. They just need to look into where their money is coming from and there will be a lot of ways they can prosecute them.
https://www.bitsaboutmoney.com/archive/optimal-amount-of-fra...
We'll surely get a significant amount of people who are doing or own things they shouldn't. Maybe even as high as 1%!
I meant it as a warning: the KYC system will be used against you. If you commit a crime (or even rock the boat too much), expect these records to be combed over and leveraged against you. At the very least, authorities will likely obtain a search warrant and systematically attempt to destroy your life.
And Al Capone could have used a non-profit as they are tax exempt, where money laundering - the crime - is not possible because there are potentially no taxes to report
that's the system
Money laundering is possible regardless of whether an organisation needs to pay tax.
laundering is a crime which relies on identifying an illicit origin. so this victimless invention is actually impossible to prosecute laundering on its own, only unsuccessful laundering not just “why are you moving money how suspicious”, and it can only be a tacked on charge that might stick when the other charges wont
this further bolsters the point that the dragnet is just inconveniencing everyone else
This. Right here. KYC is prone to abuse for censorship, and does anyone believe that it isn't already? Does anyone believe that KYC scores aren't going to eventually be linked to credit scores, ESG scores, perhaps social credit scores someday?
The best proxy for the deterrent effect is how much criminals need to pay to launder money. I can’t find a good source on this, but some anectdata that put it between 15-50%.
Author's point is like saying having cops near a bank is useless because robbers will just avoid those banks.
Do you just keep the money? Or do you send it to the government who keeps it, because they can’t assign it to a person?
KYC is a speed-bump for criminals, yes. But it’s also the only way to support the finance system for regular people.
What happens when you have a financial system where there is no people or traceability tied to funds? You know the answer, it’s a loaded question.
I don’t think tin foil hat shout into the clouds articles are very useful. Is the author an expert on money laundering or organized crime? Give me some reasons that aren’t just soap box speeches about freedom.
Finally, I think that it’s pretty obvious how basic identity regulations can work. If a bar has an ID scanner that accesses a state database to look up your picture on file that can trivially defeat a fake ID. If a car dealership does the same they can prevent selling a car to someone who isn’t licensed to drive. Seems pretty normal to me.
I find Patrick McKenzie’s (patio11) deep dive into KYC [1] useful to understand more of why KYC exists and what is and isn’t in the law.
1. https://www.bitsaboutmoney.com/archive/kyc-and-aml-beyond-th...
nobody here would ever know if a bank account currently exists in their name at a different institution, if it was properly used to simply accept payments for legal services and not leave an account in overdraft.
the entire concept of whitelisting transactions is a fools errand
I too can pull arbitrary statistics straight out of my backside, and use them to argue my point
Why not 10%? Why not 10000% in fact (if we’re comparing it to the number of current bad actors)?
Do you really think there wouldn’t be more tax cheaters if nobody did KYC checks? Come on…
If that was the intention they'd be applied equally in all legal contexts like re: DMCA claims, but the fact that they aren't shows the intentions of regulators for KYC in practice.
and to clarify the article, not all cryptocurrencies are set in stone traceable. Monero enjoys ephemeral transactions that are so untraceable, no ones claimed the US government bounty for a proof-of-concept yet. In turn, youll likely see most KYC exchanges get strong-armed into dropping support for mondero-like currencies altogether.
your entire monetary life is effectively for review. visa/amex/mc all tag your transactions with a vendor code as part of KYC to build a profile of your spending and sell analytics to economists about what you buy (food, guns, clothing, cars, etc..) move too much money in cash? KYC kicks in and youll need to explain to the teller why you want that money. Dont want to explain? they will inform the FBI under the bank secrecy act. want to know if they reported you? you cant (its literally illegal.)
This line of reasoning is highly suspect --- particularly when based on assumptions without concrete supporting evidence.
Oh yeah we did that a few years ago and it was scams all the way down :)
The crypto ecosystem has scams but it also has genuine financial privacy with Monero, while the average person in a western country has zero options for financial privacy in the traditional banking system.
The only difference is that you apply it to preventing people from controlling the keys to how and where they keep or send their money. Why? Because "terrorists!" "Money Laundering!", Tax evasion!" Oh my! How many of these justifications wouldn't even exist if government wasn't so heavy handed in slathering on endless regulations to criminalize whole areas of human activity that never needed to be harmful or criminal in the first place?
I'll also note here that in many countries, employees at major banks and at major government offices collude with organized crime to a pervasive degree, and actively look at the accounts of people with signs of having come into large amounts of money (but without corresponding protective power of their own) for the sake of extorting or even kidnapping them. I live in one such country. It's easy to bleat about the need for KYC and making sure everyone "pays their fair share" (a thing that anyhow barely functions as claimed even in the most KYC-obsessed countries, since the wealthy use all kinds of legal loopholes and special connections to keep their funds safe) if you live in a place where the powers that be aren't overtly parasitical and criminal. It's a little more difficult to apply the same in other parts of the world.
So clearly AML laws are making a difference at detection at least.
[1] https://www.eurojust.europa.eu/news/money-laundering-cases-r...