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KYC and AML do very little to actually address any risks related to money laundering. But they’re very powerful tools that banks use to push their customers aro

KYC and AML do very little to actually address any risks related to money laundering. But they’re very powerful tools that banks use to push their customers around and control how they use their money (somehow usually in ways that benefit the banks of course).

nine_k 3y ago
Could you offer a few examples of such limitations which banks impose, and how it benefits them?
- brunblanc 3y ago
  1) Float. Every dollar that is held in limbo 'for checking' is interest income to the bank. 2) Rabid identification requirements lower the risk of new account fraud (which is paid by the bank). 3) Information on who you're sending payments to is usable by the bank for prospecting and risk analysis. 4) If you read anything about regulatory capture, it explains how regulation is used by incumbents to discourage competition. i.e. No new banks have opened in the U.S. since 2009, when new regulations to prevent banks from getting bigger were passed. <- And now, the biggest banks are MUCH larger.
  - threeseed 3y ago
    > No new banks have opened in the U.S. since 2009 From 2009 to 2013 only 7 new banks were formed, fewer than 2 per year. Many industry observers have suggested that the decline is primarily due to regulatory burden, including new FDIC regulations and the 2010 Dodd‐Frank Act. But other influences could have played a role, in particular, the current weak economy. https://www.federalreserve.gov/econresdata/feds/2014/files/2014113pap.pdf https://www.federalreserve.gov/econresdata/feds/2014/files/2...
- AmericanChopper 3y ago
  Banks don’t want you to do anything that reduces their deposits, because they directly lose money when that happens. If you had $1 billion in deposits at a bank that was getting 5% returns on investing its deposits, and you wanted to spend that money on buying some securities or something, then that bank would generate approx $1,000,000 in returns for every week that the AML process takes to complete. Due to how fractional banking works, in reality they would be earning some multiple of that return rate, but that’s a bit more abstract and hard to quantify. Because AML processes are completely opaque, often made up on the fly and operate without any due process, banks can and routinely do delay transactions worth multiple billions of dollars for many weeks or longer by asking lots of irrelevant questions, requesting new documents or minor changes, and taking their time in getting back to you about anything, ect... In the world of high value transactions these kafkaesque processes and delays are completely routine.
AlbertCory 3y ago
> KYC and AML do very little This reminds me of when people say, "those stories of street crime are exaggerated." It's content-free. And "any risks related to money laundering" is rather dismissive, isn't it? Are you denying that actual criminals have a problem with moving money around except in $100 bills and other tangible assets?
- brunblanc 3y ago
  I would say that PETTY criminals have difficulty moving money around electronically. Criminals with LOTS of money do not have any difficulty finding an investment bank to handle money movement. i.e. Epstein JPMorgan, WireCard, Lloyds https://www.reuters.com/world/uk/lloyds-says-it-faces-money-laundering-controls-investigation-2024-02-22/ https://www.reuters.com/world/uk/lloyds-says-it-faces-money-...
  - AmericanChopper 3y ago
    AML laws are just a compliance cost of actual money launderers. All they do is increase the number of intermediaries involved in a transaction (who each collect their fees).
    - AlbertCory 3y ago
      Even if that were to be granted for the sake of argument: why is it a bad thing to make criminals expend more effort and money?
      - safety1st 3y ago
        Embedded within our justice system and the values of our society we have the concept of the protection of the innocent. See William Blackstone's famous quotation: "It is better that ten guilty persons escape than that one innocent suffer." If you want to imprison all the murderers, you can accomplish that goal by imprisoning everyone but we don't do this and most people would recognize that the idea is mad. So the test here for any regulating authority should be, is your regulation harming the innocent in some way? If so, the imperative is on you to find a better way to go after the guilty, if you don't you have become an enemy of the public good and your moral authority is lost. We can get into specific regulations but I think with modern KYC and AML we are absolutely at the point where they contribute to the suppression of economic growth and individual liberties and need to be dialed back.
threeseed 3y ago
Where I live there isn't just one bank. So customers can very easily move their money and business elsewhere if they feel like they are being somehow controlled. And as someone who has worked at two banks almost all of those restrictions derive from the government.
- AmericanChopper 3y ago
  > So customers can very easily move their money For retail and SME customers this is true. But for any customer that deals with large sums of money it is not. If you’ve never heard of an MT730, then you probably have good reason to think that moving money around is easy.
  - threeseed 3y ago
    You're dealing with large sums of money and you want to remain anonymous. Sounds like exactly the sort of entities that the government should be investigating.
    - AmericanChopper 3y ago
      Where did I say anything about anonymous? I do some work with an AML consultancy, and I’ve never even heard of a customer who wanted to be anonymous. But your reaction of “must be a criminal, let’s investigate you” to my complaints of banks abusing your power leads me to 100% believe your claim of having worked in banks before.
    - kelnos 3y ago
      Ah yes, "if you want to be anonymous while doing X, you're probably a criminal". That's reductive.

nine_k 3y ago

Could you offer a few examples of such limitations which banks impose, and how it benefits them?

brunblanc 3y ago
1) Float. Every dollar that is held in limbo 'for checking' is interest income to the bank. 2) Rabid identification requirements lower the risk of new account fraud (which is paid by the bank). 3) Information on who you're sending payments to is usable by the bank for prospecting and risk analysis. 4) If you read anything about regulatory capture, it explains how regulation is used by incumbents to discourage competition. i.e. No new banks have opened in the U.S. since 2009, when new regulations to prevent banks from getting bigger were passed. <- And now, the biggest banks are MUCH larger.
- threeseed 3y ago
  > No new banks have opened in the U.S. since 2009 From 2009 to 2013 only 7 new banks were formed, fewer than 2 per year. Many industry observers have suggested that the decline is primarily due to regulatory burden, including new FDIC regulations and the 2010 Dodd‐Frank Act. But other influences could have played a role, in particular, the current weak economy. https://www.federalreserve.gov/econresdata/feds/2014/files/2014113pap.pdf https://www.federalreserve.gov/econresdata/feds/2014/files/2...
AmericanChopper 3y ago
Banks don’t want you to do anything that reduces their deposits, because they directly lose money when that happens. If you had $1 billion in deposits at a bank that was getting 5% returns on investing its deposits, and you wanted to spend that money on buying some securities or something, then that bank would generate approx $1,000,000 in returns for every week that the AML process takes to complete. Due to how fractional banking works, in reality they would be earning some multiple of that return rate, but that’s a bit more abstract and hard to quantify. Because AML processes are completely opaque, often made up on the fly and operate without any due process, banks can and routinely do delay transactions worth multiple billions of dollars for many weeks or longer by asking lots of irrelevant questions, requesting new documents or minor changes, and taking their time in getting back to you about anything, ect... In the world of high value transactions these kafkaesque processes and delays are completely routine.

AlbertCory 3y ago

> KYC and AML do very little This reminds me of when people say, "those stories of street crime are exaggerated." It's content-free. And "any risks related to money laundering" is rather dismissive, isn't it? Are you denying that actual criminals have a problem with moving money around except in $100 bills and other tangible assets?

brunblanc 3y ago
I would say that PETTY criminals have difficulty moving money around electronically. Criminals with LOTS of money do not have any difficulty finding an investment bank to handle money movement. i.e. Epstein JPMorgan, WireCard, Lloyds https://www.reuters.com/world/uk/lloyds-says-it-faces-money-laundering-controls-investigation-2024-02-22/ https://www.reuters.com/world/uk/lloyds-says-it-faces-money-...
- AmericanChopper 3y ago
  AML laws are just a compliance cost of actual money launderers. All they do is increase the number of intermediaries involved in a transaction (who each collect their fees).
  - AlbertCory 3y ago
    Even if that were to be granted for the sake of argument: why is it a bad thing to make criminals expend more effort and money?
    - safety1st 3y ago
      Embedded within our justice system and the values of our society we have the concept of the protection of the innocent. See William Blackstone's famous quotation: "It is better that ten guilty persons escape than that one innocent suffer." If you want to imprison all the murderers, you can accomplish that goal by imprisoning everyone but we don't do this and most people would recognize that the idea is mad. So the test here for any regulating authority should be, is your regulation harming the innocent in some way? If so, the imperative is on you to find a better way to go after the guilty, if you don't you have become an enemy of the public good and your moral authority is lost. We can get into specific regulations but I think with modern KYC and AML we are absolutely at the point where they contribute to the suppression of economic growth and individual liberties and need to be dialed back.

threeseed 3y ago

Where I live there isn't just one bank. So customers can very easily move their money and business elsewhere if they feel like they are being somehow controlled. And as someone who has worked at two banks almost all of those restrictions derive from the government.

AmericanChopper 3y ago
> So customers can very easily move their money For retail and SME customers this is true. But for any customer that deals with large sums of money it is not. If you’ve never heard of an MT730, then you probably have good reason to think that moving money around is easy.
- threeseed 3y ago
  You're dealing with large sums of money and you want to remain anonymous. Sounds like exactly the sort of entities that the government should be investigating.
  - AmericanChopper 3y ago
    Where did I say anything about anonymous? I do some work with an AML consultancy, and I’ve never even heard of a customer who wanted to be anonymous. But your reaction of “must be a criminal, let’s investigate you” to my complaints of banks abusing your power leads me to 100% believe your claim of having worked in banks before.
  - kelnos 3y ago
    Ah yes, "if you want to be anonymous while doing X, you're probably a criminal". That's reductive.