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Squillions: How money laundering won

lrb.co.uk

181–190 of 238 posts

Re: Squillions: How money laundering won

#181

The true crime is involving a multinational corporation in a transaction between two private individuals at the local market. I like cash because it's direct, and where possible I avoid paying by card because I don't want the merchant to pay fees to third parties. In Europe, most of the time, using cash doesn't imply avoiding taxes on the transaction, but having cash is essentially sovereignty .

Sovereignty or not, at least in Germany, cash-only restaurants are definitely at least as much about tax evasion, especially now that card interchange is heavily regulated in the EU.

There were even complaints that lowering the restaurant sales tax (which happened a while ago) would be unfairly disadvantaging small restaurants, since benefiting from a tax cut requires paying taxes in the first place…

Re: Squillions: How money laundering won

#182

Earlier quoted context omitted.

My business needs to insure cash that we keep at the shop in case we get robbed, but that amount is much much less than we pay in credit card fees. In other words, we would much prefer customers to pay with debit or cash.

Is this comparison made with the cost of transactions in the US or elsewhere? For example in Europe interchange fees are generally much lower, especially for debit cards which are also more common than credit cards.

Interchange for debit and credit cards is now almost the same in Europe (0.2% vs. 0.3%).

Re: Squillions: How money laundering won

#183

Earlier quoted context omitted.

Most of your cash back money actually comes from fees that merchants pay. In the US and especially for credit cards with cash back those fees can be quite high, and unfortunately it's illegal for merchants to discriminate against credit cards with high fees.

> it's illegal for merchants to discriminate against credit cards with high fees Do you have a source for this? Often times merchants don't accept American Express because it charges higher fees [1]. [1] https://www.bankrate.com/credit-cards/business/why-american-...

Those rules are about discriminating against various cards from the same brand. They have also been significantly limited in many jurisdictions by now.

Re: Squillions: How money laundering won

#184

Earlier quoted context omitted.

In many cases they do actually offer the discount (or tack on the "hidden" fee for using a credit card). In some markets there are also sellers who only accept cash (often discount stores etc.) and correspondingly have lower prices, which is a slightly more inconvenient version of the same thing if you patronize them. Moreover, we should encourage every retailer to offer this, because getting 2% back (or less) while…

Depends on your points usage, airline points can be much more valuable than the 3% fee.

On average they’re worth much less. After all, why would airlines cross-subsidize a card on which they earn <3%?

Re: Squillions: How money laundering won

#185
post #113

Aside: The author of this article wrote a fantastic novel that not a lot of people know about called “The Debt to Pleasure”. One of the best instances of the “unreliable narrator” I’ve ever read.

I enjoyed it too, a long time ago, and some sentences have stuck with me. This is the first time I’ve seen someone mention it. Felt inspired by Pale Fire.

…another fantastic book.

Re: Squillions: How money laundering won

#186
post #65

Earlier quoted context omitted.

> Likely the main driver for this was tax avoidance. It's not just that, though. It's common here in France for credit card operators to have fees in the 5-10% range (or 0.30€ per operation + 2% of the amount). That's why you often see signs « card accepted above 10€ », and that's why your local shop will probably not mind if you're missing 10 cents when paying cash.

> It's common here in France for credit card operators to have fees in the 5-10% range (or 0.30€ per operation + 2% of the amount) Interchange in the EU is capped at 0.4% for credit cards. Typical costs for processing are much lower than 5-10%. For example, Adyen charges the 0.4% interchange + their fee of 0.6% and a flat 0.11€. On a 10€ transaction, that's 2.1%. In most cases this is cheaper than handling cash. When…

> Interchange in the EU is capped at 0.4% for credit cards

Still clients pay much more. To be fair, the prices i remember are from 15 years ago, and now there seems to be better offers for small businesses. For example, SumUp proposes 1.75% flat (no per-transaction fee). But yes, i'm quite sure that's not the kind of fees Carrefour or FNAC are paying.

Re: Squillions: How money laundering won

#187
post #69

I learned a lot about the AML system many years ago and still have some books about how it works on my bookshelf. It's fascinating stuff. A few minor comments. My wife and I have owned and used 1000 CHF notes quite a few times in the past. The last two times we moved apartments I paid part of the moving fee with a 1000 CHF note. We've also bought furniture this way. Nobody was surprised to see this and the notes were…

I'm not suprised that in the swiss economy no one bats an eye at 1000 CHF bank notes. After all the swiss are historically known for being the classy alternative to launder and store your ill gotten gains from, for example, your stint as the dictator of an African country. But there has been some changes in recent years so I don't know how it is today.

That's a sort of standard cope found abroad but bears no relation to reality. It's not easier to launder money in Switzerland vs anywhere else. Actually it's much harder because of the generally high level of policing here. Dictators and oligarchs often end up in London instead.

Look at the article and note the common themes: money is frequently laundered through dodgy chains of high street stores that don't seem to have any actual customers. Everyone is aware of this problem but nobody solves it. What the article doesn't explain is why: it's because these chains are largely owned by ethnic minorities and the left wing governments that have ruled Britain for decades are terrified of anything that looks like an ethnically targeted crackdown, or anything that could be called "Islamophobia".

Good luck running a fake vape shop in a Swiss village, lol. I've never seen or heard of such a thing here. In Britain you can just drive for a while and see lots of them. Look at the sibling comments where British police won't even investigate car theft (the idea there's not lots of street crime there is crazy). Come visit Zürich and it won't take long until you see bobbies on the beat, just cruising around looking for trouble. Levels of attention to low level street crime are completely different.

The origins of the Switzerland/ML link are the numbered (anonymous) bank accounts available and used in WW2, often by Jews trying to preserve their wealth from confiscation by the Nazis. Along with a general culture of financial privacy in which the local governments are constrained by law from obtaining all your transaction data from banks.

The AML system was invented by Americans who cared a lot about the war on drugs, tax evasion, and later, the war on terrorism. They didn't care about financial privacy at all, probably because they never lived right next to Nazis or communists, or experience floods of refugees fleeing totalitarian governments during WW2 (not on the scale Switzerland did). So the global AML system has been built largely by America threatening huge trade sanctions on any country that didn't agree to comply and financial privacy be damned. After all, Uncle Sam is the very avatar of democracy and freedom so who could object to it knowing everything?

Culture of financial privacy American sanctions. Who wins? The answer is the US wins and Switzerland implemented all the rules long ago. Swiss citizens get some level of privacy from their own government, but Swiss banks will hand over all your data and then some to the US government if you're a "US person" - a category much broader than merely being a US citizen. So banks and sometimes other companies here often have you declare that you're not a US person because dealing with such persons results in the full force of the AML/FATCA compliance cannon being pointed at the org and it's too expensive and dangerous to deal with.

Re: Squillions: How money laundering won

#188
post #69

Earlier quoted context omitted.

I'm not suprised that in the swiss economy no one bats an eye at 1000 CHF bank notes. After all the swiss are historically known for being the classy alternative to launder and store your ill gotten gains from, for example, your stint as the dictator of an African country. But there has been some changes in recent years so I don't know how it is today.

The usual (gu)estimate is that 1 to 3% of UK GDP is exposed to suspicious foreign wealth. It is estimated to be 15 to 20% of Switzerland GDP today. So indeed, it doesn't make sense for Switzerland to limit circulation of cash or increase tracability.

Those estimates aren't based on anything real. The entire financial system including things like insurance and pensions is only 10% of Swiss GDP. Private finance is like 1% or less. And the AML rules are the same as everywhere else because they're standardized by the FATF.

You get a lot of nonsensical talk in other countries about the Swiss economy because the alternative would be to admit that it's a genuinely strong economy and thus that the Swiss are doing things right. There's a culture in the British civil service of assuming there's nothing that can be learned from other countries policy-wise.

Re: Squillions: How money laundering won

#189

I learned a lot about the AML system many years ago and still have some books about how it works on my bookshelf. It's fascinating stuff. A few minor comments. My wife and I have owned and used 1000 CHF notes quite a few times in the past. The last two times we moved apartments I paid part of the moving fee with a 1000 CHF note. We've also bought furniture this way. Nobody was surprised to see this and the notes were…

Which AML books would you recommend?

I don't know of one that covers everything. Treasury's War is a sort of auto-biographical insider oriented history written from the perspective of someone in the Treasury Department, using the system to chase "terrorists" (often just random Muslim NGOs or orgs with zero evidence of terrorist involvement). Other books cover parts of the system incidentally, like the Banker's Plumbers Handbook (warning: self published, roughly edited).

A lot of what I learned about it, I learned by reading random documents published by governments designed for people working in regulated industries. Or by talking to people who worked in banks or regulators themselves. AML doesn't just cover banks but also in some countries casinos, car dealerships, lawyers, auction houses... it's like trying to push down on mercury so the scope of the rules constantly expands.

Re: Squillions: How money laundering won

#190
post #182

Earlier quoted context omitted.

Is this comparison made with the cost of transactions in the US or elsewhere? For example in Europe interchange fees are generally much lower, especially for debit cards which are also more common than credit cards.

Interchange for debit and credit cards is now almost the same in Europe (0.2% vs. 0.3%).

Yeah it’s the US credit card fees that are the real problem. No reasonable person would argue that Visa should get to be a 3% tax on all consumer financial activity.
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