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Money Laundering and AML Compliance

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Re: Money Laundering and AML Compliance

#201

Post by super256 »

nfzOndjy wrote: post #164
quelltext wrote: post #136

Earlier quoted context omitted.

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.

The comment above should clarify a few things.

Unfortunately, I don't have a reference, as I was told this by an advisor from PWC a few years ago. I guess you could contact any good tax consultant, tell him the details, and let him look into it. I have no idea about how 401K works in the US.

Re: Money Laundering and AML Compliance

#202

Post by citrin_ru »

koheripbal wrote: post #114
irusensei wrote: post #4

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 bli…

Being a millionaire is no where near enough for banks to look the other way. 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.

May be being a millionaire is not enough to get a non-hostile treatment from a bank but the problem is that the cost of compliance is of the same order for all customers (because reporting thresholds where exist are very low like €1K or $10K) but per-customer profit is different. This creates an incentive to disproportionately deny service to non-rich customers. This would be much less of a problem if government regulators where focused on people/entities which operate with truly large amounts of money so ordinary folks can stay under the radar and not be a burden for a bank. But for some reasons governments wants have a grip almost on everyone. So having below median wage as the main source of income doesn't not make one a low risk customer for a bank if there are other "risk" factors (like being an immigrant).

Re: Money Laundering and AML Compliance

#203

Post by wpietri »

dsfyu404ed wrote: post #191
wpietri wrote: post #188

Earlier quoted context omitted.

Yes, the status quo is definitely better. The numbers on total AML cost vary widely, and I think the high-end numbers are suspicious because there are incentives to inflate them. But taking them at face value, AML costs the US financial industry about 1% of revenue. That is nothing compared to the costs of crime in high-crime/high-corruption societies. And looking at dollars alone doesn't paint a true picture. Crimin…

>That is nothing compared to the costs of crime in high-crime/high-corruption societies. Is it really though? How much was the US (or any other equally developed country) losing to crime and corruption prior to all this KYC/AML BS? Not that much. Letting a mobster have a bank account doesn't magically turn your country into Nigeria. If anything it makes your country better because the mobster doesn't have to store th…

> Is it really though?

It really is. People flee high-crime/high-corruption countries for good reason. They also have demonstrably worse economies over the long term. KYC/AML efforts are only part of the difference, of course. But we've ended up with KYC/AML because it's one of the least intrusive ways of keeping crime in check.

If you think otherwise, I encourage you to go live in a high-crime/high-corruption country and let me know how much you're enjoying the "freedom".

Re: Money Laundering and AML Compliance

#204

Post by wpietri »

from wrote: post #200
wpietri wrote: post #126

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…

“Money laundering” became a crime in 1986. The bank secrecy act originally just introduced the $10000 threshold ($80000 now) and record keeping requirements. It was later amended in the 90s to add suspicious activity reporting. Nearly all of the major mafia cases predate this. There are many reasons for this decline ( https://www.journals.uchicago.edu/doi/10.1086/706895 ) but mostly it has to do with RICO, wiretap ev…

So you're saying the improved tracking of criminal proceeds, which started during the peak of the mafia's prominence and improved further as the mafia declined, had nothing to do with that decline? And further, has nothing to do with other criminal organizations not rising to prominence to fill the same role? I agree other things played a role, of course. You get to believe what you want, obviously, but I'm sure not persuaded.

Re: Money Laundering and AML Compliance

#205

Post by raincom »

nulbyte wrote: post #172
raincom wrote: post #146

Earlier quoted context omitted.

These days, AML algos look at cash transactions in a sliding window fashion: $2k ATM deposit on Jan 1, 2022; $3k cash deposit on Jan 21, 2022; $3k cash deposit on Feb. 28, 2022; $3k cash deposit on March 18, 2022. Boom, in the span of 3 months, $11k cash deposits, back office (not tellers) can file a SAR.

Sort of. If these are normal transactions given the customer's trade, no report is made. SARs are only filed if you are suspicious (that's what the S stands for) that a crime has occurred. This is where knowing your customer comes into play. 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 f…

Just go to bankersonline.com and see the kind of responses there. These AML folks rather file SARs for every trivial thing than otherwise.

Re: Money Laundering and AML Compliance

#206

Post by from »

wpietri wrote: post #204
from wrote: post #200

Earlier quoted context omitted.

“Money laundering” became a crime in 1986. The bank secrecy act originally just introduced the $10000 threshold ($80000 now) and record keeping requirements. It was later amended in the 90s to add suspicious activity reporting. Nearly all of the major mafia cases predate this. There are many reasons for this decline ( https://www.journals.uchicago.edu/doi/10.1086/706895 ) but mostly it has to do with RICO, wiretap ev…

So you're saying the improved tracking of criminal proceeds, which started during the peak of the mafia's prominence and improved further as the mafia declined, had nothing to do with that decline? And further, has nothing to do with other criminal organizations not rising to prominence to fill the same role? I agree other things played a role, of course. You get to believe what you want, obviously, but I'm sure not…

> So you're saying the improved tracking of criminal proceeds, which started during the peak of the mafia's prominence and improved further as the mafia declined, had nothing to do with that decline?

Very few transactions hit the CTR threshold at the time it was instituted. It was nearly $80000 in today's dollars. Computerization was also very new so doing anything useful at scale with the records was difficult for the government.

I'm not a lawyer but I read RECAP and have read the appeals from a lot of these cases and very rarely were financial records mentioned as investigative leads. They almost always relied on informants who were a part of the scheme and electronic surveillance to figure out how the crime worked. Even now, how many criminal investigations do you think start from SARs? Obviously we'll never know because they don't release that, but I don't think there's any reason to think it is a substantial fraction. Money laundering in most cases nowadays is just tacked on after they discover that someone used money from the crime they already knew about.

Re: Money Laundering and AML Compliance

#207

Post by meekaaku »

pyuser583 wrote: post #18
irusensei wrote: post #4

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 bli…

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 vani…

Honest question, where does this happen? If you are buying a house, the solicitor or whoever is dealing with legal/deed etc will ask where the money came from, don't they? In the UK atleast that seems to be the case. Lenders are fine as long as you can show your future income (eg by being employed), but not much about how you got your initial deposit money.

Re: Money Laundering and AML Compliance

#208

Post by richbell »

miohtama wrote: post #39
coderintherye wrote: post #7

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…

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 snake…

Anecdotally, I know of at least one large FI that tells auditors it's doing x, y, and z for security, when in reality their security practices are abysmal. They spend $1MM a year on a vendor product that in theory does x, y, z (though quite badly), install it on a server, and then never think about it again.

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'.

Re: Money Laundering and AML Compliance

#209

Post by miohtama »

richbell wrote: post #208
miohtama wrote: post #39

Earlier quoted context omitted.

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 snake…

Anecdotally, I know of at least one large FI that tells auditors it's doing x, y, and z for security, when in reality their security practices are abysmal. They spend $1MM a year on a vendor product that in theory does x, y, z (though quite badly), install it on a server, and then never think about it again. I've had important projects canceled because executives go 'oh we already have $tool this project is a waste o…

You are not buying a solution, you are buying compliance. It does not matter if problem is either hidden or removed because the outcome for the executive success is the same. Hiding usually costs less.

Re: Money Laundering and AML Compliance

#210

Post by super256 »

nfzOndjy wrote: post #164
quelltext wrote: post #136

Earlier quoted context omitted.

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.

I found some resource here:

https://uskanzlei.com/pages/usa-oecd-crs-facta-aia

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