[HN Gopher] Money Laundering and AML Compliance
___________________________________________________________________
Money Laundering and AML Compliance
Author : dduugg
Score : 91 points
Date : 2023-02-10 18:46 UTC (4 hours ago)
(HTM) web link (www.bitsaboutmoney.com)
(TXT) w3m dump (www.bitsaboutmoney.com)
| timcavel wrote:
| [dead]
| yieldcrv wrote:
| Al Capone would have passed KYC
| NovemberWhiskey wrote:
| Al Capone would fail KYC just on reputational risk and negative
| media exposure before we even get into unclear source of
| wealth.
| yieldcrv wrote:
| Everyone can get banked unless they didn't pay overdraft fees
| (in Chex Systems in some way). All he needs is one bank and
| brokerage firm for total access to the domestic and
| international electronic banking system. There are enough
| around. All the major ones would take his account. Negative
| media exposure lol, as if this is publicly broadcasted, but
| even then, those fees would be enticing.
| pjkundert wrote:
| _Governor Tarkin:_ 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.
|
| _Princess Leia:_ The more you tighten your
| grip, Tarkin, the more star systems will slip through your
| fingers.
|
| Every government and central bank in the world is tightening
| their grip around the tiniest transactions of their citizenry. In
| the meantime, they are printing Trillions and shovelling it to
| their sycophantic corporate and political elite buddies.
|
| 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!
| matheusmoreira wrote:
| > And then, they wonder why people are being driven to use
| Cryptocurrency...
|
| 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.
| pjkundert wrote:
| You seem to be speaking for ... a lot of people you can't
| possibly know -- such as me, and every person I work with and
| deal with on a day to day basis in the Crypto R&D field.
|
| 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...
| ClumsyPilot wrote:
| > good technology like Monero remains marginalized instead of
| replacing the USD as it should.
|
| 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
| notch898a wrote:
| Yeah then law enforcement would actually have to catch
| Kadyrov for you know, murdering civilians rather than for
| moving money. That sounds awful.
| timerol wrote:
| > burdening 8 billion law-abiding Citizens with impossibly
| complex and arduous KYC/AML requirements
|
| 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.
| exbanker wrote:
| This is just factually untrue. AML policies unjustly affect
| millions of Americans.
|
| 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.
| btilly wrote:
| While I appreciate the problems that you're describing, I'm
| dubious that it violates the 4th amendment. In particular
| look at the Private Search Exemption. Which says that the
| 4th amendment does NOT apply to searches done by private
| parties. And if a private party has voluntarily done the
| search and reported it to the government, the government
| may redo the search without a warrant, but can't exceed
| what the private party said.
|
| 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?
| notch898a wrote:
| It's not really a private or voluntary search when it's
| imposed by government. Otherwise I could just make a
| _law_ saying everybody who walks down X private road has
| to get searched by private security or turn around,
| obviously that won 't work. The private road owner might
| never wanted to do it, they're only doing because the gun
| of the government man is at their head.
|
| It is a public search carried with the dirty work portion
| of the search done by private entities directed by the
| state.
| btilly wrote:
| But the government DIDN'T impose it. Whatever the bank's
| procedures may be, the regulator can say with a straight
| face, "We didn't tell them to implement those procedures,
| and we didn't tell them to take those actions. That was
| their decision."
|
| And, unbelievable as it may seem, the government won't be
| exactly wrong either.
| pjkundert wrote:
| I'm always gobsmacked at the level of ... jawdropping "Let
| them eat cake!" self-delusion displayed by some wealthy
| people.
|
| "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.
| notch898a wrote:
| I thought their response was sarcasm. Surely no one would
| seriously think it is reasonable to be questioned over
| the phone over $10k which is what, enough to cover a
| month of expenses for an upper middle class family in
| Manhattan or San Francisco?
|
| As for a SAR, lmao. It's illegal for them to tell you if
| you triggered it, how on earth would you know?
| pjkundert wrote:
| Ihre Papeire bitte.
|
| 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
| ourmandave wrote:
| I dunno, I sent Sam Bankman Fried all my Galactic fiat credits,
| and suddenly couldn't make withdrawals.
|
| I called my senator to look into it, but then I find out the
| Emperor has dissolved the senate.
| irusensei wrote:
| It is expensive to keep a crime and corruption department on your
| banking institution. If you are dealing with a millionaire who is
| related to some oil mogul in Russia you can do your due diligence
| and Vladimirovich can hire a team of accountants to prove that
| his business is legit and not at all related to the corporativist
| oligarchy his uncle runs. Or it might be, but the risk vs reward
| is good enough to turn a blind eye for now.
|
| 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.
| malux85 wrote:
| Also - wait until Ivan has put 10k in your system, _then_ ask
| for the documents and refuse to give the money back hoping he
| will abandon it.
|
| - Lawful evil AML companies
| notch898a wrote:
| Or send him a check for the balance and then put derogatory
| information under chexsystems and all the other banking
| blacklists so it can't be cashed.
| irusensei wrote:
| I think I've heard someone calling this shotgun KYC. They
| will allow you to deposit but as soon as you show signs of
| using that money they take it as hostage until you prove you
| are not a criminal.
| cmeacham98 wrote:
| Common with offshore online casinos: you can deposit and
| lose your money, but as soon as you try to withdraw
| winnings the KYC rolls out and you better hope you're not a
| US citizen because you weren't even supposed to sign up in
| the first place then.
| [deleted]
| josephcsible wrote:
| Why is "if you gambled but we found out you weren't
| allowed to gamble, we'll take back your winnings but not
| give back your losses" legal? Shouldn't it have to be
| either "we'll reset everything back to before you
| gambled" or "everything you already did stands; you just
| can't do anymore (and are probably in trouble)"?
| cmeacham98 wrote:
| It probably isn't, but generally their ToS says you're
| not allowed to be in the US when you sign up, and they
| don't operate in the US. So you'd have to go sue them in
| the jurisdiction of whatever island nation they're
| operating in (or get the authorities there to care).
|
| 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.
| josephcsible wrote:
| Why couldn't such a judgment be enforced from a US court,
| by forbidding any American banks from sending any money
| to their bank until they pay up?
| cmeacham98 wrote:
| These sites typically operate using deposits/withdrawals
| in cryptocurrency.
| tablespoon wrote:
| > Why is "if you gambled but we found out you weren't
| allowed to gamble, we'll take back your winnings but not
| give back your losses" legal?
|
| 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).
| earnesti wrote:
| It is likely not legal but the gamblers are too lazy to
| take it to courts I would guess, and the casinos are in
| jurisdictions where it might be really tedious or
| expensive.
| wolongong942 wrote:
| Sites like Paypal and Skrill did this because they know
| most people would otherwise just cancel on sign up , and
| when you've got money locked in you have no choice but to
| complete verification. Thankfully i haven't had to deal
| with their crap in the past 4 years due to better options
| existing.
| JumpCrisscross wrote:
| > _annoy him so much with retarded requirements he will leave
| by himself_
|
| 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.
| irusensei wrote:
| > This is rare.
|
| 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.
| mistrial9 wrote:
| a large backdrop to this topic is controlling Oil and Gas
| trade dollars .. narco dollars is real and large, but OaG
| trade volumes are large and increasingly fought over..
|
| also agree on the xenophobia -- but instead of culture this
| is turf wars over control of large dollar trade over time
| NovemberWhiskey wrote:
| > _I am convinced xenophobia is alive and well through the
| financial system._
|
| It's really not. You don't make money by unnecessarily
| turning business away.
| btilly wrote:
| It really is.
|
| 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.)
| NovemberWhiskey wrote:
| > _The result of which is indistinguishable from
| xenophobia._
|
| 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.
| btilly wrote:
| Any instance is plausibly not xenophobia. Which ones are
| is hard to prove.
|
| 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.
| Mandatum wrote:
| Sure, but they like to allow as many of them in as they
| legally can. Hence the questions.
| tagyro wrote:
| The same thing happens in Germany, with N26. Under the pretext
| of "regulatory requirements", they ask for information like
| income amount and source, employment status and industry etc.
| BaFin (the banking supervisory authority) is ignoring this,
| like they did with Wirecard
| pyuser583 wrote:
| There's a really great book called Kleptopia by T. Burgis. It's
| about how wealthy oligarchs use the Western legal and banking
| systems.
|
| 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._
| Spooky23 wrote:
| Real estate is the ultimate legal grift in the US. The whole
| tax system is wired up to the benefit of real estate
| investors.
| fedreserved wrote:
| [dead]
| psobot wrote:
| Every post from patio11 is such a joy to read: precise, exact,
| descriptive, and entertaining. I'd love to understand where his
| writing style comes from and how to emulate it.
| abdullahkhalids wrote:
| I really hope he compiles these blogposts into a book. There is
| so much nuanced industry knowledge here.
|
| > 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.
| mablopoule wrote:
| Agree, It's the perfectly balanced between "too dry/academic",
| or "too vague/gimmicky".
|
| 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...
| exbanker wrote:
| The biggest money launderers are close to those who write the AML
| policies.
|
| 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.
| mmerlin wrote:
| Thanks to the Wikileaks effect of the internet (rapid info
| declassification + sharing) more corruption is able to be
| exposed, and the scale is shocking and enormous.
|
| 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...
| sjy wrote:
| Source shows the opposite: although Australia is declining in
| the rankings, it remains in the top 10% of least corrupt
| countries.
| HWR_14 wrote:
| Like, they offered you $1MM (clean) to put $100MM cash in a
| suitcase and smuggle it through customs? Or to babysit it on a
| chartered flight and claim it was yours at customs? Because
| those feel pretty different.
| fragmede wrote:
| I doubt the $1M in cash was in any way clean.
| HWR_14 wrote:
| I assumed they were offering him clean cash. Maybe it was a
| "just help yourself to 1% of the bag". At any rate, the
| perk of working for money launderers and literally
| depositing the dirty money is you should be able to do the
| exact same strategy with your million.
| wcunning wrote:
| The best thing I've read on this topic is from Matt Levine at
| Bloomberg, restated in his newsletter on Wednesday: "In general,
| the chief compliance officer at any company has a dial in front
| of her that she can turn to get More Crime or Less Crime, and at
| a normal company -- a bank, for instance -- her job consists of
| (1) turning it most of the way toward Less Crime, but (2) not all
| the way, and (3) acting very contrite when politicians and
| regulators yell at her about the residual crime. "We have a zero-
| tolerance policy for crime," she will say, and almost mean."
| josephcsible wrote:
| > At many institutions, one SAR is a non-event. Two, for a retail
| client, means one gets a letter saying the bank wishes you the
| best in your future endeavors and will not bank you anymore. That
| letter will often mention that this is a commercial decision of
| the bank and will not be reversed. Some clients receiving that
| letter will, on attempting to open account at a different bank,
| get refused because the first bank entered them into Chexsytems
| as "account closed at bank's discretion" and the second bank, on
| reviewing that entry, said "yep, we are not touching this hot
| potato."
|
| > 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"?
| notch898a wrote:
| Instigators of brutal mass violence and instability should be
| eliminated from the financial system at all costs. Ban the US gov
| from the finance system and their laundering of public money for
| war crimes.
| coderintherye wrote:
| Excellent write-up.
|
| 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.
| miohtama wrote:
| The problem with compliance is that it is pseudoscientific.
| There is no independent oversight: all regulation and tools are
| promoted by compliance companies selling those tools. There is
| no penalty for punishing innocent. There is no reasonable cost.
| More is always better. There is no court to complain or a
| channel to opt out.
|
| 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...
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