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An enormous amount of money going through Britain appears to be money laundering. Look into real estate in london. An absurd situation. Anecdotally - I spoke t

by sprafa 6y ago

An enormous amount of money going through Britain appears to be money laundering. Look into real estate in london. An absurd situation. Anecdotally - I spoke to a Goldman Sachs guy who quit - he made software to flag “suspicious” transactions. He said it flagged millions everyday. Money coming in from Saudi Arabia, Gibraltar, Panama, Jersey etc. I asked him why did he quit? This seemed like a useful thing. Stopping such transactions is a good thing, no? He said “you don’t understand. All the software did was flag the transactions. It didnt stop them. It just marked them as ‘suspicious’” I was blown away. “Why have a piece of software that just flags the transactions and does nothing??” He said “Because that’s what the law demands. And so that when we get caught, we can go to the Parliament in the inquiry and say ‘you’re absolutely right, our software did mark this as a problem!’”

xxpor 6y ago
Wasn't one of the theories why the UK wanted to get Brexit done by New Year's this year that there was a new EU financial transparency directive coming into effect that might have exposed a lot of Conservative MP's financial dealings?
- pydry 6y ago
  Except the UK is still bound by those regulations. The "getting Brexit done by new year" was a dog and pony show.
- DaiPlusPlus 6y ago
  I'm a die-hard remainer, but I know that's untrue: https://fullfact.org/online/brexit-not-concealing-offshore-accounts/ https://fullfact.org/online/brexit-not-concealing-offshore-a...
  - raverbashing 6y ago
    Well, not about bank accounts (and that's on CRS and it's a couple of years old already anyway) but your link does mention two related laws/policies (one of them referring to companies)
  - rjmunro 6y ago
    That is specifically true, but I suspect being out of the EU will make the UK easier for money launderers and similar in the long term.
  - xxpor 6y ago
    Ah that's right, it was offshore accounts. Thanks for the link, good to know that wasn't actually the case.
- deleted 6y ago
  [deleted]
- pjc50 6y ago
  Of more interest is the suppressed "Russia Report": https://www.theguardian.com/politics/2020/jun/20/russia-report-uk-mps-condemn-utterly-reprehensible-delay https://www.theguardian.com/politics/2020/jun/20/russia-repo...
- m0xte 6y ago
  I think it was a positive feedback loop across several data driven political outfits that happened to saturate into an exit eventuality. I don’t think our politicians are even in control of it. They just naively do what keeps working for them personally even if it involves skipping merrily off a cliff.
rahimnathwani 6y ago
Maybe the piece of software your friend worked on did nothing but flag the transactions. But I suspect a different piece of software (or manual process) prepared a Suspicious Activity Report (SAR) and submitted it to the relevant regulator(s) (UKFIU in the UK, FinCEN in the US, ...).
- worik 6y ago
  How sweet! I, too am sure, they obeyed the spirit and letter of the law. Even when the opportunity cost of doing so was in the billions...
  - jandrese 6y ago
    And honestly, what is a LEO going to do with a multi-million line report every day? About the only thing you can do is lobby parliament to have the laws changed citing these reports as evidence of a problem. Enforcement on foreign nationals is extremely difficult and expensive and the outcomes are very much in question, especially as the people doing very large scale money laundering are usually well connected with their local governments.
    - JoeSmithson 6y ago
      There aren't that many, only about 500k a year [0]. The software OP mentions probably flagged transactions internally to another team to review, any genuinely suspicious ones would have then had a SAR submitted. [0] https://www.nationalcrimeagency.gov.uk/what-we-do/crime-threats/money-laundering-and-terrorist-financing/suspicious-activity-reports https://www.nationalcrimeagency.gov.uk/what-we-do/crime-thre...
- sprafa 6y ago
  He quit exactly because it did nothing else but flag them.
hogFeast 6y ago
And what most people don't understand is that all we can do is pass the details of these people to their govts (the UK has actually started implementing our law/values extraterritorially, this btw is exceptionally unusual for non-US countries, with UWOs but, afaik, this only really applies if you do something stupid like buy UK property). But generally: everyone has implemented US FACTA. All the old-style tax havens bar one or two have implemented (all the BOTs have). Laundering your money through London is an unbelievably bad idea, and has been for a long time (FATCA was the end, the US applied this extraterritorially so any bank that wanted to operate in the US had to comply globally). What people get confused about is: it is perfectly legitimate to have money in any of the locations you mention (it helps you avoid exactly zero tax) but it isn't legitimate to not report those accounts to your tax authority (and all UK institutions, even in BOTs, are legally obliged to report the names/details of people involved in transactions...no question), and if that local tax authority chooses not to act on that information there is not much that can really be done (some places have said they won't comply i.e. Russia but most tax authorities aren't communicating tax information back to banks anyway). Btw, software that flags suspicious transactions is used everywhere and that information is acted on (the FCA has regulators who check this, for what should be obvious reasons banks tend to be careful about who exactly does these investigations...if you work in this job, the FCA goes through your personal emails, they investigate your family, they investigate your friends, all your bank accounts are monitored...it isn't a joke). The issue is more often that the software doesn't work (i.e. a certain location has been flagged as high-risk but the software doesn't flag it)...and even then, firms are fined tens of millions on the spot if faults with their software are discovered. It is difficult to say that the UK is soft (particularly when most of the large scale tax loss is governments collaborating with large corporations to funnel profits).
- jandrese 6y ago
  So you are saying that money laundering/tax evasion/trust theft no longer happens? Or do all of the relevant agencies have all of the information they need to stop it and choose not to use it?
  - hogFeast 6y ago
axlee 6y ago
> He said “Because that’s what the law demands. And so that when we get caught, we can go to the Parliament in the inquiry and say ‘you’re absolutely right, our software did mark this as a problem!’” Why even bother write a detection software then? Just flag all transactions, and you get the same level of plausible deniability.
- mercer 6y ago
  I think that would be entirely too implausible, but maybe you're right.
- mhh__ 6y ago
  Even the most overworked underpaid regulator isn't going to buy that 100% suspicious transactions is complying with either by the word of or in the spirit of the regulations.
- imtringued 6y ago
  You can't claim that the software is working if it doesn't.
  - axlee 6y ago
    It catches 100% of fraudulent transactions though. /s
mrtksn 6y ago
I have a close friend working in compliance for a major bank and they do use multiple software to detect risky transactions and clients. Flagging is nothing, it would flag based on name similarity and all kinds of stuff but a human would have to review it. They use scoring, review clients and transactions while prioritizing on that score. Half of their time goes on optimization of the scoring and detection as the human review process is resource intensive. If they had a system rising millions of flags, the first thing they would do is to reduce these flags to a manageable level. There’s no way that so many transactions are high risk, they would get rid of clients rising that many red flags if those are legitimately risky transactions. If they don’t do good job in the compliance department, they receive multiple billion dollar fines. Simply, no client is valuable enough to risk these fines. Rise some flags and you’re out and reported to a regulator, they’re not going to let you flood the system with questionable transactions.
ur-whale 6y ago
I find it strange that most folks on HW are ardent defenders of encrypted communication, but when it comes to financial transactions, everyone seems to think it's a good thing governments have visibility. Do you folks realize being able to read everyone's communications and being able to see, verify and control all financial transactions is the exact same curtailing of liberty?
- gbear605 6y ago
  It’s really not the exact same. Money is a different type of thing from communication. People in general are much more okay with limiting what one can do with money than with communication for a number of reasons. The essential point is that money is power while communication is not. There are some things that we don’t want to allow people to have the power to do, so we have to restrict money usage and thus see how money is used.
  - disappearance 6y ago
    I agree, I’m wondering about the difference. Despite being intangible like communications, transactions are perhaps better evidence that something tangible has happened or is about to happen.
deleted 6y ago
[deleted]
amelius 6y ago
> Look into real estate in london. An absurd situation. It's absurd in a lot of big cities, simply because land is scarce and governments fail to see that this leads to a failing market. On top of this, they fail to plan the construction of new houses.
- jungturk 6y ago
  Certainly true, but a liquid market of subjectively valued items that preserve value well - art, jewelry, and real estate - is awfully convenient. If I were someone who needed defensible transfers of large amounts of wealth in discreet transactions, London real estate laws certainly are convenient.
  - imtringued 6y ago
    The problem isn't that they are preserving their value. It's that they are growing quickly in value which is something that shouldn't happen with an essential human need like housing.
- mcv 6y ago
  Dutch organised crime also used to be (still is?) deeply involved in real estate. Several famous underworld figures were officially real estate traders or real estate financiers. Not sure if this is still going on, but it was pretty big a decade or two ago.
gambiting 6y ago
Have you posted this before? I'm 100% sure that I read exactly what you just said, verbatim, some time ago.
- verylittlemeat 6y ago
  Wow I'm glad you made this comment because I thought I was going crazy. Weird that I can't find it in the archives but I know I read it before.
mcv 6y ago
Doesn't the law also specify at least reporting those suspicious transactions to authorities so they can investigate?

by sprafa 6y ago

xxpor 6y ago

Wasn't one of the theories why the UK wanted to get Brexit done by New Year's this year that there was a new EU financial transparency directive coming into effect that might have exposed a lot of Conservative MP's financial dealings?

pydry 6y ago
Except the UK is still bound by those regulations. The "getting Brexit done by new year" was a dog and pony show.
DaiPlusPlus 6y ago
I'm a die-hard remainer, but I know that's untrue: https://fullfact.org/online/brexit-not-concealing-offshore-accounts/ https://fullfact.org/online/brexit-not-concealing-offshore-a...
- raverbashing 6y ago
  Well, not about bank accounts (and that's on CRS and it's a couple of years old already anyway) but your link does mention two related laws/policies (one of them referring to companies)
- rjmunro 6y ago
  That is specifically true, but I suspect being out of the EU will make the UK easier for money launderers and similar in the long term.
- xxpor 6y ago
  Ah that's right, it was offshore accounts. Thanks for the link, good to know that wasn't actually the case.
deleted 6y ago
[deleted]
pjc50 6y ago
Of more interest is the suppressed "Russia Report": https://www.theguardian.com/politics/2020/jun/20/russia-report-uk-mps-condemn-utterly-reprehensible-delay https://www.theguardian.com/politics/2020/jun/20/russia-repo...
m0xte 6y ago
I think it was a positive feedback loop across several data driven political outfits that happened to saturate into an exit eventuality. I don’t think our politicians are even in control of it. They just naively do what keeps working for them personally even if it involves skipping merrily off a cliff.

rahimnathwani 6y ago

Maybe the piece of software your friend worked on did nothing but flag the transactions. But I suspect a different piece of software (or manual process) prepared a Suspicious Activity Report (SAR) and submitted it to the relevant regulator(s) (UKFIU in the UK, FinCEN in the US, ...).

worik 6y ago
How sweet! I, too am sure, they obeyed the spirit and letter of the law. Even when the opportunity cost of doing so was in the billions...
- jandrese 6y ago
  And honestly, what is a LEO going to do with a multi-million line report every day? About the only thing you can do is lobby parliament to have the laws changed citing these reports as evidence of a problem. Enforcement on foreign nationals is extremely difficult and expensive and the outcomes are very much in question, especially as the people doing very large scale money laundering are usually well connected with their local governments.
  - JoeSmithson 6y ago
    There aren't that many, only about 500k a year [0]. The software OP mentions probably flagged transactions internally to another team to review, any genuinely suspicious ones would have then had a SAR submitted. [0] https://www.nationalcrimeagency.gov.uk/what-we-do/crime-threats/money-laundering-and-terrorist-financing/suspicious-activity-reports https://www.nationalcrimeagency.gov.uk/what-we-do/crime-thre...
sprafa 6y ago
He quit exactly because it did nothing else but flag them.

hogFeast 6y ago

And what most people don't understand is that all we can do is pass the details of these people to their govts (the UK has actually started implementing our law/values extraterritorially, this btw is exceptionally unusual for non-US countries, with UWOs but, afaik, this only really applies if you do something stupid like buy UK property). But generally: everyone has implemented US FACTA. All the old-style tax havens bar one or two have implemented (all the BOTs have). Laundering your money through London is an unbelievably bad idea, and has been for a long time (FATCA was the end, the US applied this extraterritorially so any bank that wanted to operate in the US had to comply globally). What people get confused about is: it is perfectly legitimate to have money in any of the locations you mention (it helps you avoid exactly zero tax) but it isn't legitimate to not report those accounts to your tax authority (and all UK institutions, even in BOTs, are legally obliged to report the names/details of people involved in transactions...no question), and if that local tax authority chooses not to act on that information there is not much that can really be done (some places have said they won't comply i.e. Russia but most tax authorities aren't communicating tax information back to banks anyway). Btw, software that flags suspicious transactions is used everywhere and that information is acted on (the FCA has regulators who check this, for what should be obvious reasons banks tend to be careful about who exactly does these investigations...if you work in this job, the FCA goes through your personal emails, they investigate your family, they investigate your friends, all your bank accounts are monitored...it isn't a joke). The issue is more often that the software doesn't work (i.e. a certain location has been flagged as high-risk but the software doesn't flag it)...and even then, firms are fined tens of millions on the spot if faults with their software are discovered. It is difficult to say that the UK is soft (particularly when most of the large scale tax loss is governments collaborating with large corporations to funnel profits).

jandrese 6y ago
So you are saying that money laundering/tax evasion/trust theft no longer happens? Or do all of the relevant agencies have all of the information they need to stop it and choose not to use it?
- hogFeast 6y ago

axlee 6y ago

> He said “Because that’s what the law demands. And so that when we get caught, we can go to the Parliament in the inquiry and say ‘you’re absolutely right, our software did mark this as a problem!’” Why even bother write a detection software then? Just flag all transactions, and you get the same level of plausible deniability.

mercer 6y ago
I think that would be entirely too implausible, but maybe you're right.
mhh__ 6y ago
Even the most overworked underpaid regulator isn't going to buy that 100% suspicious transactions is complying with either by the word of or in the spirit of the regulations.
imtringued 6y ago
You can't claim that the software is working if it doesn't.
- axlee 6y ago
  It catches 100% of fraudulent transactions though. /s

mrtksn 6y ago

I have a close friend working in compliance for a major bank and they do use multiple software to detect risky transactions and clients. Flagging is nothing, it would flag based on name similarity and all kinds of stuff but a human would have to review it. They use scoring, review clients and transactions while prioritizing on that score. Half of their time goes on optimization of the scoring and detection as the human review process is resource intensive. If they had a system rising millions of flags, the first thing they would do is to reduce these flags to a manageable level. There’s no way that so many transactions are high risk, they would get rid of clients rising that many red flags if those are legitimately risky transactions. If they don’t do good job in the compliance department, they receive multiple billion dollar fines. Simply, no client is valuable enough to risk these fines. Rise some flags and you’re out and reported to a regulator, they’re not going to let you flood the system with questionable transactions.

ur-whale 6y ago

I find it strange that most folks on HW are ardent defenders of encrypted communication, but when it comes to financial transactions, everyone seems to think it's a good thing governments have visibility. Do you folks realize being able to read everyone's communications and being able to see, verify and control all financial transactions is the exact same curtailing of liberty?

gbear605 6y ago
It’s really not the exact same. Money is a different type of thing from communication. People in general are much more okay with limiting what one can do with money than with communication for a number of reasons. The essential point is that money is power while communication is not. There are some things that we don’t want to allow people to have the power to do, so we have to restrict money usage and thus see how money is used.
- disappearance 6y ago
  I agree, I’m wondering about the difference. Despite being intangible like communications, transactions are perhaps better evidence that something tangible has happened or is about to happen.

deleted 6y ago

[deleted]

amelius 6y ago

> Look into real estate in london. An absurd situation. It's absurd in a lot of big cities, simply because land is scarce and governments fail to see that this leads to a failing market. On top of this, they fail to plan the construction of new houses.

jungturk 6y ago
Certainly true, but a liquid market of subjectively valued items that preserve value well - art, jewelry, and real estate - is awfully convenient. If I were someone who needed defensible transfers of large amounts of wealth in discreet transactions, London real estate laws certainly are convenient.
- imtringued 6y ago
  The problem isn't that they are preserving their value. It's that they are growing quickly in value which is something that shouldn't happen with an essential human need like housing.
mcv 6y ago
Dutch organised crime also used to be (still is?) deeply involved in real estate. Several famous underworld figures were officially real estate traders or real estate financiers. Not sure if this is still going on, but it was pretty big a decade or two ago.

gambiting 6y ago

Have you posted this before? I'm 100% sure that I read exactly what you just said, verbatim, some time ago.

verylittlemeat 6y ago
Wow I'm glad you made this comment because I thought I was going crazy. Weird that I can't find it in the archives but I know I read it before.

mcv 6y ago

Doesn't the law also specify at least reporting those suspicious transactions to authorities so they can investigate?