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.
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.
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.
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.
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.
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.
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.
- Lawful evil AML companies
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.
> 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"?
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)
Do you have a specific policy you are concerned about that we could rationally talk about or only talk radio talking points?
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...
"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.
The magic number is not the bank's magic number, it's politician's magic number.
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.
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.
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.
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...
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 :)
> 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.
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!
I called my senator to look into it, but then I find out the Emperor has dissolved the senate.
> 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.
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...
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
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.
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.
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
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.