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Nice point; but ... "you've got to look a little further / the argument i'm refuting is too simplistic" can continue here. What cost does society at large pay

Nice point; but ... "you've got to look a little further / the argument i'm refuting is too simplistic" can continue here. What cost does society at large pay for the 15% bite on people laundering money? How many legitimate transactions are made more expensive, or never begun at all, because of AML regulations?

ajross 3y ago
> How many legitimate transactions are made more expensive, or never begun at all, because of AML regulations? Vanishingly few, I'd say? You're asking that in a rhetorical sense: "Ah, but you didn't think about this did you? That invalidates your point." But your question is a real one with a quantitative answer. And in fact AML statutes exist (or don't) in lots of different markets in the real world, and were introduced at different times. You can look at the macroeconomics if you want and try to puzzle out the effect. And really there is none. Western capitalism was going gangbusters through the whole period in the 20th century where cash flow tracking was being introduced. And contemporary regimes that resisted AML introduction (c.f the famous swiss bank account) really didn't grow any faster or slower.
- h2odragon 3y ago
  > really there is none I personally know businesses owners who ceased operations because the laws around dealing with cash in quantity became too troublesome.
  - deleted 3y ago
    [deleted]
  - deleted 3y ago
    [deleted]
- superkuh 3y ago
  None? I think you might need to acknowledge you're speaking about something you don't have any experience with. Everyone who's touched that end of the money transfer elephant has come away stinking and with a great distaste for it. Myself included. I've definitely not done many (completely legal and above board) things simply because AML prevents it.
- arpinum 3y ago
  Most financial institutions in my country of residence will not have me as a customer because I hold a certain foreign passport. I'm too expensive to service because of these AML / KYC laws. And we know it is because of these laws as they stopped accepting me as a customer when these laws went into effect. There is exactly 1 financial institution in the country that will have me as a customer, but even then I am restricted from buying most of their products.
  - viknesh 3y ago
    Is there a passport other than USA which has these properties?
- roenxi 3y ago
  Ourworldindata claims that the 20th century saw the relative wealth of the western powers continuously decline from ~70% of the world economy to ~40% today [0]. We can't be sure why, it is a very political question. The idea that western powers should control 70% of the world economy is certainly questionable. But something that the west has been doing has killed off growth and put it in a relatively weak position. Corruption of the banking industry away from making good investments and towards supporting government policy objectives is a candidate for contributing to that. It's gotten to the point where as far as I can tell the US has capital controls in place because foreign banks won't take US customers. Not an American so I might just be wrong on that point I suppose. [0] https://ourworldindata.org/grapher/gdp-world-regions-stacked-area?stackMode=relative https://ourworldindata.org/grapher/gdp-world-regions-stacked...
  - joshuaissac 3y ago
    From that graph, it seems to just be about other parts of the world catching up, rather than an actual decline in the West. It is clearer after switching the graph from relative to absolute mode.
    - ajross 3y ago
      Yeah, that argument was taking data that says essentially "global trade driven by western rule of law regimes lifts all boats" and tries to say "western rule of law is bad because the other boats were lifted". The ideological bent on HN threads really has gotten a little out of control in recent years. We're literally in a topic where the bulk of the posting volume is from the "money laundering is good, actually" camp.
    - roenxi 3y ago
      If you are ahead and then everyone else catches up, what does that say about your running performance? It says achieving average speed, but recent performance was a bit sedentary. And it isn't KYC/AML laws doing that in isolation because it is too big a trend and too much happens over a century. But "Western capitalism was going gangbusters through the whole period in the 20th century where cash flow tracking was being introduced." - no it wasn't. Western capitalism has been slowly mean-reverting to fall in line with all the authoritarian states and tinpot dictatorships. The economic strategy that the west has been using does not seem to be creating vast amounts of wealth in the west. Most of the wealth is being created in Asia. And big investments take 20-30 years to pay off, so we're probably seeing the results of policies from 1940 through to around 2000 in that chart.
- hyperman1 3y ago
  I was talking with a bank teller in a tourist area. She told a lot of local restaurants are opening 4 or 5 bank accounts and depositing every evening, because no individual bank wants to accept the whole amount, because of AML. This in a country where most paymentscare digital. What's the cost of all these restaurant owners doing all banks every day?
threeseed 3y ago
You need to balance the increased cost of legitimate transactions which is effectively zero against the cost of widespread money laundering. And having worked at two banks the cost of AML pales in comparison to the total amount of overheads. Terrorism, sex trafficking, drug trafficking, organised crime etc. All are predominately financed through activities which depend on some form of money laundering. And the cost to society there is not measured in money but in lives, despair, suffering etc.
- logicchains 3y ago
  >Terrorism, sex trafficking, drug trafficking, organised crime etc All these things still exist in spite of AML laws and there's no evidence that AML laws meaningfully reduce the amount of them occurring.
  - Wowfunhappy 3y ago
    As the article says, it makes these activities more expensive.
  - threeseed 3y ago
    It is ridiculous to assume that any law would completely eliminate crime. But it is a fact that those crimes depend on money laundering in order to extract proceeds. And it is a fact that AML laws help law enforcement to identify the financial flows linked to money laundering.
  - mywacaday 3y ago
    The other big one is monitoring PEPs (Politically exposed Persons) for unusual activity. That list will include all your politicians their immediate family and known associates all the way down to local community councillors and representatives. That list may also anyone ever convicted of any crime or mentioned on a news website. It's been a long time since I was involved but there was a competition between list providers to have the biggest list.
  - Rastonbury 3y ago
    That fact that they still happen isn't evidence that efforts to reduce it are ineffective. Most criminal orgs are running businesses, increasing the costs of doing businesses via enforcement or AML. On the margin, increased costs are passed to consumers which would reduce drug use. Cocaine is cheaper in Europe than in the US despite the US being a lot closer to the source, much of it due to the costs due to enforcement/AML. That's one of the points of the article, do you think drug consumption would be the same in Holland if the drugs weren't 15% more expensive? The lens through which to look at is what level of enforcement/AML do we need to reduces societal harm cost effectively. Because you can't track every object that enters or every dollar that leaves. So the question is more whether reducing the harms of drug consumption that amount is worth the impact on legitimate business. Then again the merits AML is that it hits most organized crime and costs a lot less than specific enforcement to stop trafficking and distribution. Now with fentanyl, you can't reasonable prevent trafficking at any cost because 5 tonnes can supply the entire USA, so you have to turn other the screws
marcosdumay 3y ago
Well, at my country we have the extreme added cost in that you must let your phone take a photo of you or your computer link you to a government account when you open a bank account. If you are a foreigner, you must "register your identity" with the local government, a process that can take a week, and you will have to do anyway because you need it for everything. Besides, KYC also helps recovering money from your run of the mill scams and fraud. The kind of thing that makes victims every day, so I don't think anybody here puts a negative value on it.

ajross 3y ago

> How many legitimate transactions are made more expensive, or never begun at all, because of AML regulations? Vanishingly few, I'd say? You're asking that in a rhetorical sense: "Ah, but you didn't think about this did you? That invalidates your point." But your question is a real one with a quantitative answer. And in fact AML statutes exist (or don't) in lots of different markets in the real world, and were introduced at different times. You can look at the macroeconomics if you want and try to puzzle out the effect. And really there is none. Western capitalism was going gangbusters through the whole period in the 20th century where cash flow tracking was being introduced. And contemporary regimes that resisted AML introduction (c.f the famous swiss bank account) really didn't grow any faster or slower.

h2odragon 3y ago
> really there is none I personally know businesses owners who ceased operations because the laws around dealing with cash in quantity became too troublesome.
- deleted 3y ago
  [deleted]
- deleted 3y ago
  [deleted]
superkuh 3y ago
None? I think you might need to acknowledge you're speaking about something you don't have any experience with. Everyone who's touched that end of the money transfer elephant has come away stinking and with a great distaste for it. Myself included. I've definitely not done many (completely legal and above board) things simply because AML prevents it.
arpinum 3y ago
Most financial institutions in my country of residence will not have me as a customer because I hold a certain foreign passport. I'm too expensive to service because of these AML / KYC laws. And we know it is because of these laws as they stopped accepting me as a customer when these laws went into effect. There is exactly 1 financial institution in the country that will have me as a customer, but even then I am restricted from buying most of their products.
- viknesh 3y ago
  Is there a passport other than USA which has these properties?
roenxi 3y ago
Ourworldindata claims that the 20th century saw the relative wealth of the western powers continuously decline from ~70% of the world economy to ~40% today [0]. We can't be sure why, it is a very political question. The idea that western powers should control 70% of the world economy is certainly questionable. But something that the west has been doing has killed off growth and put it in a relatively weak position. Corruption of the banking industry away from making good investments and towards supporting government policy objectives is a candidate for contributing to that. It's gotten to the point where as far as I can tell the US has capital controls in place because foreign banks won't take US customers. Not an American so I might just be wrong on that point I suppose. [0] https://ourworldindata.org/grapher/gdp-world-regions-stacked-area?stackMode=relative https://ourworldindata.org/grapher/gdp-world-regions-stacked...
- joshuaissac 3y ago
  From that graph, it seems to just be about other parts of the world catching up, rather than an actual decline in the West. It is clearer after switching the graph from relative to absolute mode.
  - ajross 3y ago
    Yeah, that argument was taking data that says essentially "global trade driven by western rule of law regimes lifts all boats" and tries to say "western rule of law is bad because the other boats were lifted". The ideological bent on HN threads really has gotten a little out of control in recent years. We're literally in a topic where the bulk of the posting volume is from the "money laundering is good, actually" camp.
  - roenxi 3y ago
    If you are ahead and then everyone else catches up, what does that say about your running performance? It says achieving average speed, but recent performance was a bit sedentary. And it isn't KYC/AML laws doing that in isolation because it is too big a trend and too much happens over a century. But "Western capitalism was going gangbusters through the whole period in the 20th century where cash flow tracking was being introduced." - no it wasn't. Western capitalism has been slowly mean-reverting to fall in line with all the authoritarian states and tinpot dictatorships. The economic strategy that the west has been using does not seem to be creating vast amounts of wealth in the west. Most of the wealth is being created in Asia. And big investments take 20-30 years to pay off, so we're probably seeing the results of policies from 1940 through to around 2000 in that chart.
hyperman1 3y ago
I was talking with a bank teller in a tourist area. She told a lot of local restaurants are opening 4 or 5 bank accounts and depositing every evening, because no individual bank wants to accept the whole amount, because of AML. This in a country where most paymentscare digital. What's the cost of all these restaurant owners doing all banks every day?

threeseed 3y ago

You need to balance the increased cost of legitimate transactions which is effectively zero against the cost of widespread money laundering. And having worked at two banks the cost of AML pales in comparison to the total amount of overheads. Terrorism, sex trafficking, drug trafficking, organised crime etc. All are predominately financed through activities which depend on some form of money laundering. And the cost to society there is not measured in money but in lives, despair, suffering etc.

logicchains 3y ago
>Terrorism, sex trafficking, drug trafficking, organised crime etc All these things still exist in spite of AML laws and there's no evidence that AML laws meaningfully reduce the amount of them occurring.
- Wowfunhappy 3y ago
  As the article says, it makes these activities more expensive.
- threeseed 3y ago
  It is ridiculous to assume that any law would completely eliminate crime. But it is a fact that those crimes depend on money laundering in order to extract proceeds. And it is a fact that AML laws help law enforcement to identify the financial flows linked to money laundering.
- mywacaday 3y ago
  The other big one is monitoring PEPs (Politically exposed Persons) for unusual activity. That list will include all your politicians their immediate family and known associates all the way down to local community councillors and representatives. That list may also anyone ever convicted of any crime or mentioned on a news website. It's been a long time since I was involved but there was a competition between list providers to have the biggest list.
- Rastonbury 3y ago
  That fact that they still happen isn't evidence that efforts to reduce it are ineffective. Most criminal orgs are running businesses, increasing the costs of doing businesses via enforcement or AML. On the margin, increased costs are passed to consumers which would reduce drug use. Cocaine is cheaper in Europe than in the US despite the US being a lot closer to the source, much of it due to the costs due to enforcement/AML. That's one of the points of the article, do you think drug consumption would be the same in Holland if the drugs weren't 15% more expensive? The lens through which to look at is what level of enforcement/AML do we need to reduces societal harm cost effectively. Because you can't track every object that enters or every dollar that leaves. So the question is more whether reducing the harms of drug consumption that amount is worth the impact on legitimate business. Then again the merits AML is that it hits most organized crime and costs a lot less than specific enforcement to stop trafficking and distribution. Now with fentanyl, you can't reasonable prevent trafficking at any cost because 5 tonnes can supply the entire USA, so you have to turn other the screws

marcosdumay 3y ago

Well, at my country we have the extreme added cost in that you must let your phone take a photo of you or your computer link you to a government account when you open a bank account. If you are a foreigner, you must "register your identity" with the local government, a process that can take a week, and you will have to do anyway because you need it for everything. Besides, KYC also helps recovering money from your run of the mill scams and fraud. The kind of thing that makes victims every day, so I don't think anybody here puts a negative value on it.