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Money Laundering and AML Compliance

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161–170 of 218 posts

Re: Money Laundering and AML Compliance

#161

Earlier quoted context omitted.

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

Funniest AML thing I ever did. Went to open a new account in the app, it's like sorry you haven't verified your identity can't do it through the app. Okay. Walk into a branch, ask to make a new account. They're like nah, you need to come back with proof of where you live before we can verify your identity. I'm literally standing in front of you. With ID. I already have 3 accounts, what's a 4th?

They would need a recent proof of address to know where you live.

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.

Re: Money Laundering and AML Compliance

#162
post #152

Earlier quoted context omitted.

Yes, actually, the American mafia has declined severely since its heyday. There are surely many reasons, as it's part of a broader decline in crime in recent decades, but the increased difficulty of cleaning dirty money is part of it. 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 di…

The Mafia just bought politicians and now operate their rackets according to law. Can't commit something illegal when it's explicitly legal.

And this, right here, is the fundamental problem with all of this. "Legal" vs "illegal" doesn't really tell us much these days about the value of the thing in question. Civil asset forfeiture losses per year long ago crossed the amount lost to simple robbery, politicians engaging in insider trading has long been seen as perfectly normal and acceptable, and large multinational corporations buying off politicians and getting return on investment in the tens of thousands of percent, likewise.

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?

Re: Money Laundering and AML Compliance

#163
post #128

Earlier quoted context omitted.

An innocent buyer would just say “I sold my home of 20 years to some company - Perwinkle LLC of Bermuda. Pretty strange, but not my problem.” 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…

As separation of concerns, this sounds reasonable and efficient: why should it be the financial sector's job to weigh whether someone is good or bad? 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 diffe…

> why should it be the financial sector's job to weigh whether someone is good or bad

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).

Re: Money Laundering and AML Compliance

#164

Earlier quoted context omitted.

The USA is the only economically significant country that opts out of participating in the Common Reporting Standard (CRS) data exchange. The USA claim that FACTA is enough. This puts the USA in the unique position where it only receives information from other countries through FACTA and its IGAs, without providing any information in return. Why doesn't it provide information in return? Well, only specific bank accou…

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). You say that investment accounts are subject to FACTA, but not anymore if dividends or interest earnings fl…

I am confused as well. Maybe you could share a reference? I am trying to understand how this would affect 401K/IRAs for people leaving the US.

Re: Money Laundering and AML Compliance

#165

Earlier quoted context omitted.

Well, there was that entire huge NFT crypto scam bubble. 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.

Ah, I think I’m beginning to understand… 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.

It can't be proof of ownership if it's all of those things because ownership is decided by eg judges and not what's written in a random database somewhere.

Re: Money Laundering and AML Compliance

#166
My hope is that someday people will be able to open bank accounts and transfer money online without revealing their deadname to the bank, having it shoved in their face in bank websites and emails and phone calls, and doxxed to everybody sending them payments for purchases, or even a $1 donation over Ko-Fi.

Re: Money Laundering and AML Compliance

#167

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 d…

It's much more of a financial intelligence collection operation.

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).

Re: Money Laundering and AML Compliance

#168

Excellent essay. 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 accou…

The article is leaving out the fact that the $10k threshold is not at the discretion of the bank. It comes directly from the Bank Secrecy Act (https://en.wikipedia.org/wiki/Bank_Secrecy_Act).

The magic number is not the bank's magic number, it's politician's magic number.

Re: Money Laundering and AML Compliance

#169
post #128

Earlier quoted context omitted.

As separation of concerns, this sounds reasonable and efficient: why should it be the financial sector's job to weigh whether someone is good or bad? 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 diffe…

I'd go further and say it isn't the job of Western countries to fix corruption. If Putin wants to fleece his people he can take his billions to a European bank.

I'd ask a slightly different set of questions: (1) "Is it good for {country} if {country's corrupt leaders} are able to bank elsewhere?" (2) "Is it good for {bank elsewhere country} if they accept corrupt money?"

(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!

Re: Money Laundering and AML Compliance

#170
If you are a US citizen and you have any kind of middle class life that crosses international boundaries, you quickly become familiar with many of these terms and processes.

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.

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