8 ms·

The peculiarities of the US financial system make it ideal for money laundering

102 points by chmaynard 9y ago

orf 9y ago
> The international community usually looks to the US to be a leader in criminal justice, transparency, and the rule of law. They do?
- TravelTechGuy 9y ago
  I just attended a crypto convention, where most of the speakers, some with legal background, said their respective countries are waiting to see how the US SEC rules on ICOs, before taking a similar approach.
- pessimizer 9y ago
  They have to use the US as a ceiling on the amount of regulation they can do, or else business will just move to the US while still operating in their country.
  - Buldak 9y ago
    I guess it depends on whether you interpret "leadership" to entail virtue or excellence as opposed to influence or impact.
- FabHK 9y ago
  Certainly not for criminal justice. A criminal lawyer friend of mine in Berlin considers the US system a shameful travesty (1% of the adult population in prison, plea bargaining, for-profit-prisons, death penalty, and more - IANAL). Transparency and the rule of law – historically, certainly. Recently, maybe less so. FWIW, the 2017/2018 World Justice Project's Rule of Law index has the USA on rank 19 (out of 113). EDIT to add source: https://worldjusticeproject.org/our-work/wjp-rule-law-index/wjp-rule-law-index-2017–2018 https://worldjusticeproject.org/our-work/wjp-rule-law-index/...
  - paulie_a 9y ago
    Under no circumstance do you ever need to use the acronym IANAL on the internet.
- IAmEveryone 9y ago
  In some areas, the US was indeed the driving force for changes that I believe anyone would describe as positive. One example is the legality of bribing foreign officials: these bribes were outlawed with the Foreign Corrupt Practices Act in 1977. In my home country of Germany, foreign bribes were not just legal, but actually tax-deductible until the late 1990s.
  - milesrout 9y ago
    In some countries, bribery is just how the system works. I see no reason why it should be illegal. The US has no jurisdiction whatsoever over your actions in another state.
roywiggins 9y ago
The Manafort/Gates indictments, I think, demonstrate how easy it is to launder money into the US and how unlikely it is to get caught. These guys were pretty blatant about it and nothing happened to them, for years, laundering millions of dollars into the US. It's pretty clear that they would have gotten away with it if a precise sequence of events in the last couple of years hadn't happened.
- valuearb 9y ago
  Money laundering is a vague term used to justify intrusive government overreach. If you have $16,000 in cash and deposit $9,000 in your bank account one day and $7,000 the next, you are a criminal guilty of structuring.
  - eli 9y ago
    That's not what Manafort/Gates were accused of doing.
    - valuearb 9y ago
      They are accused of being unregistered agents for the Russian government, violating foreign influence laws, and Manafort bank fraud by lying on a loan application. The money laundering charges were used as leverage to get Gates to turn, which makes one wonder if the government should be allowed such a powerful tool that can be misused against the innocent. Shouldn’t the prosecution be focused on proving their real crimes and not a victimless reporting statute?
      - roywiggins 9y ago
        They were both indicted on tax fraud. By laundering that 30 million, they were also evading taxes on it. The victim is the US government and by extension the US generally. The "reporting requirement" they evaded was... paying taxes. > “Manafort and Gates generated tens of millions of dollars in income as a result of their Ukraine work. From approximately 2006 through the present, Manafort and Gates engaged in a scheme to hide income from United States authorities, while enjoying the use of the money,” the indictment charges. https://www.washingtonpost.com/world/national-security/special-counsel-mueller-files-new-charges-in-manafort-gates-case/2018/02/22/7db99c9c-1716-11e8-8b08-027a6ccb38eb_story.html https://www.washingtonpost.com/world/national-security/speci...
drawkbox 9y ago
Luxury real-estate was looked into in 2016 and up to 30% of deals they looked into were suspicious as money laundering conduits [1]. Who knows how much this inflates real estate values or diminishes needed supply. With Citizen's United vs FEC it is now a massive target for money laundering as well [2]. Tons of foreign money is involved with it and can get in easily with Citizens United [3]. Our politics is going to get much more crazy with not only the foreign money involved but the dark money being cleaned. Russian oligarchs or any group under sanctions also have ways to get money laundered besides the old school ways of casinos, black market products, etc [4]. > According to James Henry, a former chief economist at McKinsey & Company who consulted on the Panama Papers, some $1.3 trillion in illicit capital has poured out of Russia since the 1990s. [4] > In 1998, Russia defaulted on $40 billion in debt, causing the ruble to plummet and Russian banks to close. The ensuing financial panic sent the country’s oligarchs and mobsters scrambling to find a safe place to put their money. [4] > Among the new tenants was Eduard Nektalov, a diamond dealer from Uzbekistan. Nektalov, who was being investigated by a Treasury Department task force for mob-connected money laundering, bought a condo on the seventy-ninth floor, directly below Trump’s future campaign manager, Kellyanne Conway. A month later he sold his unit for a $500,000 profit. The following year, after rumors circulated that Nektalov was cooperating with federal investigators, he was shot down on Sixth Avenue.[4] > In 2013, police burst into Unit 63A of Trump Tower and rounded up 29 suspects in a $100 million money-laundering scheme [4]. [1] https://cnbc.com/2017/08/24/a-third-of-luxe-real-estate-deals-involve-suspicious-activity.html https://cnbc.com/2017/08/24/a-third-of-luxe-real-estate-deal... [2] https://www.theatlantic.com/politics/archive/2013/12/theres-no-way-to-follow-the-money/282394/ https://www.theatlantic.com/politics/archive/2013/12/theres-... [3] https://theintercept.com/2016/08/03/citizens-united-foreign-money-us-elections/ https://theintercept.com/2016/08/03/citizens-united-foreign-... [4] https://newrepublic.com/article/143586/trumps-russian-laundromat-trump-tower-luxury-high-rises-dirty-money-international-crime-syndicate https://newrepublic.com/article/143586/trumps-russian-laundr...
- Consultant32452 9y ago
  Art also. https://www.nytimes.com/2013/05/13/arts/design/art-proves-attractive-refuge-for-money-launderers.html https://www.nytimes.com/2013/05/13/arts/design/art-proves-at...
valuearb 9y ago
The lifeblood of criminal enterprises is revenues that are primarily driven by prohibition. I think I see a better solution.
- eli 9y ago
  Legalize extortion rackets and kickbacks?
  - valuearb 9y ago
    I clearly said primarily. An end to Prohibition leaves organized crime with a tiny fraction of its current revenues. And frees law enforcement to give extortion and kickbacks (along with actual crimes with actual victims) lots more attention.
    - pjc50 9y ago
      Not all this money is drug money; a lot of the international money is the result of corruption or theft from the state.
      - valuearb 9y ago
        That’s clearly not a problem for the US justice system. I’d kind of like it focused on the all of the crimes with US victims that are currently too low priority to investigate, including millions of untested rape kits.
elvirs 9y ago
not sure if starting to require a physical human being as a beneficiary for a company will do much. in post Soviet countries its a requirement and most of the shell companies are registered to some homeless guy or a shepherd who was told sign these papers here is $100. criminal enterprises wont have difficulty finding some poor guy to sign the papers for anything
pessimizer 9y ago
They make it ideal for the wealthy to launder money, rather. It's just a symptom of US general lack of regulation of corporations, other than regulation meant to cripple small corporations that are threatening larger corporations. Just a product of total regulatory capture, as developed in the US from the mid-1890s, secured at the end of the 1910s, and lasted until FDR fixed the economy in the 1930s. The resurgence in the late 1970s which was secured by the late 90s is still operating at peak now, but if you judge by the last time, hopefully this will come to an end soon.
olivermarks 9y ago
The City of London's strange history is a precursor to the convenient Wall Street offshoring and laundering arrangements 'The City of London’s strange history' Maurice Glasman, Labour peer and academic https://www.ft.com/content/7c8f24fa-3aa5-11e4-bd08-00144feabdc0 https://www.ft.com/content/7c8f24fa-3aa5-11e4-bd08-00144feab...
FabHK 9y ago
My impression (and I'm not an accountant or lawyer) is that the US make it very hard for their own citizens (and anyone else) to evade US taxes, but are otherwise happy to host other people's dirty money.
mindslight 9y ago
"Money laundering" is an oxymoron - the entire essence of money is that it is fungible. When you tie the value of some dollars to their supposed history, what you are left with is subjective points that vary based on the political connections required to redeem them. At that point, why not just stop pretending that an individual can have means independent of their standing with the bureaucracy? Like every new regulation, the outrage driving this will be stoked using the egregious examples of powerful criminals, but the actual effects will only ever be felt by the little guy.
- clamprecht 9y ago
  > the outrage over this will be stoked using the egregious examples of powerful criminals, but the actual effects will only ever be felt by the little guy. Can confirm, I'm a little guy, I did 5 years for money laundering.
- Terr_ 9y ago
  You honestly don't believe anybody should ever care if the gold-nugget they are being handed came from a person just murdered outside their store? Like many abstractions, that concept of a fungible, anonymous, history-less, and wholly judgement-free "value" is just a useful fantasy. What bothers me about your post is that it seems you think the fantasy is the true original state of the world... and that the flawed reality is "new" and artificially created by a sinister cabal.
  - mindslight 9y ago
    The fundamental problem here is like your question - conflating two completely separate concepts. A shopkeeper, being a person, should care if someone just murdered someone else outside of their shop. A shopkeeper that has just completed a sale, and then found out the customer is a murdering thief, should feel no compunction about considering the cash in the drawer theirs. They should of course help bring the murderer to justice. Abstractions are only useful if we can rely on them. Under the regime of separate ambient titles (which the concept of money laundering is intertwined with), you can never be sure anything that you have is actually yours! So this creates a whole lot of ambiguity. As I alluded to, this ambiguity erodes the rule of law because it can't not lead to selective enforcement based around the gut feelings of whomever decides if a claim to reverse has merit. And yes, lack of an ambient title most certainly is the base state of the world - it's modern communications technology that has enabled us to even fathom tracking the history of everything. But you're the one strawmanning this "sinister cabal". I would describe it as power tending to coalesce, and emergently promulgating a paradigm that relies on (and thus further necessitates) said power.
Bizarro 9y ago
I don't want the government having its greedy mitts on every financial transaction under the sun.
- RhodesianHunter 9y ago
  It's not black and white. There has to be some middle ground between "big brother sees all" and "the proceeds of illegal activities and rampant corruption flow freely into the pockets of wrongdoers".
  - AnthonyMouse 9y ago
    That middle ground should be for the government to seize the proceeds of illegal activities after proving the illegal activities themselves in a court beyond a reasonable doubt. The government shouldn't be allowed to take shortcuts.
    - CryptoPunk 9y ago
      And what you described is basically the principle of due process, which the creation of money laundering as a category of crime totally undermines in spirit.
huy-nguyen 9y ago
This piece is gold: > One report uncovered an Afghan company that was contracted to supply our troops but was secretly owned by the Taliban.
CryptoPunk 9y ago
The principle behind money laundering laws is exactly like the one behind legislation like FOSTA. It makes people legally responsible for others using the services they provide in connection with a crime. It legally mandates that third party intermediaries act as deputies for regulatory agencies, and disallow private use of the services they provide. Laws like this effectively criminalize privacy in entire categories of human activity, in the name of preempting crime. It's an absolutely terrible way to try to manage risk, and concentrates power in the hands of governing institutions to extremely dangerous proportions.

102 points by chmaynard 9y ago

orf 9y ago

> The international community usually looks to the US to be a leader in criminal justice, transparency, and the rule of law. They do?

TravelTechGuy 9y ago
I just attended a crypto convention, where most of the speakers, some with legal background, said their respective countries are waiting to see how the US SEC rules on ICOs, before taking a similar approach.
pessimizer 9y ago
They have to use the US as a ceiling on the amount of regulation they can do, or else business will just move to the US while still operating in their country.
- Buldak 9y ago
  I guess it depends on whether you interpret "leadership" to entail virtue or excellence as opposed to influence or impact.
FabHK 9y ago
Certainly not for criminal justice. A criminal lawyer friend of mine in Berlin considers the US system a shameful travesty (1% of the adult population in prison, plea bargaining, for-profit-prisons, death penalty, and more - IANAL). Transparency and the rule of law – historically, certainly. Recently, maybe less so. FWIW, the 2017/2018 World Justice Project's Rule of Law index has the USA on rank 19 (out of 113). EDIT to add source: https://worldjusticeproject.org/our-work/wjp-rule-law-index/wjp-rule-law-index-2017–2018 https://worldjusticeproject.org/our-work/wjp-rule-law-index/...
- paulie_a 9y ago
  Under no circumstance do you ever need to use the acronym IANAL on the internet.
IAmEveryone 9y ago
In some areas, the US was indeed the driving force for changes that I believe anyone would describe as positive. One example is the legality of bribing foreign officials: these bribes were outlawed with the Foreign Corrupt Practices Act in 1977. In my home country of Germany, foreign bribes were not just legal, but actually tax-deductible until the late 1990s.
- milesrout 9y ago
  In some countries, bribery is just how the system works. I see no reason why it should be illegal. The US has no jurisdiction whatsoever over your actions in another state.

roywiggins 9y ago

The Manafort/Gates indictments, I think, demonstrate how easy it is to launder money into the US and how unlikely it is to get caught. These guys were pretty blatant about it and nothing happened to them, for years, laundering millions of dollars into the US. It's pretty clear that they would have gotten away with it if a precise sequence of events in the last couple of years hadn't happened.

valuearb 9y ago
Money laundering is a vague term used to justify intrusive government overreach. If you have $16,000 in cash and deposit $9,000 in your bank account one day and $7,000 the next, you are a criminal guilty of structuring.
- eli 9y ago
  That's not what Manafort/Gates were accused of doing.
  - valuearb 9y ago
    They are accused of being unregistered agents for the Russian government, violating foreign influence laws, and Manafort bank fraud by lying on a loan application. The money laundering charges were used as leverage to get Gates to turn, which makes one wonder if the government should be allowed such a powerful tool that can be misused against the innocent. Shouldn’t the prosecution be focused on proving their real crimes and not a victimless reporting statute?
    - roywiggins 9y ago
      They were both indicted on tax fraud. By laundering that 30 million, they were also evading taxes on it. The victim is the US government and by extension the US generally. The "reporting requirement" they evaded was... paying taxes. > “Manafort and Gates generated tens of millions of dollars in income as a result of their Ukraine work. From approximately 2006 through the present, Manafort and Gates engaged in a scheme to hide income from United States authorities, while enjoying the use of the money,” the indictment charges. https://www.washingtonpost.com/world/national-security/special-counsel-mueller-files-new-charges-in-manafort-gates-case/2018/02/22/7db99c9c-1716-11e8-8b08-027a6ccb38eb_story.html https://www.washingtonpost.com/world/national-security/speci...

drawkbox 9y ago

Luxury real-estate was looked into in 2016 and up to 30% of deals they looked into were suspicious as money laundering conduits [1]. Who knows how much this inflates real estate values or diminishes needed supply. With Citizen's United vs FEC it is now a massive target for money laundering as well [2]. Tons of foreign money is involved with it and can get in easily with Citizens United [3]. Our politics is going to get much more crazy with not only the foreign money involved but the dark money being cleaned. Russian oligarchs or any group under sanctions also have ways to get money laundered besides the old school ways of casinos, black market products, etc [4]. > According to James Henry, a former chief economist at McKinsey & Company who consulted on the Panama Papers, some $1.3 trillion in illicit capital has poured out of Russia since the 1990s. [4] > In 1998, Russia defaulted on $40 billion in debt, causing the ruble to plummet and Russian banks to close. The ensuing financial panic sent the country’s oligarchs and mobsters scrambling to find a safe place to put their money. [4] > Among the new tenants was Eduard Nektalov, a diamond dealer from Uzbekistan. Nektalov, who was being investigated by a Treasury Department task force for mob-connected money laundering, bought a condo on the seventy-ninth floor, directly below Trump’s future campaign manager, Kellyanne Conway. A month later he sold his unit for a $500,000 profit. The following year, after rumors circulated that Nektalov was cooperating with federal investigators, he was shot down on Sixth Avenue.[4] > In 2013, police burst into Unit 63A of Trump Tower and rounded up 29 suspects in a $100 million money-laundering scheme [4]. [1] https://cnbc.com/2017/08/24/a-third-of-luxe-real-estate-deals-involve-suspicious-activity.html https://cnbc.com/2017/08/24/a-third-of-luxe-real-estate-deal... [2] https://www.theatlantic.com/politics/archive/2013/12/theres-no-way-to-follow-the-money/282394/ https://www.theatlantic.com/politics/archive/2013/12/theres-... [3] https://theintercept.com/2016/08/03/citizens-united-foreign-money-us-elections/ https://theintercept.com/2016/08/03/citizens-united-foreign-... [4] https://newrepublic.com/article/143586/trumps-russian-laundromat-trump-tower-luxury-high-rises-dirty-money-international-crime-syndicate https://newrepublic.com/article/143586/trumps-russian-laundr...

Consultant32452 9y ago
Art also. https://www.nytimes.com/2013/05/13/arts/design/art-proves-attractive-refuge-for-money-launderers.html https://www.nytimes.com/2013/05/13/arts/design/art-proves-at...

valuearb 9y ago

The lifeblood of criminal enterprises is revenues that are primarily driven by prohibition. I think I see a better solution.

eli 9y ago
Legalize extortion rackets and kickbacks?
- valuearb 9y ago
  I clearly said primarily. An end to Prohibition leaves organized crime with a tiny fraction of its current revenues. And frees law enforcement to give extortion and kickbacks (along with actual crimes with actual victims) lots more attention.
  - pjc50 9y ago
    Not all this money is drug money; a lot of the international money is the result of corruption or theft from the state.
    - valuearb 9y ago
      That’s clearly not a problem for the US justice system. I’d kind of like it focused on the all of the crimes with US victims that are currently too low priority to investigate, including millions of untested rape kits.

elvirs 9y ago

not sure if starting to require a physical human being as a beneficiary for a company will do much. in post Soviet countries its a requirement and most of the shell companies are registered to some homeless guy or a shepherd who was told sign these papers here is $100. criminal enterprises wont have difficulty finding some poor guy to sign the papers for anything

pessimizer 9y ago

They make it ideal for the wealthy to launder money, rather. It's just a symptom of US general lack of regulation of corporations, other than regulation meant to cripple small corporations that are threatening larger corporations. Just a product of total regulatory capture, as developed in the US from the mid-1890s, secured at the end of the 1910s, and lasted until FDR fixed the economy in the 1930s. The resurgence in the late 1970s which was secured by the late 90s is still operating at peak now, but if you judge by the last time, hopefully this will come to an end soon.

olivermarks 9y ago

The City of London's strange history is a precursor to the convenient Wall Street offshoring and laundering arrangements 'The City of London’s strange history' Maurice Glasman, Labour peer and academic https://www.ft.com/content/7c8f24fa-3aa5-11e4-bd08-00144feabdc0 https://www.ft.com/content/7c8f24fa-3aa5-11e4-bd08-00144feab...

FabHK 9y ago

My impression (and I'm not an accountant or lawyer) is that the US make it very hard for their own citizens (and anyone else) to evade US taxes, but are otherwise happy to host other people's dirty money.

mindslight 9y ago

"Money laundering" is an oxymoron - the entire essence of money is that it is fungible. When you tie the value of some dollars to their supposed history, what you are left with is subjective points that vary based on the political connections required to redeem them. At that point, why not just stop pretending that an individual can have means independent of their standing with the bureaucracy? Like every new regulation, the outrage driving this will be stoked using the egregious examples of powerful criminals, but the actual effects will only ever be felt by the little guy.

clamprecht 9y ago
> the outrage over this will be stoked using the egregious examples of powerful criminals, but the actual effects will only ever be felt by the little guy. Can confirm, I'm a little guy, I did 5 years for money laundering.
Terr_ 9y ago
You honestly don't believe anybody should ever care if the gold-nugget they are being handed came from a person just murdered outside their store? Like many abstractions, that concept of a fungible, anonymous, history-less, and wholly judgement-free "value" is just a useful fantasy. What bothers me about your post is that it seems you think the fantasy is the true original state of the world... and that the flawed reality is "new" and artificially created by a sinister cabal.
- mindslight 9y ago
  The fundamental problem here is like your question - conflating two completely separate concepts. A shopkeeper, being a person, should care if someone just murdered someone else outside of their shop. A shopkeeper that has just completed a sale, and then found out the customer is a murdering thief, should feel no compunction about considering the cash in the drawer theirs. They should of course help bring the murderer to justice. Abstractions are only useful if we can rely on them. Under the regime of separate ambient titles (which the concept of money laundering is intertwined with), you can never be sure anything that you have is actually yours! So this creates a whole lot of ambiguity. As I alluded to, this ambiguity erodes the rule of law because it can't not lead to selective enforcement based around the gut feelings of whomever decides if a claim to reverse has merit. And yes, lack of an ambient title most certainly is the base state of the world - it's modern communications technology that has enabled us to even fathom tracking the history of everything. But you're the one strawmanning this "sinister cabal". I would describe it as power tending to coalesce, and emergently promulgating a paradigm that relies on (and thus further necessitates) said power.

Bizarro 9y ago

I don't want the government having its greedy mitts on every financial transaction under the sun.

RhodesianHunter 9y ago
It's not black and white. There has to be some middle ground between "big brother sees all" and "the proceeds of illegal activities and rampant corruption flow freely into the pockets of wrongdoers".
- AnthonyMouse 9y ago
  That middle ground should be for the government to seize the proceeds of illegal activities after proving the illegal activities themselves in a court beyond a reasonable doubt. The government shouldn't be allowed to take shortcuts.
  - CryptoPunk 9y ago
    And what you described is basically the principle of due process, which the creation of money laundering as a category of crime totally undermines in spirit.

huy-nguyen 9y ago

This piece is gold: > One report uncovered an Afghan company that was contracted to supply our troops but was secretly owned by the Taliban.

CryptoPunk 9y ago

The principle behind money laundering laws is exactly like the one behind legislation like FOSTA. It makes people legally responsible for others using the services they provide in connection with a crime. It legally mandates that third party intermediaries act as deputies for regulatory agencies, and disallow private use of the services they provide. Laws like this effectively criminalize privacy in entire categories of human activity, in the name of preempting crime. It's an absolutely terrible way to try to manage risk, and concentrates power in the hands of governing institutions to extremely dangerous proportions.