5 ms·

> The premise is that because corruption involves money and money involves banks and London has lots of banks, transitively, London is very corrupt. The premis

> The premise is that because corruption involves money and money involves banks and London has lots of banks, transitively, London is very corrupt. The premise was that the banks of London launder huge amounts of drug money... I don't necessarily agree with this article but you're just avoiding the points it makes.

sievebrain 10y ago
Money laundering used to have a fairly precise definition when the crime was first invented in the 1970's: "knowingly working to disguise the origins of money gained through crime". But over time various people (primarily aggressive tough-on-crime politicians) have watered down the definition until it's now more like "any financial transaction that someone somewhere doesn't like". We can see the slide in the USA PATRIOT Act which removed the "knowingly" from the original definition. Now you can do money laundering without even being aware of it, under the American definition, simply by interacting with money that was earned by criminals. Once they started chipping away at the mens rea requirement, the standards had to be redefined. Now it's not enough to avoid money you know to be criminal. You also have to avoid money you merely suspect might be criminal, lest it later on turn out to be the result of crime and you get sucked in after the fact. Hence banks turning away people who want to deposit cash. The fact that the cash has innocent origins is insufficient. Then they went further and defined money laundering as failing to do 'enhanced due diligence' on any transactions related to a 'politically exposed person'. There is no clear definition of either term, meaning banks have to make it up as they go along. But the spirit of the law is that a PEP is anyone who might conceivably be corrupt. This was meant to fight corruption by forcing banks to investigate anyone who might be receiving bribes. With no definition and heavy penalties for non-compliance, which by this time is entirely in the eye of the beholder, private firms sprang up to compile blacklists of PEPs, some of which contain millions of people. There is of course no way to get yourself off such a blacklist. Now throw sanctions compliance into the concept of money laundering and now you can be an evil corrupting money launderer simply by processing a payment from a firm in country A to a firm in country B where there are no laws in either country A or B against the trade, and the firm in country B is run by a guy who some powerful bureaucrat has decided is in some way shady. No evidence or trial is required and there's usually no way to get yourself off such sanctions lists. One US list of sanctioned people is simply a list of names with no other clarifying information, meaning people with generic names end up being treated as guilty-until-proven-innocent. By the time we're done, you realise that every bank in the world is guilty of the modern definition of money laundering, simply by virtue of working with money. If you're interested in the topic of abuse of AML laws, read the book "Treasuries War".
- danieltillett 10y ago
  These secret lists are a real problem. I have to hope that no one sharing my name does anything wrong (or is put on one of these lists by mistake). When will the people in charge of these programs realise that names are not a unique identifier.
- Chestofdraw 10y ago
  How do you feel about HSBC being convicted of money laundering? Do you feel that they were wrongly convicted based on the original definition of the term?
  - sievebrain 10y ago
    They were not convicted of anything, if you're referring to the Mexico/Iran story which I guess you are. You heard the US Government's side of the story. The USG agreed not to take the charges to court as long as HSBC accepted big fines and didn't say anything (i.e. didn't attempt to defend itself in public). So there was never any court case or any judicial process involved. If you hear only the government's story and the other side is gagged, the listener will always conclude the perp is guilty. You can dig in and find the other side if you like: I did. The case looks a lot less clear, then. For instance HSBC was accused of laundering lots of money for Mexican drug cartels. Most people think that means "knowingly laundering". It doesn't: the money in question actually came from remittances firms. The American's case was something like this: there's so much money being remitted across the border, there must be drug money in there. HSBC is moving money for remittances firms. Therefore HSBC must be moving drug money without knowing. Therefore their AML standards are too low, therefore they are money laundering. As you can see, I am not sympathetic to this kind of logic or "justice". Certainly the US case would not have been successful in court under the original definition as they never presented evidence any kind of conspiracy inside HSBC to launder drug money. The allegations revolved entirely around HSBC not trying hard enough, which is not the same thing. Actual convictions for anti-money laundering offences are very rare. This kind of fine-and-silence outcome is much more common. The reasons are simple. The current situation is kind of like a Cuban missile crisis. It's very volatile and unstable. Every banker knows that every banker is guilty of some kind of AML offence, because it's impossible to work in finance and not be guilty. The laws are just that badly written. What's more, western governments know this too. Almost every big bank has been fined under AML laws in the past 20 years or so. But American justice is extremely vicious (and it's in America where the whole idea of anti-money-laundering originated). Like many laws, AML offences can carry 20 year jail sentences. If you mix 20 year sentences with "everyone is guilty" you have a situation that is like a minefield. If the government actually started prosecuting bankers under these laws, there's a risk they might win and that could be apocalyptic - it could trigger a collapse of the entire financial system as bankers exited the industry en-masse. In the HSBC case, one part of the US Gov (either Treasury or DoJ, I forget which) actually did want to prosecute. The other part convinced them not to, using the above logic. The chance of successfully jailing a banker is high enough that they can't actually do so, lest it cause the industry to self destruct.

sievebrain 10y ago

Money laundering used to have a fairly precise definition when the crime was first invented in the 1970's: "knowingly working to disguise the origins of money gained through crime". But over time various people (primarily aggressive tough-on-crime politicians) have watered down the definition until it's now more like "any financial transaction that someone somewhere doesn't like". We can see the slide in the USA PATRIOT Act which removed the "knowingly" from the original definition. Now you can do money laundering without even being aware of it, under the American definition, simply by interacting with money that was earned by criminals. Once they started chipping away at the mens rea requirement, the standards had to be redefined. Now it's not enough to avoid money you know to be criminal. You also have to avoid money you merely suspect might be criminal, lest it later on turn out to be the result of crime and you get sucked in after the fact. Hence banks turning away people who want to deposit cash. The fact that the cash has innocent origins is insufficient. Then they went further and defined money laundering as failing to do 'enhanced due diligence' on any transactions related to a 'politically exposed person'. There is no clear definition of either term, meaning banks have to make it up as they go along. But the spirit of the law is that a PEP is anyone who might conceivably be corrupt. This was meant to fight corruption by forcing banks to investigate anyone who might be receiving bribes. With no definition and heavy penalties for non-compliance, which by this time is entirely in the eye of the beholder, private firms sprang up to compile blacklists of PEPs, some of which contain millions of people. There is of course no way to get yourself off such a blacklist. Now throw sanctions compliance into the concept of money laundering and now you can be an evil corrupting money launderer simply by processing a payment from a firm in country A to a firm in country B where there are no laws in either country A or B against the trade, and the firm in country B is run by a guy who some powerful bureaucrat has decided is in some way shady. No evidence or trial is required and there's usually no way to get yourself off such sanctions lists. One US list of sanctioned people is simply a list of names with no other clarifying information, meaning people with generic names end up being treated as guilty-until-proven-innocent. By the time we're done, you realise that every bank in the world is guilty of the modern definition of money laundering, simply by virtue of working with money. If you're interested in the topic of abuse of AML laws, read the book "Treasuries War".

danieltillett 10y ago
These secret lists are a real problem. I have to hope that no one sharing my name does anything wrong (or is put on one of these lists by mistake). When will the people in charge of these programs realise that names are not a unique identifier.
Chestofdraw 10y ago
How do you feel about HSBC being convicted of money laundering? Do you feel that they were wrongly convicted based on the original definition of the term?
- sievebrain 10y ago
  They were not convicted of anything, if you're referring to the Mexico/Iran story which I guess you are. You heard the US Government's side of the story. The USG agreed not to take the charges to court as long as HSBC accepted big fines and didn't say anything (i.e. didn't attempt to defend itself in public). So there was never any court case or any judicial process involved. If you hear only the government's story and the other side is gagged, the listener will always conclude the perp is guilty. You can dig in and find the other side if you like: I did. The case looks a lot less clear, then. For instance HSBC was accused of laundering lots of money for Mexican drug cartels. Most people think that means "knowingly laundering". It doesn't: the money in question actually came from remittances firms. The American's case was something like this: there's so much money being remitted across the border, there must be drug money in there. HSBC is moving money for remittances firms. Therefore HSBC must be moving drug money without knowing. Therefore their AML standards are too low, therefore they are money laundering. As you can see, I am not sympathetic to this kind of logic or "justice". Certainly the US case would not have been successful in court under the original definition as they never presented evidence any kind of conspiracy inside HSBC to launder drug money. The allegations revolved entirely around HSBC not trying hard enough, which is not the same thing. Actual convictions for anti-money laundering offences are very rare. This kind of fine-and-silence outcome is much more common. The reasons are simple. The current situation is kind of like a Cuban missile crisis. It's very volatile and unstable. Every banker knows that every banker is guilty of some kind of AML offence, because it's impossible to work in finance and not be guilty. The laws are just that badly written. What's more, western governments know this too. Almost every big bank has been fined under AML laws in the past 20 years or so. But American justice is extremely vicious (and it's in America where the whole idea of anti-money-laundering originated). Like many laws, AML offences can carry 20 year jail sentences. If you mix 20 year sentences with "everyone is guilty" you have a situation that is like a minefield. If the government actually started prosecuting bankers under these laws, there's a risk they might win and that could be apocalyptic - it could trigger a collapse of the entire financial system as bankers exited the industry en-masse. In the HSBC case, one part of the US Gov (either Treasury or DoJ, I forget which) actually did want to prosecute. The other part convinced them not to, using the above logic. The chance of successfully jailing a banker is high enough that they can't actually do so, lest it cause the industry to self destruct.