I thought this was going to be another crypto slander piece, parroting incorrect propaganda about how it's only used for illicit activity. But what do you know, it's about bank activity! Funny how that all works....
Meh. Our first world consumption habits are more than adequate to destroy the planet. Just saying mining produces lots of CO2 with current energy generation sources isn't a good enough argument on its own.
Internalize the cost of carbon pollution and let the market price out wasteful usage. Demonizing specific energy usage is a waste of time and mindshare. It's little more than moral masturbation.
The correct solution to this is for official banking systems to out-compete cryptocurrency by providing the advantages that it actually has, e.g. pseudonymous accounts that can't be frozen or seized without proving the commission of a crime beyond a reasonable doubt in a court of law.
Obviously this is approximately the opposite of AML, but everybody keeps demonstrating that AML doesn't work. So we're better off to just give it up and take the advantage of a formal financial system with the properties that people will be able to get from cryptocurrency regardless, without the energy waste of Bitcoin et al.
Because then people will use the official financial system, cryptocurrency will be less valuable, and less energy will be wasted mining it. Which is more than we're getting from privacy-invasive and ineffective AML rules.
> this is approximately the opposite of AML, but everybody keeps demonstrating that AML doesn't work
It's odd to make these claims simultaneously. That one, AML doesn't work. But that two, crypto's value statement is in circumventing AML. Which, per the first claim, doesn't work.
I get that the needle can be threaded by holding that an ineffective AML system can still be annoying. But if it's circumventable, that's just a cost. Which means we're comparing transaction costs versus fundamental aspects of differentiation.
At the end of the day, most people aren't money laundering. Having everyone who is money laundering self identify on a public ledger might be the solution the problem is looking for.
> It's odd to make these claims simultaneously. That one, AML doesn't work. But that two, crypto's value statement is in circumventing AML. Which, per the first claim, doesn't work.
The trouble is that the baseline level of inconvenience doesn't phase a criminal enterprise, because to even exist it already has to incur the cost of operating unlawfully and risk being shut down and compensate employees for the risk of being charged with a crime, regardless of AML.
But the AML rules don't only inconvenience people who are really doing something wrong. There are obvious privacy problems with associating every purchase anyone makes with their name, and chilling effects for what people are willing to buy. It creates friction in things that aren't illegal. And since legal activity is so much more common than illegal activity, a little bit of inconvenience multiplied by the entire population is a lot, whereas a little bit of inconvenience multiplied by a couple of outliers is not. So the cost is more than the benefit.
> The trouble is that the baseline level of inconvenience doesn't phase a criminal enterprise, because to even exist it already has to incur the cost of operating unlawfully and risk being shut down and compensate employees for the risk of being charged with a crime, regardless of AML.
Operating an illegal enterprise in such a manner that cash can make it past AML measures and eventually be spent by the enterprise's owners, and the concomitant problem of structuring the enterprise's bookkeeping and tax reporting so it has enough plausibility to avoid prosecution, is more than an inconvenience. It's the central business problem the owners of those enterprises face. Talking about their business costs and risks "regardless of AML" doesn't really make a lot of sense.
> But the AML rules don't only inconvenience people who are really doing something wrong. There are obvious privacy problems with associating every purchase anyone makes with their name, and chilling effects for what people are willing to buy. It creates friction in things that aren't illegal.
This problem, the effects of which you're wildly overstating, has little or nothing to do with AML measures. (You mentioned a chilling effect on things that aren't illegal - are we just talking about stuff that people don't want their spouses to see on the credit card bill?) It's true that every purchase you make without cash will have a lot of detail associated with it, stored electronically and held by the banks and credit cards processors. This all predates modern AML rules by decades.
You would have to do something very unusual for one of your transactions to "create friction" with your bank under the guise of AML rules. If it has ever happened to you, I'm super curious about the circumstances. Insofar as AML and other more modern, security-related rules might inconvenience ordinary people, they tend to affect people when opening an account, not when transacting.
AML prevents very little money laundering but imposes a huge cost on everyone.
Before 9/11 it was possible for a foreigner to open a bank account in the US. It's now been 20 years since it is required to physically travel to the us to open a bank account.
Do you think that increases crypto demand or decreases it?
> it is required to physically travel to the us to open a bank account
One, why does a non-American non-resident need an American bank account? Foreign banks can hold dollars. And two, plenty of American banks open accounts for overseas non-Americans.
> Do you think that increases crypto demand or decreases it?
Why is this a bad thing? An edge case is being addressed through a novel product. Win win.
> One, why does a non-American non-resident need an American bank account? Foreign banks can hold dollars.
HackerNews "its just rsync" level comment
> And two, plenty of American banks open accounts for overseas non-Americans
Literally 0 without physical presence. But I'm very much welcome to be proven wrong here, can you give me a bank that opens accounts for non american non residents?
What they don't mention in the news stories that say "Crypto now uses more electricity than Denmark" is that Youtube still uses more electricity than crypto, or all the electricity used by traditional payment processors and banks.
Youtube could be considered more wasteful than crypto (depending who you ask) and it is never mentioned when people talk about "wasteful electricity usage".
The conspiratorial part of me wonders why that would be? Is it because it is actually a threat to large payment processors that if crypto were to succeed would make them obsolete in the future?
I think that there is a lot of problems with the current crypto market, the electricity usage while concerning isn't the biggest issue with these electronic currencies.
Translation: Running an electronic Bitcoin mining army is fine even if it provides no meaningful benefits beyond military spending.
I'm honestly surprised that literally every comment that is defending Bitcoin mining energy is always pulling out the same poorly though out argument as if knowing that electricity is being wasted is a recreational activity in its own right.
Please come up with better rebuttals. Here is a freebie:
The block reward goes down over time and thus the economic incentive to waste energy. The transaction fee goes up to compensate and the transaction fee is directly paid by users who derive value from the platform, otherwise they wouldn't pay the fee in the first place.
> Translation: Running an electronic Bitcoin mining army is fine even if it provides no meaningful benefits beyond military spending.
No. I never said that. When did I say that. I never said that? I get very bored by people that try to put words in my mouth. Hackernews (this isn't my first account here) is like this. It is horrifically boring.
> Please come up with better rebuttals. Here is a freebie:
It is a perfectly fine rebuttal. At the moment the only reason anyone is buying crypto is because they think it is going to be worth more in the future. Most aren't buying it for transactions at the moment. If you can somehow so that is false, please do so otherwise don't be an asshat.
God I hate this site. It is little better than reddit these days.
I suggest you look at how much Youtube and Netflix burn electricity. Not saying these things are fine. Just that Bitcoin is quite unfairly singled out.
Less than bitcoin, while providing actual value? According to Netflix's 2020 ESG report [1], their hardware infrastructure used just under 95 GWh in 2020 (not including data transmission or your TV). All of which was from renewable sources, btw. Including transmission and the end-user's viewing devices, watching Netflix is estimated to use 77W of power [2], for a total estimate of around 1.2 TWh per year. Bitcoin is estimated at 140 TWh per year [3], or 1500 times Netflix's data centre power usage, or a 120 times the likely total energy consumption of watching Netflix.
Going further, all data centres in the world use an estimated 200 TWh per year, and data transmission networks are estimated at 250 TWh per year [4], for a total of 3.2 times Bitcoin's energy use. Maybe it's just me, but the value provided by the internet is more than 3.2 times higher than that of Bitcoin.
The difference is that the energy used by Netflix to stream content is a mean to an end. Find a way to reduce the energy cost and you can provide the same value for less cost. It is possible to both increase the value provided by Netflix and decrease the energy consumed by it. In fact it's even desirable.
The energy consumed by Bitcoin is the entire value. Find a way to reduce the energy cost and everyone will mine more and consume more. If they don't the trust in the network decreases and the value of Bitcoin decreases. It is not possible to get a popular situation where bitcoin is valuable and does not consume a lot of energy. The valu of Bitcoin is strictly tied to the amount of electricity people are willing to waste for it.
Netflix and Youtube serve good purposes. What purpose does Bitcoin serve? Helping people hide money, evade taxes, speculate without creating any value, buy drugs, make ransomware viable? Or as some proponents imagine, subvert financial institutions and national governments? No need to answer.
Bitcoin mining is defense spending. The only fair comparison is to compare it to the US army energy consumption and when you consider that the protection granted by the US army spans multiple countries and partially protects Bitcoin it is entirely stacked against Bitcoin.
BTC generally goes to where electricity is cheapest in order to mine efficiently. In some cases, this electricity would otherwise be wasted if it wasn't being used to mine crypto. So the actual additional electricity being generated in order to facilitate mining is lower than the headline wattage used.
Secondly, crypto is not wasteful. It is broadly breaking down the global walls put up by 1st world countries like the US and EU that have plagued every day people in 3rd world countries for decades.
It feels wasteful to us since most people near us have unrestricted access to banking and finance. Most of us are not journalists or activists who have to fear one phone call to Chase bank ending our entire operation. Despite recent events, the USG is not about to topple into a third world dictatorship that we would feel the need to flee from.
Crypto gives refugees a means of escaping with some of their family wealth. It allows journalists and activist insulation from governments and corporations trying to squeeze them out financially. And finally, it gives every day people across the globe the ability to start investing their money outside their own countries and begin accruing wealth.
Just goes to show you what moral hazards look like. The DOJ (and perhaps similarly in GB?) has repeatedly preferred to prosecute white collar crimes seeking fines instead of jail time. From their perspective it makes sense. The accused admit their crime, you get a quicker resolution, and the government gets more tax revenue. The problem of course is that everyone bakes it into the “cost of business”. What would the banking industry look like if HSBC executives had been personally indicted for the many money laundering issues they allow to happen? What would it look like if the HSBC’s corporate veil were pierced as a result of their malfeasance?
You don’t need conviction numbers to set examples around unacceptable bad behavior. Add enforcement and regular independent audits by regulators with strong regulatory capture protections, and you’ll have a better run system.
That’s the point of limited liability companies. Shareholders are able to invest capital without needing to invest anything else (like time) and without worrying that they will go to jail for something the company does, with or without the consent of the shareholders. This is hugely important to VC funding and to the entire share market. Imagine buying shares on the NYSE and next week you’re in prison!! So that is sensible I think.
The flip side is that shareholders don’t get to make any material decisions about running the company; that’s the job of the directors (who might not be shareholders). Directors are, in theory, legally liable for the actions of the company they manage.
All this would be fine with me, and directors certainly have gone to jail for crimes committed by their company, but it’s incredibly rare, and in Australia where I live, is generally related to trading insolvent, tax avoidance, or other clear and simple legal issues. But go ahead and let your company illegally blow up irreplaceable ancient cave paintings in the outback, and you’ll be fine.
In fact, in Australia at least, the corporate regulator ASIC is so toothless that there is no straightforward way to enforce director’s breaches of company constitutions or other governance agreements other than directly with lawyers. This makes enforcement of the governing documents of a company (the documents that the shareholders sign up to) incredibly expensive and intimidating. Even clear breaches of the Corporations Act, the governing law of business in Australia, must be dealt with through civil law.
So if you are a minority shareholder in an Australian Pty Ltd company and the directors decide to break their agreements with you - say an agreement to use green energy or to use ethically sourced labour - you’re screwed unless you sue them. If you’re a small time investor or if a significant portion of your wealth is invested in that company, you’re shit out of luck. The directors can do what they like.
That’s messed up, because it means that directors can get away with almost anything, even if the minority shareholders disapprove, and there is zero recourse in the justice system.
I presume that, as with many things legal, Australia follows the US in this regard, but I don’t know this for certain.
>>Imagine buying shares on the NYSE and next week you’re in prison!! So that is sensible I think.
If you give your neighbour some money and he goes and buys a gun with it and kills someone, you can be held liable in that scenario(depending on the intent, on how well you knew what he was going to do etc etc etc).
If you give a company money(investment) and they go and destroy the Amazon illegaly.....your hands are clean?
I mean, obviously I understand what you mean. I own some shares myself. But there has to be some middle ground between "100% responsibily, straight to jail" and "give money to people who do bad things, have 0 responsibility".
I'm assuming - hoping - that if could be demonstrated that a LLC was open about trying to engage in illegal practices, and the investor knew that before investing, then the investor could be charged with facilitating crime.
Lots of companies operate in a grey area. PayPal, Uber/Lyft, AirBnB, and others were all open about “disrupting” which is code for breaking regulations that some people don’t agree with.
All four of those companies have made my life better and I’m glad someone invested to make them happen.
It was entirely possible to achieve the same disruption without breaking laws, so think instead of the opportunity cost - the damage done to the markets, granting wealth to people who demonstrated sociopathic tendencies and blatant disregard for the law, allowing those people to follow their principles and abuse their workers/"partners" at scale, and erosion of public trust in local governance.
All of which could perhaps be avoided if the investors were afraid to be associated with such scummy business practices, and instead pressured aforementioned startups to stay fully above board while realizing their vision.
You're describing a world where quite possibly no-one would be stupid enough to start PayPal, Uber/Lyft or AirBnB. Limiting risk is one of the most counterintuitive laws that has ever stuck, and one of the most devastating for the poor countries who didn't adopt it fast enough.
Without those protections it would be far too risky to invest in companies that people weren't intimately involved with. The scope of human activity would be limited to things that could be achieved with a small business. While not necessarily the end of civilisation, it would be a huge change. And quite likely knock down one of the ladders (a well balanced stock portfolio) that people use to move up into the middle class.
I'm not a fan of the idea. It entrenches class divisions and probably shrinks the middle class. It raises difficult questions of how retirement would be set up too, it would be much harder to organise an independent retirement without access to the share market.
one version would be to make sure that fines is paid in freshly raised (and dedicated) capital and not from the operating budget, or that shareholders are made financially responsible up to the value of their shares for criminal fines against the company.
If you combine that by making should have known the company was doing things illegally an good enough reason for the shareholders to sue the responsible executives into bankruptcy and you might see a change in behavior.
The problem is that when all of the costs comes out of the operating budget there is very little reason for the general assembly to hold the board responsible and if the board is not held responsible neither will the executives.
This seems like an awesome idea, at least on the surface. I’d say fines should be paid in issued capital - I’m going to be thinking about this for a few days I think!
Several problems remains however.
Simply knowing that the company was breaking the law isn’t sufficient for a shareholder to be able to do anything about it. If you own <5% of a company’s shares[0], you have basically no way to change the behaviour of a company even if you know it’s wrong and want it to stop.
Also, the value of a privately held business is difficult to compute. Although setting fines as a percentage of issued capital rather than a dollar value would ameliorate that.
Finally, what would the government do with those shares? If the government simply destroys them then the actual value of the remaining shares won’t change. And the market for privately held shares isn’t huge.
Still I love the basic idea. Can’t imagine it happening though, nobody wants to be held accountable.
[0] if you’re a shareholder with less than 5% of shares in Australia you basically have no right to access anything other than the annual reports, so your ability to even know what’s going on is extremely limited. Don’t know if it’s the same in other countries.
What i mean is that the shareholders should be able to reclaim lost value from any CEO who can be found to should have known the company was breaking the law, in civil court.
The shareholders should be held financially responsible for any fines not levied directly at the board or the executive team, hence why their liablity should be capped to the value of the shares.
The point is to force the large institutional investors to really care about the integrity of the boards they elect, so it might be worth putting in an lower limit to exclude retail investors with trivial amounts along with holders of non-voting shares from liability.
The government would not be holding or owning the share they would be paid their fine in USD raised by the company from either newly created shares, or fresh investment in the case it's not publicly traded. And if they cant it's up the current owners to either pony up loose all of their investments. It should be up to the company fined to market those shares not the goverment.
Remember that issuing shares without generating investment money devalue the existing shares, which is the point of the operation.
IT might not be the one true solution but letting fines be paid from revenue disincentivize the owners from caring that much about legal fines.
To be clear, I think there are huge problems with how corporations (and by extension the directors) are able to act with impunity, but most of those problems would be resolved by proper enforcement of the existing laws. I can’t see how investment can work if the shareholders were made accountable, but even if this became law, nobody would actually be thrown in jail under the current hands-off regime that seems prevalent in the Anglosphere at the moment.
The fact that directors and CEOs have so much control over a business, but that it’s extremely difficult to hold them to account, is very bad IMO. But changing the law won’t fix anything if the law itself is not properly enforced.
In practice it’s overwhelmingly common for Directors in a company to be shareholders. I’m sure there’s a counter-example somewhere, but it’s quite rare.
Not at all. At least in Australia, loads of companies have outside “trophy” chairs or directors who don’t own shares, and just earn a wage; it’s an arrangement that is intended to effectively buy prestige for the company. This may be because shares must typically be declared and taxed as income at the time of issue, which means there’s a significant out of pocket cost to the recipient, and which probably makes it more common for non shareholder directors than in the US? I’m just speculating, but the situation is pretty stupid here. There were some reforms a few years ago, but they didn’t go far enough.
Directors being shareholders doesn't stop directors having a big incentive to screw over shareholders.
Imagine I'm the CEO of FooCorp, I own 5% of the shares, and FooCorp have $10 million in profit. I'll make $500k if I pay out that profit as a dividend - but I'll make 20x as much if I pay it as a 'pension contribution' to myself.
"The accused admit their crime, you get a quicker resolution, and the government gets more tax revenue. "
The problem there is that the government has no need of their 'tax revenue' because no such thing exists in sovereign currency areas like the UK and the US. (As explained by Beardsley Ruml decades ago: http://home.hiwaay.net/~becraft/RUMLTAXES.html) If they don't get it from the fraudster, they'll get it from the next person in the spending chain. It all happens anyway. (And if they divert it, then the downstream doesn't happen and they lose 'tax revenue').
For the integrity of the tax system, tax evasion must always involve significant jail time. It's the most valuable thing you can take away from the people who undertake these sorts of frauds.
It's the public (aka the holders of the currency) who get the benefit of tax enforcement, because it causes demand for the currency and so contributes to it having value in the first place.
But there's multiple levels of government and not all of them get to print money; the US federal government does a lot of payments but doesn't give states whatever they want.
Printing money is just taking on debt. Anyone can do it in proportion to their assets and future income. just your interest rates are different. Local governments issuing municipal bonds is essentially printing money.
All money is debt. Government always spends by "printing money". That's how bank payment and clearing works.
So if it caused inflation then we'd have loads of it, and we don't.
Whether a bank ends up holding reserves, or holding a government bond is just a difference between a floating rate debt receiving the base rate, or a fixed rate debt receiving the bond rate. Just an interest rate and term difference - nothing else.
The last year has completely debunked any question that 'creating money' is inflationary. Believing otherwise is up there with anti-vax thinking.
Creating money is inflationary when it's not backed up by something like bonds (which temporarily destroy money) or taxes (which permanently destroy money).
And yet we have 30 years of QE in Japan, and 10 years of QE in the UK and US that debunk that belief as well.
If the state creates $100 and you stick it in a drawer, or just leave it in your bank account, where's the inflation coming from?
It's 'not spending' that causes deficits in the first place. If everybody spends and never saves then there can be no deficit for any positive tax rate.
I was with you until “there is no magic in bonds”; you haven't shown that. Bonds are a way for everyone to know that that money is _staying_ in that drawer.
It can be inflationary but it isn’t necessarily - sometimes you don’t have enough users of your currency, because there isn’t enough of it, and it becomes more useful and therefore stronger once you acquire some more users.
Even in crypto, Bitcoin is still in its inflationary phase until mining runs out.
I think white collar criminals should be punished with prison time, but in the end how would it look - I guess the criminal sentences would have about the same deterrent effect as harder sentencing has on violent crime, drugs, burglary or whatever else. People would commit the crimes hoping not to get caught.
That is true for friday night stabbing type of crime, pretty much anything drug related (excepting the higher-up El Chapo types), and anything driven by poverty.
Do it also hold for white collar greedy banker type crime?
The real problem is that the whole concept of laws against money laundering is operating at the wrong layer of abstraction.
You have these criminals. Drug cartels. They sell their drugs and send the profits back to Colombia where they own the government and are immune from prosecution. The theory is supposed to be that you prevent them from getting the money or using it to pay their operatives in the US, since you can't actually put them in jail.
The problem is that it can't make their business unprofitable. It can't because the demand is relatively inelastic. Heroin addicts gonna buy heroin. You make it less convenient, the price goes up, the drug cartels make more money and use the money to bribe whoever they need to or buy submarines etc. And all the AML rules can ever do is make it more inconvenient to launder their money. Can't ever actually win that way.
It even makes it worse, because higher barriers to entry induce market consolidation. You get bigger, more violent cartels. Because AML drives some producers out of the market, but the others figure out how to evade AML and keep the higher margins from the reduction in competition, and increase their production to satisfy the demand left by the exit of the weaker producers. It puts more money into the hands of the cartels. It's a dumpster fire and should be utterly dismantled.
The answer is to solve the underlying problem. Do the opposite on the supply side; increase competition so much that nobody is making any money at all. Decriminalization. And then address the problem on the demand side through regulation and treatment programs etc. rather than prohibition.
I thought a lot of the history of the Mexican cartels was the Government almost collaborating with some of them because having one dominant cartel resulted in a lot less violence than multiple smaller ones.
If the price is higher there is more financial incentive to fight over territory (violence). In theory that doesn't happen if there is an actual monopoly, but that only works for Mexico, not the US. Because even if there is only one cartel in Mexico and one in Colombia, that's still at least two cartels operating in the US and fighting over territory.
On top of that, the merge to monopoly plan has the further disadvantage that then the monopolist drug cartel will be long-term stable. So their operation remains profitable and they never get shut down, which means their power grows over time as they use money to buy more power ad infinitum. You end up as a narco state. Very bad.
> I thought a lot of the history of the Mexican cartels was the Government almost collaborating with some of them because having one dominant cartel resulted in a lot less violence than multiple smaller ones.
A lot of the history of Mexican cartels was the government renting territory to all the cartels and actively supporting them as long as they played ball, because because that maximizes the ability to extract revenue from them and play them against them against each other when they get out of line.
The type of tax fraud that requires money laundering is drugs. Or some other highly profitable criminal enterprise the proceeds of which have to be laundered to use in the regular economy without suspicion. As long as there is profit to be laundered it will be profitable to launder it.
Money laundering is a consequence, not a cause. You have to address the cause.
Joe's Pizza not reporting their entire income or some plumber not reporting their side gig income isn't really a big deal except to the people who get bent out of shape over the sanctity of taxes. Only their thin profit margin (businesses with fat margins can afford to not run the risk of being on the wrong side of the law) doesn't make it right back into the local economy, arguably in a more efficient manner than if the money was taxed and given back by the government.
I've heard that one of the down-sides of underreporting is that, if in the future you want to get a business loan, you won't be able to claim as much past/future cash flow, so the bank won't extend you as much credit. For a plumber who plans to avoid debt, maybe that's fine. For another business that depends on leverage, like real estate, it could be disadvantageous, overall.
> The type of tax fraud that requires money laundering is drugs.
even white collar crime would face the problem of explaining where the money for purchases came from if that income hasn't been declared. money laundering is part of the strategy for anyone who does crimes and wishes to not get caught (otherwise why give up part of the profit for the laundromat).
> It can't because the demand is relatively inelastic. Heroin addicts gonna buy heroin. You make it less convenient, the price goes up, the drug cartels make more money and use the money to bribe whoever they need to or buy submarines etc.
That kind of addict is already spending 100% of their available money on heroin. Worst case the price going up means they take less, which seems like a somewhat positive outcome.
> And all the AML rules can ever do is make it more inconvenient to launder their money. Can't ever actually win that way.
You could say the same about every law. All you can do is make it more expensive; murder still happens despite all our efforts to prevent it. But you can make it rarer, make it a less profitable business. Eventually it becomes non-worthwhile for most of the people currently involved in it.
>You could say the same about every law. All you can do is make it more expensive; murder still happens despite all our efforts to prevent it. But you can make it rarer, make it a less profitable business. Eventually it becomes non-worthwhile for most of the people currently involved in it.
You can say whatever you want, but what matters is the evidence, and there's no evidence AML laws have reduced illicit drug use.
> "[...]murder still happens despite all our efforts to prevent it"
I beg to differ. I definitely think we could do a whole lot more to stop serious crimes like murder, assault and rape. Hell, we're not even solving domestic violence properly when we could be doing so much more. Instead, the cheap and I guess politically-easy steps are taken, whilst the more drastic options are ignored.
> That kind of addict is already spending 100% of their available money on heroin. Worst case the price going up means they take less, which seems like a somewhat positive outcome.
No, worst case they get violently sick, resort to crime, lose their house, try risky new suppliers...
As an ex-heroin addict, nah that’s too simplistic. We will find more money, some way some how instead. This is where more crime ends up happening, too (I never stole to support my addiction, but plenty around me did).
That, and there’s a lot more addicts and users who aren’t spending 100% of their income on it than you’d think. It’s extremely addictive, but it’s still not 100% addictive after all.
>Worst case the price going up means they take less, which seems like a somewhat positive outcome.
That's already addressed by demand inelasticity. When price rises, the quantity demanded falls at a much lower rate. It's the same demand curve we see for healthcare. In a scenario where there is ample competition, the price equilibrium is not as skewed, but when supply is severely limited or suppliers collude, the price equilibrium inflates needlessly, which is exactly what we see in both controlled substances and healthcare.
>That kind of addict is already spending 100% of their available money on heroin. Worst case the price going up means they take less, which seems like a somewhat positive outcome.
Yes, they end up taking less heroin and more fentanyl.
"...murder still happens despite all our efforts to prevent it."
Sure, but it happens more in some places than others. We can nudge people to situations where they are more likely to murder or we can take care of society and have fewer.
Drugs aren't quite like murder, and laws regulating food additives aren't like drug or murder laws, and each of these have different impacts.
> The answer is to solve the underlying problem. Do the opposite on the supply side; increase competition so much that nobody is making any money at all. Decriminalization. And then address the problem on the demand side through regulation and treatment programs etc. rather than prohibition.
Problem with this statement is it's not only about drugs. Yesterday it was heroine/cocaine, today the cartels are laundering avocados, tomorrow it can be whatever else high-demand product of the western world that is available in Americas. The mafia cartels will always find a new field to profit from.
> The mafia cartels will always find a new field to profit from.
Only if they are finding people to work for them. Mafia and other organized crime thrives in areas of weak and/or authoritarian government and poverty since they can lure young people, most often men, with the promise of luxury and riches while at the same time being certain they won't get into too much trouble with the authorities (or can bribe them off if need be).
Remember that mafia started in Sicily (Italy) back in the 19th century when the central government was not much a thing and feudal landlords organized "security" on plantations in exchange for protection money from small farmers.
The solution to get rid of the mafia or at least drastically cut their influence is to strengthen civil society, democracy and governments in plagued regions. Unfortunately, the general trend is exactly the opposite with many governments that have been weak before corona hit now getting absolutely destroyed.
> tomorrow it can be whatever else high-demand product of the western world that is available in Americas
Would that be bad though? That's just the market at work. If crimes are being committed (such as stealing the to-be-resold goods, etc) then go after it but otherwise I see no problem with cartels reinventing themselves as somewhat-legitimate businesses.
We're only talking about money that is being generated by crime. That is the purpose of money laundering. If the produce they were selling was procured legally, they wouldn't need to launder the money.
This may be the case if you're looking from a first-world standpoint.
There are too many shithole countries with governments so corrupt or tax system so disfunct that any money generated could not be legalized in the eyes of US regulators.
Someone who's not me lives and works in one of those countries doing 100% legal and clear business (think software development or furniture manufacturing). This person is forced to acquire money laundering services.
Do you have any problem opening a company in Singapore with bank account in Switzerland? For a US citizen this is a matter of days if not hours and with no problem whatsoever.
This used to be possible for people of my country, albeit it took weeks. Now it is impossible. Banks all over the world refuse to open accounts for companies whose founders come from my country, no matter how good is the reputation. Opening a US company? Not even on the table.
Can someone open a local company and bank account? Sure. But nobody in the world is going to wire money there just because of the same reasons. And even if they did, this someone would have not much less problems legalizing the incoming wire transfer in the eyes of the local banks and would be eventually fucked up by local financial monitoring authority anyway. They want you to be in the dark.
At this point you may be imagining some african desert with dust in the wind and eeries silence around with rare beaten up toyota pickup trucks passing by on the lone road. But that's not the case. If you google "<my city> skyline" you would find pictures looking no different than Manhattan.
TL;DR: AML/KYC laws not only make criminal transactions hard, they make small business lives outside of the US even harder. These laws deepen the trench of the Global Digital Divide[1].
That's not the wrong layer of abstraction, that's a different problem entirely - idiotic drug laws - that ends up involving money laundering.
If you really thought that supplying drugs was actually evil at a conceptual level, e.g. sex slavery - which also exists, and benefits from money laundering - then its profitability would be irrelevant. I'm not "fixing money laundering" by legalising sex slavery. And "fixing money laundering" was the topic, not "fixing idiotic drug laws".
You're both not wrong in my eyes. It's that drugs have a disproportionally large section of the income pie. It's way more scalable than sex slavery.
But you're right in that AML also includes things like terror financing which wouldn't be fixed by... legalizing terror???
Terror has a pretty sizable portion of the pie... maybe... the lines get blurry really fast when say a state level actor is terrorizing its own people.
And then you're looking at a different problem with a different root cause. And the whole claim about "terrorism funding" is a farce anyway. It came out of the use of 9/11 to justify whatever privacy-destroying rules they wanted, so everything was "fighting terrorism" even if that made no sense. 9/11 was funded by the Saudis, who have their own country and banks. They didn't need to launder the money, they already had it.
Moreover, "terrorism funding" is a joke. It costs only a few thousand dollars to fund a major act of terrorism. You're never going to stop it by depriving them of money because the primary cost of doing it is that it's punishable by death, not that they can't afford the monetary cost of a plane ticket or some fertilizer.
So once again you have to use solutions that address the root of the problem. Which for terrorism would be things like putting terrorists in prisons and coffins, or not conducting foreign policy by propping up authoritarian regimes whose victims then get so pissed off that they're willing to give their lives over it.
When a government gets consumed by drug cartels, the UN security council should vote to conduct "peacekeeping" (blitz war) on all the drug dealers, burn all their plantations with napalm.
Drug dealers can't harass the family of a peacekeeping soldier from the other side of the world. So all those intimidation tactics involving people's families get invalidated and everything that's left are the drug dealers alone against thousands of well equiped professional soldiers.
Unfortunately, the UN starts with the premise that governments should deal with their own stuff, something that in practice doesn't work.
That sounds like an authoritarian nightmare. Its bad enough with US stormtroopers imposing US will around the world. We do not need a supranational entity raiding sovereigns for what they perceive as a problem.
Plus economically it is certifiably insane - destroying competitors and reducing the supply for a relatively fixed demand is subsidizing the same problem they are fighting against.
If stability was the number one priority the proper thing would be to have the government provide the supply for too cheap to compete with. Fill the power vacuum to prevent the reincarnation of organized crime. It turns out economic fungibility also includes criminals.
People in Mexico already get routinely kidnapped, murdered, tortured, extorted, trafficked, etc.
If anything, this would be an improvement. It is bad, yes. But far better than the status quo.
CJNG for example lost all respect and now they have an army, with uniforms, vehicles, military grade weapons and all. They do not hide who they are anymore. It is a joke.
Under normal conditions, you can deal with an infection with an antibiotic. But when left untreated long enough, you have to amputate. That is what is needed here. A complete amputation of those clowns from reality.
That is what the US would do if an organization dared to pull off 1% of what these clowns do every day.
Blitz war on cartels with army, navy and air force, missiles, bombs, napalm, tanks, helicopters, armored personal carriers... leave no trace of them.
The prohibition era analogy argument stops working when you realize cartels traffic people too.
Well, maybe. The fact that crime is, in fact, already illegal points suggestively at AML laws not actually being targeted at criminals. The law itself is mostly relatively new (article notes 1980s) and probably correlates to driving out people competing with entrenched US banking system and/or supporting the US's campaigns of using the dollar against rivals or inconvenient countries like Iran.
Freezing people out of the monetary system is less effective against criminals and more effective against business ventures the US doesn't like.
Anything linked to the Patriot Act is bad news; it was one of the 'rush stuff through in a crisis then refuse to unwind it' plays that the government makes when it wants unpopular law changes.
>Abstract: In many situations people behave ethically, while elsewhere dishonesty reigns. Studies of the determinants of unethical behavior often use random assignment of participants in various conditions to identify contextual or psychological factors influencing dishonesty. However, in many real-world contexts, people deliberately choose or avoid specific environments. In three experiments (total N = 2,124) enabling self-selection of participants in two similar tasks, one of which allowed for cheating, we found that participants who chose the task where they could lie for financial gain reported a higher number of correct predictions than those who were assigned it at random. Introduction of financial costs for entering the cheating-allowing task led to a decrease in interest in the task; however, it also led to more intense cheating. An intervention aimed to discourage participants from choosing the cheating-enabling environment based on social norm information did not have the expected effect; on the contrary, it backfired. In summary, the results suggest that people low in moral character are likely to eventually dominate cheating-enabling environments, where they then cheat extensively. Interventions trying to limit the preference of this environment may not have the expected effect as they could lead to the selection of the worst fraudsters.
And then address the problem on the demand side through regulation and treatment programs etc. rather than prohibition.
Why do that at the end? Start by treating drug addicts as patients to be treated instead of criminals to be punished, set up comprehensive evidence-based well-funded programs to do so. First decrease the demand, then the supply will settle itself.
That would maybe work for the drug cartels (assuming they haven't diversified their business model off of drugs into other criminal enterprises by now). But then you're still left with all the non-drug related criminal activity under which money laundering is commonplace.
Now they'll scapegoat cryptocurrency even though its use for ML amounts to a tiny percentage of the massive global ML industry.
The vast majority of ML is via real estate, all manner of fake businesses and fake equity deals, the "aaaaaaht" market, creative use of things like penny stocks, etc.
This is sort of like how they go after street dealers and small time drug "kingpins" while the real leaders of the industry (and there's a heavy overlap there with the major players in ML) aren't prosecuted. The real drug kingpins generally don't touch the product.
a brown person and refugee who gets convicted with a few gram of weed AND for not having a registered address with the police (as is law in Germany) often spends more time behind bars than somebody like the above. Bavaria (CDU/CSU) is especially notorious for being tough on immigrants or foreigners.
I don’t know. Incarceration is an old idea with surprisingly scant evidence, despite it long predating our ability to analyze it dispassionately. Besides, many white collar crimes, like money laundering, lack a proper victim. So you’re missing both the quantitative and qualitative justification to send executives to jail.
Your outrage shouldn’t be focused on this. Instead demand that all justice for all crimes be evidence based, especially for crimes committed by normal people.
Seems extremely unlikely. According to a EU report [1], estimated market for illegal drugs in Europe is 20-30 billion EUR per year. That's not that much, compared to say market for fossil fuels.
White collar crime has always been enabled at the highest levels of governmental authority. The Panama Papers shed some light on the most recent incarnations of this.
Governments are inherently the largest criminal actors, they have a monopoly on the enforcement of law. Corruption is a natural consequence of a world governed by profit. What happened when whistleblowers stepped forward on the true extent of international financial crime? Nothing.
The question is not how a government can hold itself or its citizens accountable for white collar crime, the question is why and how these structures exist.
Look at the money laundering records of the largest banks, their cooperation with organized crime. Look at the slush money and criminal activities of federal law enforcement, military, and intelligence agencies.
The answer is that profit governs our global society and holds the greatest sway in political power structures.
As long as our world is governed in this way, then the world can be looted and plundered without consequence. Money laundering is just a vehicle for legitimizing these activities.
>Corruption is a natural consequence of a world governed by profit.
Profit is no necessary for corruption to happen. Lenin and Stalin did prosecute profit(and millions starved as a consequence) and their country was extremely corrupt.
It is power that corrupts. Humans have a social hierarchy like other social animals and people want to be above and not down.
Power is inside our brains not outside. You don't need to teach anything to a horse or a Wolf, or gorillas, they will try to dominate the other horses, Wolves or Gorillas.
And Humans, specially dominant Humans want to dominate other humans, and most humans don't like being dominated.
Stalin sold out his country in debt negotiations with foreign banks. He did this because Kulaks destroyed massive amounts of grain in order to maintain profitable prices.
Ask a Russian and they will tell you that profit seeking caused the Holodomor.
This Animal Farm logic has been digested by most Americans. Russians actually wanted democracy, but this was suppressed by Bolshevism.
Most of human history encompasses hunter gatherer societies, a social hierarchy in which the most vital resources are collectively owned.
Most of human history does not fall under a collectively owned economy.
Maybe much of human pre-history, or peoples with no history could be classified this way (although struggles for control of resources was still pervasive), but the historical period of humanity goes hand in hand with ownership and some of the first historical records were in fact to record ownership.
Private ownership has existed since prehistoric times. Even animals observe private ownership, not just over their own bodies, which is self-ownership, but also over their kills, and territory.
The principle of First Possession, where other animals have a tendency to cede control over a resource to the first animal that comes to possess it, is widely observed by behaviorally advanced animals, and game theory experiments suggest it reduces conflict, which would explain why.
This is very difficult problem when you look at the interplay of information between parties trying to combat this that have very limited means to collaborate: governments, regulators, and the banks.
In Australia (at least) banks are given rather descriptive measures to check for by the regulator. Some of these are quite standard but leave some room for the banks to decide what hard values they set in their checks. Every so often the regulator comes in, does an audit of these checks and tells the bank if they think the implementation could be better or not, but it's very arms length.
You see, when the detection systems produce a result (live or historical) they are then investigated further by human analysts. How many human analysts do you need to pay? Well, it's a tradeoff between where you set those hard limits and historically how many results you get over periods. You don't want to have a massive backlog, processing time is also a consideration, but how do you know when you're picking up actual money laundering and not just weird human behavior? When you think you've found something, you send it to the regulator and the police who take it from there. You don't get any feedback. It goes into a blackhole.
This sounds inefficient but perhaps (not sure if it's been determined) it avoids the case where you start overfitting to particular types of activity at the risk of ignoring others.
All banks implement their own checks, so assuming other parameters (customer base, technology, enterprise risk environment etc.) are the same there must be one out of any group that's better than the rest, but the regulator is the only one that could possibly know based on outcomes. Any signal from them will be picked up on by those actors trying to get around this.
This is hard, but the transaction is just a record of activity (albeit one of the only ones available to enforcers) usually after the fact. Maybe to achieve any meaningful reduction, you have to stop the flow in the first place, I don't know.
Financial institutions don’t have incentives to deeply scrutinize all money transactions.
If it entails some sophisticated trades with different financial instruments backed by some complex setup of involved parties, then it means that doing a deep due diligence would cost them a lot of money.
So of course many financial institutions would just do the standard due diligence, the one for which they have a justifiable cost of business.
It’s cheaper to pay one penalty that could or couldn’t come, than to scrutinize your customers and their transactions.
That’s why they are losing the war against money laundering. Because the only laundering that is being caught, is the petty one. The one that doesn’t matter. Paradoxically billions of dollars are invested in catching this type of money laundering.
It’s the exact same problems of tax evasion. Same reversed incentives, same functional behavior. You could almost say that the money laundering and tax evasion are symmetrical problems.
There is no actual war on money-laundering just like there is no war on drugs. In the sense that the people that do the most money-laundering are the same people that control the institutions of the state. Invariably people indicted for money-laundering are small fries that do not have the necessary connections to be immune to indictment.
Without actual expenses or a plausible storefront, it’ll get flagged pretty quick and shut down - and that type of ‘hands on’ money laundering usually results in significant jail time. Not looking too hard with complex movement of funds with wires is usually more plausibly deniable.
There are all sorts of different schemes and they change with time. One I kind of knew about was a lot of drugs in the EU are traded for cash in Amsterdam. The cash was then put into the boot of a car and driven to Marbella where it was used to buy property. It affected me because I have a property there and one day they arrested half the lawyers in the area for facilitating that. I assume they are doing something a little different now.
That's why it's called money laundering. Laundries, along with cabs, bookies and casinos, provided a 100% legit company front that could easily bill for many small imaginary services that were paid in cash.
However, running a single legit company large enough to launder the proceedings of a large criminal enterprise is impossible these days. A big successful company with sufficient revenue to mask laundering would draw attention to itself just by existing.
Does anyone know how it is legal to be considered guilty until proven innocent in the financial world? For me it feels like this changed slowly during the past 30 years without anyone noticing it.
I'm not sure it's really "guilty until proven innocent." Having had money held up myself by anti laundering it's more the bank writes to you saying we can't process this until you provide some evidence as to its source. And they're not really that interested as to the source - they just want an appropriate bit of paper in their file so they can say they met regulations.
If I'm an "artist", and I draw a horizontal line, and a "buyer" pays 7 figures for my "art", and I sort of know into exactly which account to deposit the payment: is that money laundering?
That is just modern art. But... if in the previous week you paid someone those same 7 figures, or you paid N people 7 figures/N for their creative dance with walnuts, then the tax people might be justified in their curiosity.
If you deposit the payment into an account that's not yours, that is where AML (and tax laws!) kick in. Are you simply giving a gift to that person? Are you buying something from them? Are you making a honest mistake?
The problem is not that a casino "makes a lot of money" suddenly. Sure, great for them. But then if that money starts to percolate into the other jurisdictions. For example the casino orders dry cleaning from a foreign company. The casino wire transfers the money, the cleaners send the receipts, but no actual cleaning happens (obviously).
And this is where banks come in, because they provide the wire transfer. And they are mandated to flag extremely successful dry cleaners and other providers, report it to various government agencies.
And ... it turns out that somehow they can't even do plausible deniability properly.
I have no idea if that is money laundering or not.
But in the Real World™, most money-laundering investigations are done by law firms after a theft of funds is discovered.
The frauds are typically insider-assisted procurement fraud where some known list of initial illegal transactions are identified and then attempts are make to recover it from intermediate and/or ultimate beneficiaries.
The bank accounts of a long list of intermediaries are subpeonaed and the transactions traced.
The entire point of money-laundering is to make the trail go cold.
The 'contra' bank account entries keeps the trail very, very alive.
Imagine, paying 52 million bucks for a vertical blue line on a canvas. When the auctioneer, who suspiciously never really care to do background checks beyond the simple stuff, finds that the buyer is an offshore trust fund - they are more than happy to sell the painting and extract ridiculous fees because the trustee won't care. The trust is a laundering device for whole countries created by the English to aid capital flight. 52 million is but a drop in the ocean.
If the money used to pay for the "art" comes from declared income and and the only thing you provide in return is "the artwork" it's modern art, unless of cause your connected enough that it could be seen as an attempt to carry favor with your connections.
The transaction that happens when the buyer then sells it for twice the amount to an offshore holding trust without any operational business associated with it is money laundering.
1. All economic transactions between parties are given to government and linked to a government-issued identifier. With this data, you can throw a bunch of smart people and algorithms to detect fraud, laundering and tax evasion.
But of course, "privacy". Such a convenient excuse to prevent us from stopping alot of crime and fraud.
> But of course, "privacy". Such a convenient excuse to prevent us from stopping alot of crime and fraud.
Are you saying that law-abiding people should renounce their right to privacy because of a few malicious actors, especially when there's plenty of other ways to prevent such crime (money laundering is merely a symptom of another crime and that one needs to be prevented).
"I'm sorry, your 6 month old daughter was selling carfentanil to her grandparents, with a probability of 99.63%" Privacy also saves us from lots of machine learning fishing expeditions gone wrong.
Then I'd ask why you trust them with everything else? They can pretty much make you a non-person, or make you disappear, or treat you as sub-human. And they regularly prioritize companies, rich people and other special-interest groups over you.
So yeah, you shouldn't trust them. But right now they are an inevitability with no alternative, so we need to figure out how to solve the problems plaguing us whilst reigning government in and keeping it from overstepping. Some element of "given" trust is necessary for that.
As a side note, seeing as this is a technical space. One reason you should trust their identifiers is the same reason you shouldn't use non-unique natural keys as primary-keys in your database. The identifier is essentially your surrogate key and government is in a very unique position of power/influence that aides it in being a custodian of citizen data.
That's not really true: it takes about 30min to setup dummy companies so instead of A->B you now go A->X->Y->B and A and B can continue pretending they didn't know...
I hear this a lot and on the face of it, it sounds plausible but I have worked with a number of startups from before their founders incorporated and I don't think, "setting up dummy companies in 30 min" is a thing.
You need directors and shareholders for all these companies (and nominee directors aren't really a thing anymore because of the obvious risks), you need to provide a lot of UBO paperwork (ultimate beneficial owner) and even more if you ever want to open a bank account (dummy companies without bank accounts are useless after all).
So while you, as a person, may be able to open a bunch of Ltd.s online (e.g. in GB) in an hour, this means that all these would be in your name and all your data publicly available for everybody.
Please correct me if I'm wrong, I'd like to learn more about this...
Delaware LLCs take literal minutes and just a small amount of paperwork. We created a LLC because we bought a boat. since my partner wasn’t a US citizen it couldn’t be documented with her name on it so we created a LLC who technically owned it and me holding 50.1% ownership.
Any documents to the LLC goes to a POBox in Delaware. There is very little attaching my name to it that you could find without a court order.
I get that. How would that help you do any money-laundering though?
(Not saying that you would do that but that's the subject of the thread ;-)).
You couldn't just set up a second or third Delaware LLC and move money back and forth between them with impunity...
What I was saying is that I don't see how money-laundering is all that easy anymore nowadays, at least not for any normal person which is not part of a criminal organization (mafia etc.) with lots of members willing to do illegal stuff for them...
LLCs can't hurt nor hinder laundering. I was just pointing out that it's fairly easy to set one up. Developers do it all the time when they are trying to buy blocks of adjacent properties without revealing themselves to competitors or flippers.
KYC and AML departments have made it a little more difficult but not impossibly so. I would wager it's gotten even easier with cryptocurrencies.
in EU, governments are removing the "bank secrecy" so they will have access to everyone's bank account pretty soon. don't worry, it's for your own good.
And just like a real war innocent people are suffering the consequences.
There are no shortage of stories of small business owners that were kicked out of the banking system for dealing with so called "high risk activities" like the cannabis industry or cryptocurrencies and there are also no shortage of stories of rich criminals and politicians just getting away with whatever fucked up activity they do. Hell... they even put a literal criminal in charge of the ECB.
Will be interesting if digital yuan changes the landscape. It has "controllable anonymity," meaning buyer and seller can be anonymous, but government authorities can readily track suspicious transactions.
I was in the thickets of “big bank” AML for a few years. The experience left me pessimistic.
Tragically, the process is treated entirely as a box ticking exercise. Incumbent AML systems are old and ineffective, and scores of investigators submit thousands of SARs (suspicious activity reports) to central policing authorities that 99.9% of the time are ignored until they help an ongoing case.
The process is neglected partly because it doesn’t generate money, it prevents fines, which are tricky to predict and a less obvious priority for upper management.
Launderers of any significant amount of money are savvy to the pitfalls of current systems. Best in class solutions can capture some money laundering schemes via watchlist screening and “suspicious looking”transactional patterns - but the limit is the data the company owns. The main issue is that money is spread across multiple institutions in multiple jurisdictions.
As systems to tackle money laundering become more effective, so too do the launderers.
We have a real example in the United States called Trump,
Get someone to buy a piece of real estate at allow price who does it anonymously and set it up also to support the valuation of the same piece of real estate at a new inflated price. Tada! You have just laundered some Russian money just by refusing to ask money source questions.
And they real trick is make sure every single piece of real estate is a separate pass-through-LLC as than the IRS is hampered by not having enough audit staff to even examine it.
You think I am joking....not really ask an IRS return examiner.
World-wide one of the easiest ways to launder money still remains the real estate buying and selling.
Please, how do you buy a piece of real estate anonymously? Come on, that's not a thing.
Certainly not anonymous in respect to the government.
A pass-through-LLC means everything is directly in your name and if you don't report it on your personal tax return you go direct to jail without collecting $200. If the LLC has its own bank account, this will also be associated with your name.
And once you're on their radar, I bet they can find enough auditors to check your other LLCs as well.
Please correct me if I'm wrong but I really don't see how you think this can work in reality.
I will not get into the Trump thing other than saying it's not like they're not already investigating him either (and possibly have been for years).
That is because States are most of the time the dirtiest of all launderers.
For example the US financed its South America operations with drugs for a long time. US, Israel, Germany or Russia sells weapons under the table to other countries.
Venezuela's leaders are financed by drugs today, like Cuba and Bolivia.
US, Saudi Arabia, Russia, Turkey give money or weapons to people that destabilize other countries like Syria , Ukraine or Iran, Iraq or Afghanistan. Osama Bin Laden for example was paid by the US for a long time,like Hillary recognized.
In Iran and Congo or Egypt the US simply destroyed democracy killing their leaders in order to loot their countries, just like their predecesors.
Talking with Syrian refugees, it was usual for them to see some alien(no Syrians) group enter their villages with the newest weapons and Iphones and do things like killing all Christians or raping all women, they were financed by external powers.
If you are Chinese and have lots of money the UK will welcome you in any of their tax havens, of course, while the Chinese have made it illegal. Remember the British Empire financed itself with drugs(opium) and slaves for all its History.
If you are Germany Italy or Switzerland and the US imposes you ridiculous sanctions like those to North Stream 2 project, you will find a way to evade the control of foreign powers over your sovereign rights paying on alternative places than those controlled by the foreign power.
True, but that isn't money laundering that the article talks about because it is done by the State.
The Economist knowingly ignores various crimes by the UK and USA while whining how there's not enough money for the endless illegal wars they support. The more money is hidden from the State and politicians, the better.
> Venezuela's leaders are financed by drugs today, like Cuba and Bolivia.
Do you have a source for this? All the reports I have seen point the opposite, modern current Bolivian Venezuelan govs have seen a dramatic fall on drug trade, there was even an apalling graph from US senate where it showed that the bulk of drug trade left LATAM through Colombia and the Pacific Coast vs Venezuela, but still US gov PR line has been insistent on tarnishing the global reputations of said countries because they oppose US hegemony in the region
》 British Empire financed itself with ... slaves for all its History
That is just not true.
British Empire abolished slavery worldwide. They went into war with many countries that supported slavery. They even took huge loan to end slavery, that took hundreds years to repay (until 2015).
Before abolition, profit from slavery was the empire’s largest source of revenue for centuries. A few months ago, Jane Austen led me to do some digging.
I think they got most of that pretty correct, but I agree that making such a long list of claims should inspire a list of citations before being shared.
It's ridiculous when the West claims Nazarbayev (Kazakhstan's first president) dictator, at the same time allowing his family to buy properties in London spending billions of dollars. Hypocrisy at its finest. That's one of the reasons I, personally, no longer accept West as world's morality leader and their "democratic values". They're good at fooling young people, but when you start to think and analyze, you'll realize that corruption is legalized in US, that there are plenty of presidential families or otherwise high-ranked positions there, so it's all the same. West condemns when "dictators" shut protests while doing the same with protest in their own countries, even more violently. They just have more money, so they can wash brains better, end of story.
The tax office doesn't go after the worst offenders it mainly goes after the ones where they can get the most money out for the least effort. But the worst offenders often have all kind of fallback strategies and good tax lawers so it's costly to get them and you likely never see the money. So instead they go after small one/two/three people companies as they are most likely to make some easy to spot mistake when making taxes which you then can spin out of control. That this often will lead to less taxes earned on the long run due to small tax paying companies going out of business due to a small mistake being turned into a big thing no one cares.
This also leads to absurdities that certain kinds of businesses are seldomly tax checked and in turn often used to do massive money laundering.
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[ 2.1 ms ] story [ 240 ms ] threadWhen you make everything that's not permitted and highly taxed illegal, you find yourself in a money laundering war you can't win.
Internalize the cost of carbon pollution and let the market price out wasteful usage. Demonizing specific energy usage is a waste of time and mindshare. It's little more than moral masturbation.
Obviously this is approximately the opposite of AML, but everybody keeps demonstrating that AML doesn't work. So we're better off to just give it up and take the advantage of a formal financial system with the properties that people will be able to get from cryptocurrency regardless, without the energy waste of Bitcoin et al.
Because then people will use the official financial system, cryptocurrency will be less valuable, and less energy will be wasted mining it. Which is more than we're getting from privacy-invasive and ineffective AML rules.
It's odd to make these claims simultaneously. That one, AML doesn't work. But that two, crypto's value statement is in circumventing AML. Which, per the first claim, doesn't work.
I get that the needle can be threaded by holding that an ineffective AML system can still be annoying. But if it's circumventable, that's just a cost. Which means we're comparing transaction costs versus fundamental aspects of differentiation.
At the end of the day, most people aren't money laundering. Having everyone who is money laundering self identify on a public ledger might be the solution the problem is looking for.
The trouble is that the baseline level of inconvenience doesn't phase a criminal enterprise, because to even exist it already has to incur the cost of operating unlawfully and risk being shut down and compensate employees for the risk of being charged with a crime, regardless of AML.
But the AML rules don't only inconvenience people who are really doing something wrong. There are obvious privacy problems with associating every purchase anyone makes with their name, and chilling effects for what people are willing to buy. It creates friction in things that aren't illegal. And since legal activity is so much more common than illegal activity, a little bit of inconvenience multiplied by the entire population is a lot, whereas a little bit of inconvenience multiplied by a couple of outliers is not. So the cost is more than the benefit.
Operating an illegal enterprise in such a manner that cash can make it past AML measures and eventually be spent by the enterprise's owners, and the concomitant problem of structuring the enterprise's bookkeeping and tax reporting so it has enough plausibility to avoid prosecution, is more than an inconvenience. It's the central business problem the owners of those enterprises face. Talking about their business costs and risks "regardless of AML" doesn't really make a lot of sense.
> But the AML rules don't only inconvenience people who are really doing something wrong. There are obvious privacy problems with associating every purchase anyone makes with their name, and chilling effects for what people are willing to buy. It creates friction in things that aren't illegal.
This problem, the effects of which you're wildly overstating, has little or nothing to do with AML measures. (You mentioned a chilling effect on things that aren't illegal - are we just talking about stuff that people don't want their spouses to see on the credit card bill?) It's true that every purchase you make without cash will have a lot of detail associated with it, stored electronically and held by the banks and credit cards processors. This all predates modern AML rules by decades.
You would have to do something very unusual for one of your transactions to "create friction" with your bank under the guise of AML rules. If it has ever happened to you, I'm super curious about the circumstances. Insofar as AML and other more modern, security-related rules might inconvenience ordinary people, they tend to affect people when opening an account, not when transacting.
Before 9/11 it was possible for a foreigner to open a bank account in the US. It's now been 20 years since it is required to physically travel to the us to open a bank account.
Do you think that increases crypto demand or decreases it?
One, why does a non-American non-resident need an American bank account? Foreign banks can hold dollars. And two, plenty of American banks open accounts for overseas non-Americans.
> Do you think that increases crypto demand or decreases it?
Why is this a bad thing? An edge case is being addressed through a novel product. Win win.
HackerNews "its just rsync" level comment
> And two, plenty of American banks open accounts for overseas non-Americans
Literally 0 without physical presence. But I'm very much welcome to be proven wrong here, can you give me a bank that opens accounts for non american non residents?
Youtube could be considered more wasteful than crypto (depending who you ask) and it is never mentioned when people talk about "wasteful electricity usage".
The conspiratorial part of me wonders why that would be? Is it because it is actually a threat to large payment processors that if crypto were to succeed would make them obsolete in the future?
I think that there is a lot of problems with the current crypto market, the electricity usage while concerning isn't the biggest issue with these electronic currencies.
I'm honestly surprised that literally every comment that is defending Bitcoin mining energy is always pulling out the same poorly though out argument as if knowing that electricity is being wasted is a recreational activity in its own right.
Please come up with better rebuttals. Here is a freebie:
The block reward goes down over time and thus the economic incentive to waste energy. The transaction fee goes up to compensate and the transaction fee is directly paid by users who derive value from the platform, otherwise they wouldn't pay the fee in the first place.
No. I never said that. When did I say that. I never said that? I get very bored by people that try to put words in my mouth. Hackernews (this isn't my first account here) is like this. It is horrifically boring.
> Please come up with better rebuttals. Here is a freebie:
It is a perfectly fine rebuttal. At the moment the only reason anyone is buying crypto is because they think it is going to be worth more in the future. Most aren't buying it for transactions at the moment. If you can somehow so that is false, please do so otherwise don't be an asshat.
God I hate this site. It is little better than reddit these days.
Going further, all data centres in the world use an estimated 200 TWh per year, and data transmission networks are estimated at 250 TWh per year [4], for a total of 3.2 times Bitcoin's energy use. Maybe it's just me, but the value provided by the internet is more than 3.2 times higher than that of Bitcoin.
[1] https://s22.q4cdn.com/959853165/files/doc_downloads/2021/03/...
[2] https://www.iea.org/commentaries/the-carbon-footprint-of-str...
[3] https://cbeci.org/
[4] https://www.iea.org/reports/data-centres-and-data-transmissi...
Value is subjective. What you call actual value has zero value to others.
The energy consumed by Bitcoin is the entire value. Find a way to reduce the energy cost and everyone will mine more and consume more. If they don't the trust in the network decreases and the value of Bitcoin decreases. It is not possible to get a popular situation where bitcoin is valuable and does not consume a lot of energy. The valu of Bitcoin is strictly tied to the amount of electricity people are willing to waste for it.
Mining bitcoin is comparable to the US army? LOL.
How delusional are you, is that correlated with the amount of BTC you own?
Secondly, crypto is not wasteful. It is broadly breaking down the global walls put up by 1st world countries like the US and EU that have plagued every day people in 3rd world countries for decades.
It feels wasteful to us since most people near us have unrestricted access to banking and finance. Most of us are not journalists or activists who have to fear one phone call to Chase bank ending our entire operation. Despite recent events, the USG is not about to topple into a third world dictatorship that we would feel the need to flee from.
Crypto gives refugees a means of escaping with some of their family wealth. It allows journalists and activist insulation from governments and corporations trying to squeeze them out financially. And finally, it gives every day people across the globe the ability to start investing their money outside their own countries and begin accruing wealth.
Here is one example of the usefulness crypto can provide. https://www.reddit.com/r/MakerDAO/comments/de0sys/kyc_is_abs...
That electricity is being put to far better use than Youtube or Netflix.
https://www.toysruscreditcard.net/
You don’t need conviction numbers to set examples around unacceptable bad behavior. Add enforcement and regular independent audits by regulators with strong regulatory capture protections, and you’ll have a better run system.
This refers only to going after shareholders. Employees can always be held responsible for their actions.
The flip side is that shareholders don’t get to make any material decisions about running the company; that’s the job of the directors (who might not be shareholders). Directors are, in theory, legally liable for the actions of the company they manage.
All this would be fine with me, and directors certainly have gone to jail for crimes committed by their company, but it’s incredibly rare, and in Australia where I live, is generally related to trading insolvent, tax avoidance, or other clear and simple legal issues. But go ahead and let your company illegally blow up irreplaceable ancient cave paintings in the outback, and you’ll be fine.
In fact, in Australia at least, the corporate regulator ASIC is so toothless that there is no straightforward way to enforce director’s breaches of company constitutions or other governance agreements other than directly with lawyers. This makes enforcement of the governing documents of a company (the documents that the shareholders sign up to) incredibly expensive and intimidating. Even clear breaches of the Corporations Act, the governing law of business in Australia, must be dealt with through civil law.
So if you are a minority shareholder in an Australian Pty Ltd company and the directors decide to break their agreements with you - say an agreement to use green energy or to use ethically sourced labour - you’re screwed unless you sue them. If you’re a small time investor or if a significant portion of your wealth is invested in that company, you’re shit out of luck. The directors can do what they like.
That’s messed up, because it means that directors can get away with almost anything, even if the minority shareholders disapprove, and there is zero recourse in the justice system.
I presume that, as with many things legal, Australia follows the US in this regard, but I don’t know this for certain.
If you give your neighbour some money and he goes and buys a gun with it and kills someone, you can be held liable in that scenario(depending on the intent, on how well you knew what he was going to do etc etc etc).
If you give a company money(investment) and they go and destroy the Amazon illegaly.....your hands are clean?
I mean, obviously I understand what you mean. I own some shares myself. But there has to be some middle ground between "100% responsibily, straight to jail" and "give money to people who do bad things, have 0 responsibility".
All four of those companies have made my life better and I’m glad someone invested to make them happen.
All of which could perhaps be avoided if the investors were afraid to be associated with such scummy business practices, and instead pressured aforementioned startups to stay fully above board while realizing their vision.
Without those protections it would be far too risky to invest in companies that people weren't intimately involved with. The scope of human activity would be limited to things that could be achieved with a small business. While not necessarily the end of civilisation, it would be a huge change. And quite likely knock down one of the ladders (a well balanced stock portfolio) that people use to move up into the middle class.
I'm not a fan of the idea. It entrenches class divisions and probably shrinks the middle class. It raises difficult questions of how retirement would be set up too, it would be much harder to organise an independent retirement without access to the share market.
If you combine that by making should have known the company was doing things illegally an good enough reason for the shareholders to sue the responsible executives into bankruptcy and you might see a change in behavior.
The problem is that when all of the costs comes out of the operating budget there is very little reason for the general assembly to hold the board responsible and if the board is not held responsible neither will the executives.
Several problems remains however.
Simply knowing that the company was breaking the law isn’t sufficient for a shareholder to be able to do anything about it. If you own <5% of a company’s shares[0], you have basically no way to change the behaviour of a company even if you know it’s wrong and want it to stop.
Also, the value of a privately held business is difficult to compute. Although setting fines as a percentage of issued capital rather than a dollar value would ameliorate that.
Finally, what would the government do with those shares? If the government simply destroys them then the actual value of the remaining shares won’t change. And the market for privately held shares isn’t huge.
Still I love the basic idea. Can’t imagine it happening though, nobody wants to be held accountable.
[0] if you’re a shareholder with less than 5% of shares in Australia you basically have no right to access anything other than the annual reports, so your ability to even know what’s going on is extremely limited. Don’t know if it’s the same in other countries.
The shareholders should be held financially responsible for any fines not levied directly at the board or the executive team, hence why their liablity should be capped to the value of the shares.
The point is to force the large institutional investors to really care about the integrity of the boards they elect, so it might be worth putting in an lower limit to exclude retail investors with trivial amounts along with holders of non-voting shares from liability.
The government would not be holding or owning the share they would be paid their fine in USD raised by the company from either newly created shares, or fresh investment in the case it's not publicly traded. And if they cant it's up the current owners to either pony up loose all of their investments. It should be up to the company fined to market those shares not the goverment.
Remember that issuing shares without generating investment money devalue the existing shares, which is the point of the operation.
IT might not be the one true solution but letting fines be paid from revenue disincentivize the owners from caring that much about legal fines.
The fact that directors and CEOs have so much control over a business, but that it’s extremely difficult to hold them to account, is very bad IMO. But changing the law won’t fix anything if the law itself is not properly enforced.
Imagine I'm the CEO of FooCorp, I own 5% of the shares, and FooCorp have $10 million in profit. I'll make $500k if I pay out that profit as a dividend - but I'll make 20x as much if I pay it as a 'pension contribution' to myself.
The problem there is that the government has no need of their 'tax revenue' because no such thing exists in sovereign currency areas like the UK and the US. (As explained by Beardsley Ruml decades ago: http://home.hiwaay.net/~becraft/RUMLTAXES.html) If they don't get it from the fraudster, they'll get it from the next person in the spending chain. It all happens anyway. (And if they divert it, then the downstream doesn't happen and they lose 'tax revenue').
For the integrity of the tax system, tax evasion must always involve significant jail time. It's the most valuable thing you can take away from the people who undertake these sorts of frauds.
But there's multiple levels of government and not all of them get to print money; the US federal government does a lot of payments but doesn't give states whatever they want.
So if it caused inflation then we'd have loads of it, and we don't.
Whether a bank ends up holding reserves, or holding a government bond is just a difference between a floating rate debt receiving the base rate, or a fixed rate debt receiving the bond rate. Just an interest rate and term difference - nothing else.
The last year has completely debunked any question that 'creating money' is inflationary. Believing otherwise is up there with anti-vax thinking.
If the state creates $100 and you stick it in a drawer, or just leave it in your bank account, where's the inflation coming from?
It's 'not spending' that causes deficits in the first place. If everybody spends and never saves then there can be no deficit for any positive tax rate.
There is no magic in bonds. It's a myth.
Even in crypto, Bitcoin is still in its inflationary phase until mining runs out.
What are some examples of this or where can I read about how to do that?
Many times the settlements allow them to avoid making any admissions of wrongdoing.
It would look the same, we already know that harsher sentences do not provide effective deterrence.
Do it also hold for white collar greedy banker type crime?
You have these criminals. Drug cartels. They sell their drugs and send the profits back to Colombia where they own the government and are immune from prosecution. The theory is supposed to be that you prevent them from getting the money or using it to pay their operatives in the US, since you can't actually put them in jail.
The problem is that it can't make their business unprofitable. It can't because the demand is relatively inelastic. Heroin addicts gonna buy heroin. You make it less convenient, the price goes up, the drug cartels make more money and use the money to bribe whoever they need to or buy submarines etc. And all the AML rules can ever do is make it more inconvenient to launder their money. Can't ever actually win that way.
It even makes it worse, because higher barriers to entry induce market consolidation. You get bigger, more violent cartels. Because AML drives some producers out of the market, but the others figure out how to evade AML and keep the higher margins from the reduction in competition, and increase their production to satisfy the demand left by the exit of the weaker producers. It puts more money into the hands of the cartels. It's a dumpster fire and should be utterly dismantled.
The answer is to solve the underlying problem. Do the opposite on the supply side; increase competition so much that nobody is making any money at all. Decriminalization. And then address the problem on the demand side through regulation and treatment programs etc. rather than prohibition.
Are bigger cartels actually more violent?
I thought a lot of the history of the Mexican cartels was the Government almost collaborating with some of them because having one dominant cartel resulted in a lot less violence than multiple smaller ones.
On top of that, the merge to monopoly plan has the further disadvantage that then the monopolist drug cartel will be long-term stable. So their operation remains profitable and they never get shut down, which means their power grows over time as they use money to buy more power ad infinitum. You end up as a narco state. Very bad.
Honestly, I think we'll only solve it via legalisation as anything else just leaves the money in the hands of the drug cartels.
One would have hoped we'd have learned the lesson from Prohibition and organized crime in the early 20th century.
A lot of the history of Mexican cartels was the government renting territory to all the cartels and actively supporting them as long as they played ball, because because that maximizes the ability to extract revenue from them and play them against them against each other when they get out of line.
Agree for drugs. Disagree for tax fraud.
Money laundering is a consequence, not a cause. You have to address the cause.
The causes are embezzlement and fraud (tax and otherwise). The drug trade is a flashy source of money laundering demand. But it is one of many.
even white collar crime would face the problem of explaining where the money for purchases came from if that income hasn't been declared. money laundering is part of the strategy for anyone who does crimes and wishes to not get caught (otherwise why give up part of the profit for the laundromat).
That kind of addict is already spending 100% of their available money on heroin. Worst case the price going up means they take less, which seems like a somewhat positive outcome.
> And all the AML rules can ever do is make it more inconvenient to launder their money. Can't ever actually win that way.
You could say the same about every law. All you can do is make it more expensive; murder still happens despite all our efforts to prevent it. But you can make it rarer, make it a less profitable business. Eventually it becomes non-worthwhile for most of the people currently involved in it.
You can say whatever you want, but what matters is the evidence, and there's no evidence AML laws have reduced illicit drug use.
No, it means my car gets broken into.
I beg to differ. I definitely think we could do a whole lot more to stop serious crimes like murder, assault and rape. Hell, we're not even solving domestic violence properly when we could be doing so much more. Instead, the cheap and I guess politically-easy steps are taken, whilst the more drastic options are ignored.
No, worst case they get violently sick, resort to crime, lose their house, try risky new suppliers...
That, and there’s a lot more addicts and users who aren’t spending 100% of their income on it than you’d think. It’s extremely addictive, but it’s still not 100% addictive after all.
That's already addressed by demand inelasticity. When price rises, the quantity demanded falls at a much lower rate. It's the same demand curve we see for healthcare. In a scenario where there is ample competition, the price equilibrium is not as skewed, but when supply is severely limited or suppliers collude, the price equilibrium inflates needlessly, which is exactly what we see in both controlled substances and healthcare.
Yes, they end up taking less heroin and more fentanyl.
Sure, but it happens more in some places than others. We can nudge people to situations where they are more likely to murder or we can take care of society and have fewer.
Drugs aren't quite like murder, and laws regulating food additives aren't like drug or murder laws, and each of these have different impacts.
Problem with this statement is it's not only about drugs. Yesterday it was heroine/cocaine, today the cartels are laundering avocados, tomorrow it can be whatever else high-demand product of the western world that is available in Americas. The mafia cartels will always find a new field to profit from.
Only if they are finding people to work for them. Mafia and other organized crime thrives in areas of weak and/or authoritarian government and poverty since they can lure young people, most often men, with the promise of luxury and riches while at the same time being certain they won't get into too much trouble with the authorities (or can bribe them off if need be).
Remember that mafia started in Sicily (Italy) back in the 19th century when the central government was not much a thing and feudal landlords organized "security" on plantations in exchange for protection money from small farmers.
The solution to get rid of the mafia or at least drastically cut their influence is to strengthen civil society, democracy and governments in plagued regions. Unfortunately, the general trend is exactly the opposite with many governments that have been weak before corona hit now getting absolutely destroyed.
Would that be bad though? That's just the market at work. If crimes are being committed (such as stealing the to-be-resold goods, etc) then go after it but otherwise I see no problem with cartels reinventing themselves as somewhat-legitimate businesses.
This may be the case if you're looking from a first-world standpoint.
There are too many shithole countries with governments so corrupt or tax system so disfunct that any money generated could not be legalized in the eyes of US regulators.
Someone who's not me lives and works in one of those countries doing 100% legal and clear business (think software development or furniture manufacturing). This person is forced to acquire money laundering services.
Do you have any problem opening a company in Singapore with bank account in Switzerland? For a US citizen this is a matter of days if not hours and with no problem whatsoever.
This used to be possible for people of my country, albeit it took weeks. Now it is impossible. Banks all over the world refuse to open accounts for companies whose founders come from my country, no matter how good is the reputation. Opening a US company? Not even on the table.
Can someone open a local company and bank account? Sure. But nobody in the world is going to wire money there just because of the same reasons. And even if they did, this someone would have not much less problems legalizing the incoming wire transfer in the eyes of the local banks and would be eventually fucked up by local financial monitoring authority anyway. They want you to be in the dark.
At this point you may be imagining some african desert with dust in the wind and eeries silence around with rare beaten up toyota pickup trucks passing by on the lone road. But that's not the case. If you google "<my city> skyline" you would find pictures looking no different than Manhattan.
TL;DR: AML/KYC laws not only make criminal transactions hard, they make small business lives outside of the US even harder. These laws deepen the trench of the Global Digital Divide[1].
[1] https://en.wikipedia.org/wiki/Global_digital_divide
https://ngm.com.au/money-laundering-human-trafficking/
https://www.state.gov/report-to-congress-on-an-analysis-of-a...
It is elastic if you can regulate the number of heroin addicts.
If you really thought that supplying drugs was actually evil at a conceptual level, e.g. sex slavery - which also exists, and benefits from money laundering - then its profitability would be irrelevant. I'm not "fixing money laundering" by legalising sex slavery. And "fixing money laundering" was the topic, not "fixing idiotic drug laws".
But you're right in that AML also includes things like terror financing which wouldn't be fixed by... legalizing terror???
Terror has a pretty sizable portion of the pie... maybe... the lines get blurry really fast when say a state level actor is terrorizing its own people.
Moreover, "terrorism funding" is a joke. It costs only a few thousand dollars to fund a major act of terrorism. You're never going to stop it by depriving them of money because the primary cost of doing it is that it's punishable by death, not that they can't afford the monetary cost of a plane ticket or some fertilizer.
So once again you have to use solutions that address the root of the problem. Which for terrorism would be things like putting terrorists in prisons and coffins, or not conducting foreign policy by propping up authoritarian regimes whose victims then get so pissed off that they're willing to give their lives over it.
Drug dealers can't harass the family of a peacekeeping soldier from the other side of the world. So all those intimidation tactics involving people's families get invalidated and everything that's left are the drug dealers alone against thousands of well equiped professional soldiers.
Unfortunately, the UN starts with the premise that governments should deal with their own stuff, something that in practice doesn't work.
If stability was the number one priority the proper thing would be to have the government provide the supply for too cheap to compete with. Fill the power vacuum to prevent the reincarnation of organized crime. It turns out economic fungibility also includes criminals.
If anything, this would be an improvement. It is bad, yes. But far better than the status quo.
CJNG for example lost all respect and now they have an army, with uniforms, vehicles, military grade weapons and all. They do not hide who they are anymore. It is a joke.
Under normal conditions, you can deal with an infection with an antibiotic. But when left untreated long enough, you have to amputate. That is what is needed here. A complete amputation of those clowns from reality.
That is what the US would do if an organization dared to pull off 1% of what these clowns do every day.
Blitz war on cartels with army, navy and air force, missiles, bombs, napalm, tanks, helicopters, armored personal carriers... leave no trace of them.
The prohibition era analogy argument stops working when you realize cartels traffic people too.
Freezing people out of the monetary system is less effective against criminals and more effective against business ventures the US doesn't like.
Anything linked to the Patriot Act is bad news; it was one of the 'rush stuff through in a crisis then refuse to unwind it' plays that the government makes when it wants unpopular law changes.
Selection effects on dishonest behavior
>Abstract: In many situations people behave ethically, while elsewhere dishonesty reigns. Studies of the determinants of unethical behavior often use random assignment of participants in various conditions to identify contextual or psychological factors influencing dishonesty. However, in many real-world contexts, people deliberately choose or avoid specific environments. In three experiments (total N = 2,124) enabling self-selection of participants in two similar tasks, one of which allowed for cheating, we found that participants who chose the task where they could lie for financial gain reported a higher number of correct predictions than those who were assigned it at random. Introduction of financial costs for entering the cheating-allowing task led to a decrease in interest in the task; however, it also led to more intense cheating. An intervention aimed to discourage participants from choosing the cheating-enabling environment based on social norm information did not have the expected effect; on the contrary, it backfired. In summary, the results suggest that people low in moral character are likely to eventually dominate cheating-enabling environments, where they then cheat extensively. Interventions trying to limit the preference of this environment may not have the expected effect as they could lead to the selection of the worst fraudsters.
Why do that at the end? Start by treating drug addicts as patients to be treated instead of criminals to be punished, set up comprehensive evidence-based well-funded programs to do so. First decrease the demand, then the supply will settle itself.
The executives have an attractive call option.
Get caught = limited downside (being fired, no jail time), and the fine is paid fully by the shareholder.
Don't get caught = unlimited upside (bonus).
The vast majority of ML is via real estate, all manner of fake businesses and fake equity deals, the "aaaaaaht" market, creative use of things like penny stocks, etc.
This is sort of like how they go after street dealers and small time drug "kingpins" while the real leaders of the industry (and there's a heavy overlap there with the major players in ML) aren't prosecuted. The real drug kingpins generally don't touch the product.
The fine just became a cost of doing business for the banks and corps, and a funding the gov budget, truly a vicious cycle.
a brown person and refugee who gets convicted with a few gram of weed AND for not having a registered address with the police (as is law in Germany) often spends more time behind bars than somebody like the above. Bavaria (CDU/CSU) is especially notorious for being tough on immigrants or foreigners.
Your outrage shouldn’t be focused on this. Instead demand that all justice for all crimes be evidence based, especially for crimes committed by normal people.
Seems extremely unlikely. According to a EU report [1], estimated market for illegal drugs in Europe is 20-30 billion EUR per year. That's not that much, compared to say market for fossil fuels.
[1] https://www.emcdda.europa.eu/system/files/publications/3096/...
Governments are inherently the largest criminal actors, they have a monopoly on the enforcement of law. Corruption is a natural consequence of a world governed by profit. What happened when whistleblowers stepped forward on the true extent of international financial crime? Nothing.
The question is not how a government can hold itself or its citizens accountable for white collar crime, the question is why and how these structures exist.
Look at the money laundering records of the largest banks, their cooperation with organized crime. Look at the slush money and criminal activities of federal law enforcement, military, and intelligence agencies.
The answer is that profit governs our global society and holds the greatest sway in political power structures.
As long as our world is governed in this way, then the world can be looted and plundered without consequence. Money laundering is just a vehicle for legitimizing these activities.
Profit is no necessary for corruption to happen. Lenin and Stalin did prosecute profit(and millions starved as a consequence) and their country was extremely corrupt.
It is power that corrupts. Humans have a social hierarchy like other social animals and people want to be above and not down.
Power is inside our brains not outside. You don't need to teach anything to a horse or a Wolf, or gorillas, they will try to dominate the other horses, Wolves or Gorillas.
And Humans, specially dominant Humans want to dominate other humans, and most humans don't like being dominated.
Ask a Russian and they will tell you that profit seeking caused the Holodomor.
This Animal Farm logic has been digested by most Americans. Russians actually wanted democracy, but this was suppressed by Bolshevism.
Most of human history encompasses hunter gatherer societies, a social hierarchy in which the most vital resources are collectively owned.
Profit is but one of many ways to compete. You can't eliminate competition by eliminating the ability to profit:
https://fee.org/articles/there-s-no-escaping-competition/
Capitalism is not very old in the grand scheme of human history. Most of human history falls under a collectively owned economy.
Maybe much of human pre-history, or peoples with no history could be classified this way (although struggles for control of resources was still pervasive), but the historical period of humanity goes hand in hand with ownership and some of the first historical records were in fact to record ownership.
The principle of First Possession, where other animals have a tendency to cede control over a resource to the first animal that comes to possess it, is widely observed by behaviorally advanced animals, and game theory experiments suggest it reduces conflict, which would explain why.
In Australia (at least) banks are given rather descriptive measures to check for by the regulator. Some of these are quite standard but leave some room for the banks to decide what hard values they set in their checks. Every so often the regulator comes in, does an audit of these checks and tells the bank if they think the implementation could be better or not, but it's very arms length.
You see, when the detection systems produce a result (live or historical) they are then investigated further by human analysts. How many human analysts do you need to pay? Well, it's a tradeoff between where you set those hard limits and historically how many results you get over periods. You don't want to have a massive backlog, processing time is also a consideration, but how do you know when you're picking up actual money laundering and not just weird human behavior? When you think you've found something, you send it to the regulator and the police who take it from there. You don't get any feedback. It goes into a blackhole.
This sounds inefficient but perhaps (not sure if it's been determined) it avoids the case where you start overfitting to particular types of activity at the risk of ignoring others.
All banks implement their own checks, so assuming other parameters (customer base, technology, enterprise risk environment etc.) are the same there must be one out of any group that's better than the rest, but the regulator is the only one that could possibly know based on outcomes. Any signal from them will be picked up on by those actors trying to get around this.
This is hard, but the transaction is just a record of activity (albeit one of the only ones available to enforcers) usually after the fact. Maybe to achieve any meaningful reduction, you have to stop the flow in the first place, I don't know.
So of course many financial institutions would just do the standard due diligence, the one for which they have a justifiable cost of business.
It’s cheaper to pay one penalty that could or couldn’t come, than to scrutinize your customers and their transactions.
That’s why they are losing the war against money laundering. Because the only laundering that is being caught, is the petty one. The one that doesn’t matter. Paradoxically billions of dollars are invested in catching this type of money laundering.
It’s the exact same problems of tax evasion. Same reversed incentives, same functional behavior. You could almost say that the money laundering and tax evasion are symmetrical problems.
1. Have a legit company/ies with sufficient revenue.
2. Bill for imaginary goods/services.
3. Receive and deposit dirty cash as payment for them. Any questions, just say "oh, they're foreigners who do everything in cash."
4. Remit clean funds to "investors" as "special profit dividends," minus your take.
However, running a single legit company large enough to launder the proceedings of a large criminal enterprise is impossible these days. A big successful company with sufficient revenue to mask laundering would draw attention to itself just by existing.
I don't know you. Why would I lend you money.
1. show the "contra" bank account details for every transfer in and out of an account (to show who oaid or who received the funds)
2. provide bank statements in a (standardised) machine readable format
3. provide the statements within a week of request.
Such bank statements would make following the trail a lot easier.
None of the enormous, listed, multi-national banks where I live can do all three. Most can barely do 3.
They are so bad, we have had to conclude that money-laundering is actually a tacit service they offer.
Or just a modern art?
The problem is not that a casino "makes a lot of money" suddenly. Sure, great for them. But then if that money starts to percolate into the other jurisdictions. For example the casino orders dry cleaning from a foreign company. The casino wire transfers the money, the cleaners send the receipts, but no actual cleaning happens (obviously).
And this is where banks come in, because they provide the wire transfer. And they are mandated to flag extremely successful dry cleaners and other providers, report it to various government agencies.
And ... it turns out that somehow they can't even do plausible deniability properly.
But in the Real World™, most money-laundering investigations are done by law firms after a theft of funds is discovered.
The frauds are typically insider-assisted procurement fraud where some known list of initial illegal transactions are identified and then attempts are make to recover it from intermediate and/or ultimate beneficiaries.
The bank accounts of a long list of intermediaries are subpeonaed and the transactions traced.
The entire point of money-laundering is to make the trail go cold.
The 'contra' bank account entries keeps the trail very, very alive.
So no. Its not modern art. It's money laundering.
The transaction that happens when the buyer then sells it for twice the amount to an offshore holding trust without any operational business associated with it is money laundering.
1. All economic transactions between parties are given to government and linked to a government-issued identifier. With this data, you can throw a bunch of smart people and algorithms to detect fraud, laundering and tax evasion.
But of course, "privacy". Such a convenient excuse to prevent us from stopping alot of crime and fraud.
Are you saying that law-abiding people should renounce their right to privacy because of a few malicious actors, especially when there's plenty of other ways to prevent such crime (money laundering is merely a symptom of another crime and that one needs to be prevented).
So yeah, you shouldn't trust them. But right now they are an inevitability with no alternative, so we need to figure out how to solve the problems plaguing us whilst reigning government in and keeping it from overstepping. Some element of "given" trust is necessary for that.
As a side note, seeing as this is a technical space. One reason you should trust their identifiers is the same reason you shouldn't use non-unique natural keys as primary-keys in your database. The identifier is essentially your surrogate key and government is in a very unique position of power/influence that aides it in being a custodian of citizen data.
You need directors and shareholders for all these companies (and nominee directors aren't really a thing anymore because of the obvious risks), you need to provide a lot of UBO paperwork (ultimate beneficial owner) and even more if you ever want to open a bank account (dummy companies without bank accounts are useless after all).
So while you, as a person, may be able to open a bunch of Ltd.s online (e.g. in GB) in an hour, this means that all these would be in your name and all your data publicly available for everybody.
Please correct me if I'm wrong, I'd like to learn more about this...
Any documents to the LLC goes to a POBox in Delaware. There is very little attaching my name to it that you could find without a court order.
(Not saying that you would do that but that's the subject of the thread ;-)).
You couldn't just set up a second or third Delaware LLC and move money back and forth between them with impunity...
What I was saying is that I don't see how money-laundering is all that easy anymore nowadays, at least not for any normal person which is not part of a criminal organization (mafia etc.) with lots of members willing to do illegal stuff for them...
KYC and AML departments have made it a little more difficult but not impossibly so. I would wager it's gotten even easier with cryptocurrencies.
There are no shortage of stories of small business owners that were kicked out of the banking system for dealing with so called "high risk activities" like the cannabis industry or cryptocurrencies and there are also no shortage of stories of rich criminals and politicians just getting away with whatever fucked up activity they do. Hell... they even put a literal criminal in charge of the ECB.
https://news.ycombinator.com/item?id=26788896 (the linked piece is sensationalist and sycophantic but IMO such concept will be irresistible for western politicians too)
So no anonymity at all.
Tragically, the process is treated entirely as a box ticking exercise. Incumbent AML systems are old and ineffective, and scores of investigators submit thousands of SARs (suspicious activity reports) to central policing authorities that 99.9% of the time are ignored until they help an ongoing case.
The process is neglected partly because it doesn’t generate money, it prevents fines, which are tricky to predict and a less obvious priority for upper management.
Launderers of any significant amount of money are savvy to the pitfalls of current systems. Best in class solutions can capture some money laundering schemes via watchlist screening and “suspicious looking”transactional patterns - but the limit is the data the company owns. The main issue is that money is spread across multiple institutions in multiple jurisdictions.
As systems to tackle money laundering become more effective, so too do the launderers.
Get someone to buy a piece of real estate at allow price who does it anonymously and set it up also to support the valuation of the same piece of real estate at a new inflated price. Tada! You have just laundered some Russian money just by refusing to ask money source questions.
And they real trick is make sure every single piece of real estate is a separate pass-through-LLC as than the IRS is hampered by not having enough audit staff to even examine it.
You think I am joking....not really ask an IRS return examiner.
World-wide one of the easiest ways to launder money still remains the real estate buying and selling.
He sold a $40m for $100m to a Russian oligarch, who promptly demolished it. The overpaying is the point.
Real estate is one of the primary means of laundering money out of a country that otherwise restricts it. See: FINCEN [0]
[0] https://www.fincen.gov/suspected-money-laundering-and-fraud-...
Certainly not anonymous in respect to the government.
A pass-through-LLC means everything is directly in your name and if you don't report it on your personal tax return you go direct to jail without collecting $200. If the LLC has its own bank account, this will also be associated with your name.
And once you're on their radar, I bet they can find enough auditors to check your other LLCs as well.
Please correct me if I'm wrong but I really don't see how you think this can work in reality.
I will not get into the Trump thing other than saying it's not like they're not already investigating him either (and possibly have been for years).
For example the US financed its South America operations with drugs for a long time. US, Israel, Germany or Russia sells weapons under the table to other countries.
Venezuela's leaders are financed by drugs today, like Cuba and Bolivia.
US, Saudi Arabia, Russia, Turkey give money or weapons to people that destabilize other countries like Syria , Ukraine or Iran, Iraq or Afghanistan. Osama Bin Laden for example was paid by the US for a long time,like Hillary recognized.
In Iran and Congo or Egypt the US simply destroyed democracy killing their leaders in order to loot their countries, just like their predecesors.
Talking with Syrian refugees, it was usual for them to see some alien(no Syrians) group enter their villages with the newest weapons and Iphones and do things like killing all Christians or raping all women, they were financed by external powers.
If you are Chinese and have lots of money the UK will welcome you in any of their tax havens, of course, while the Chinese have made it illegal. Remember the British Empire financed itself with drugs(opium) and slaves for all its History.
If you are Germany Italy or Switzerland and the US imposes you ridiculous sanctions like those to North Stream 2 project, you will find a way to evade the control of foreign powers over your sovereign rights paying on alternative places than those controlled by the foreign power.
The Economist knowingly ignores various crimes by the UK and USA while whining how there's not enough money for the endless illegal wars they support. The more money is hidden from the State and politicians, the better.
Do you have a source for this? All the reports I have seen point the opposite, modern current Bolivian Venezuelan govs have seen a dramatic fall on drug trade, there was even an apalling graph from US senate where it showed that the bulk of drug trade left LATAM through Colombia and the Pacific Coast vs Venezuela, but still US gov PR line has been insistent on tarnishing the global reputations of said countries because they oppose US hegemony in the region
That is just not true.
British Empire abolished slavery worldwide. They went into war with many countries that supported slavery. They even took huge loan to end slavery, that took hundreds years to repay (until 2015).
https://consideringausten.wordpress.com/austen-and-antigua-s...
That being said, I'm sad to see such a blob of unsubstantiated "facts" at the top of HN.
I'm also not sure it has anything to do with the subject at hand.
That's actually the most accurate description of the international narc-terrorism business I have ever seen in print. Very well put bumbada ..
The tax office doesn't go after the worst offenders it mainly goes after the ones where they can get the most money out for the least effort. But the worst offenders often have all kind of fallback strategies and good tax lawers so it's costly to get them and you likely never see the money. So instead they go after small one/two/three people companies as they are most likely to make some easy to spot mistake when making taxes which you then can spin out of control. That this often will lead to less taxes earned on the long run due to small tax paying companies going out of business due to a small mistake being turned into a big thing no one cares.
This also leads to absurdities that certain kinds of businesses are seldomly tax checked and in turn often used to do massive money laundering.