Considering the amounts being laundered, it seems likely that a lot of the money is ultimately being invested.
If we stopped money laundering totally and completely, and managed to track down and confiscate all that money, the stock market would crash, hard. So would real estate.
Only read the abstract, but this doesn't seem surprising seeing that crypto, despite maybe noble intentions, has evolved in the worlds' easiest way to launder money and the president himself happily makes a couple of 100 mil with his own shitcoin.
You'd be better off not implementing the majority of the AML stuff and then just freezing/seizing the assets of known criminals once it's in the system.
> For example, the United States has not required the disclosure of beneficial ownership information for establishing corporations (violating rec. 24) until recently.
I worked on a front line product for US banks and built a process to verify beneficial ownership for business account openings. I found the current expectations to be laughable:
> An individual may be a beneficial owner of a reporting company by indirectly holding 25 percent or more of the ownership interests of the reporting company through multiple exempt entities.
Getting around this is not very difficult if you are clever and wealthy.
The overall takeaway I had was that these kinds of rules don't really work in the cases where they need to the most. I don't know how much of a deterrent this could ever hope to be. We even developed an override process for this based on a request from one of our clients.
The money laundering control systems, as well as being ineffective at controlling crime can be a pain in the neck for the law abiding. I have money from my grandad, received 40 years ago. No one really has records going back that far but you try buying a house and they want proof of the origin of the funds. Trying going to your bank to get records from five years ago often gives a date out of range error.
We all complain about big brother, new surveillance tech, and the easy sharing of personal data with government. And yet, some of the biggest problems seem to be untouched. Is this incompetence, beuacracy, complicity?
Money laundering is an absurd concept made up by a lazy government that fails to go after the actual underlying crime or criminals. They don't really have evidence of actual crime, so instead they target anyone they don't like. The ultimate effect it will have is of people exiting the government controlled financial system altogether.
One thing that consumers can do right now is to petition their favorite online vendors to start accepting cryptocurrency, at least a stablecoin that you can swap to.
I agree with you as well. I am sick and tired of being put in position where governments are turning the tables and ask people to justify their innocence without any recourse as if everyone is de facto a criminal.
I've worked in a regulatory agency, albeit for a brief time. I worked with analyzing data, usually in cooperation with law enforcement, as part of some case or operation.
I don't know what to tell you - but my experience was that it is the most careless and obvious criminals that get caught. Some even being very rich, rich enough to afford solid defense teams, and rich enough to stay in court for a long time. These were also the very same type of people that would cry to the media about unfair treatment, witch hunts, etc.
But, as for why these agencies go after the money: It is much easier to prove money laundering, rather than the actual crime itself. Many of cases I worked on focused on companies that illegally harvested regulated natural resources, used unreported employees, and did not report their sales / trades. Off the market, under the table.
We co-operated with other regulatory agencies around the world, and I can tell you - in the more corrupt parts of the world, the effects can be devastating on the community: No honest companies can compete against the ones that operate illegally, dire working conditions, less tax funding to the local community. What happens is that these actors eventually become local monopolies, and start operate semi-legally, but that's what the community is stuck with. If you report those companies, you end up losing your own job - should the company go down. And since these players don't care about regulations anyway, whatever natural resources they harvest, can risk being wiped out.
And to re-iterate: It is easier to follow the money. Usually in these cases, where there's smoke, there's fire.
This is such an eye-opening overview of the AML system. It really highlights how much effort, money, and regulation goes into preventing money laundering, yet the results seem limited.
Moving money around is a crime...why? It results in massive intrusiveness by government: full insight into everyone's finances, without evidence of a crime.
And, yes, this does get abused. Government is people, some of whom are evil, or out for revenge, or whatever. I had an acquaintance whose accounts were periodically frozen by the IRS, because he had pissed off the local office. He would get them unblocked, but only after weeks of missing mortgage payments and other bills.
I'm in an EU country where banks go through all the necessary checks.
As someone who worked for a bank, I got hit by the AML check on a larger transaction, delaying it for over 3 months in the end, causing me to have to spend from my companies war chest instead.
Once, I mistakenly sent a large amount of money from my own account to my own account, which I had to spend multiple emails and phonecalls explaining the mistake to the tax authority.
But, we had cases where people illegaly transferred hundreds of thousands/millions of dollars to accounts without anyone reacting.
We have a large amount of real estate that is "bought in cash". It is especially popular among politicians who declare getting a large "loan in cash from their mother" or "their parents collected money for years". When you compare the salaries to the amount of cash earned, it is obviously impossible unless they were genius investors too.
We have corruption cases in which money was transferred from government companies into personal accounts without anyone's knowledge or anyone triggering a check.
These transactions are somehow legitimate and not investigated.
The AML system as it is is not just inefficient, it is suspect to corruption, human error and vindictiveness.
>Moving money around is a crime...why? It results in massive intrusiveness by government: full insight into everyone's finances, without evidence of a crime.
Because Karen is salty her teenage son's weed dealer isn't paying taxes, basically.
And then there's all the people who see these broad invasive things as a way to get at people who can't otherwise easily be caught, Al Capone and the like.
And don't forget all the idiots who see it as a means for "their guy" in government to exert control over people they don't like such as brown people without papers, uppity truckers with horns, etc.
As someone who sees the outcome of people losing everything to sophisticated scammers/ fraudsters and thieves and how little authorities are able to do, nah, the overreach is not in sight.
There are more criminals than abusive IRS agents. And usually when people tell me stories like that, there is more to it..
I've come to realize that viewing the world through the simple lens of laundering causes dumb systems to suddenly make sense. Silly rabbit, you thought these industries were there for the normal public?
Add to the list almost all high end (dance) clubs, the kind that sell you the $50 bottle of champagne for $5000, "cleaning" thousands for every easily justifiable and anonymous bottle sale with close to 0 effort.
Actually, any business that can just add an arbitrarily huge markup for what are otherwise cheap, run of the mill products and services is probably also laundering money. Usually exclusive/luxury places, the ones where in one go they can convert the lowest possible cost into the highest possible clean profit.
If something in the world doesn’t make sense, figure out who’s profiting from it.
That’s something that a friend mentioned to me a few years ago, haven’t forgotten it since, and now everything does make sense when viewed from the right context.
The crazy thing about money laundering laws is that in many jurisdictions, just failing to prove the legitimate origin of your funds can be enough to lose assets, and face criminal prosecution, without the state ever proving an underlying crime. It effectively shifts the burden of proof.
I generally like having these systems in place, because I find when dealing with certain vendors and businesses that following these helps me weed out many scammers when dealing with large amounts of money. Every transfer required a discussion with the teller asking questions about transfers and if the transaction is suspicious. Yes, criminals will find a way, but I find it provides me an easier screening to ensure some businesses are more likely legit.
It works as intended, it allows the US to pay bribes around the world while also allowing law enforcement to prevent criminal enterprises from competing with the regulated financial services industry.
In Canada any transactions over a certain limit require the regulated counterparty to file a Suspicious Transaction Report with FINTRAC.
FINTRAC is unable to establish a pattern in those reports and prosecute. Instead, when someone is charged with an indictable offence, their name and related entities are searched for STRs. Any financial crimes are then used to create additional charges.
The net result of this, because of lack of digitization and various privacy guarantees, is that it is almost impossible to be charged with financial crimes as a primary offence in Canada.
In the UK one of the best ways to launder money is to open a barber shop. Most people pay cash and unless they are going to watch every shop to see how many customers go through there's simply no way to police it effectively. I have heard that the shop owner will get a commission on any laundered money.
I worked in the legal cannabis industry in California before the pandemic. The business I worked for had to jump through a lot of hoops, including dividing itself into multiple LLCs, in order to deal with the disparity between state and federal laws, and the business policies of banks and even some of our equipment vendors (I remember specifically that McMaster-Carr would not do business with you if you were a cannabis company). Most cannabis businesses were forced to work in cash, which made a lot of financial transactions difficult, but also made it easier to do business with those still in the "traditional market". In the end, the stricter regulations had the effect of greater concentration of ownership, but questionable efficacy in stopping illegal exports.
Well, sometimes they really gum up the works. I have developers in Ukraine and several times in the last year a wire transfer to them to pay them their monthly salary was held up for more than a month in transit. It was stuck at a bank in NYC and no amount of me pushing on my rep at Wells Fargo could get it unstuck OR returned. Last one ended up taking almost 2 months to get there! And, they told us it was going to be returned, so we paid the person via other means (BTC). Very frustrating.
I had the exact same experience paying developers in Serbia. It was pretty eye opening to how unreliable something fundamentally important like wire transfers can be, and made me appreciate crypto in a new light.
It works well enough so that little people have a hard time dodging taxes. It creates some friction for criminals, but only in ludicrous concentrations of wealth like pablo Escobar managed.
Other than that it is largely ineffectual, it’s just not that hard to work around, for a percentage of course.
Its main function is to protect existing power structures from usurpment by potential up and comers. Oligarchs have no significant issues if they hire the right people, but small organizations can face cash crisis and limited maneuvering room.
The actual article is really interesting and informative.
I've yet to see a single comment here that referrences any of the facts or ideas presented in the article. It is entirely composed of people responding to the headline.
I found the section on MERS particularly interesting. Minimal training on how to asses inconsistent assements between countries, complete failure to mention massive laundering scandals at banks in the asses countries... And this is the primary method of international oversight to see if these systems work and are implemented consistently.
Systems against money laundering only work against average Joe/Jane. Really wealthy people just make a deal with a bank of their choice and launder money legally.
Crypto replaces all other money laundering schemes. This is the only use case for crypto. Easiest to hold anywhere, move across borders, don't even need freeports or anything physical.
Crypto is also the currency of corruption. Easiest way to pay/accept bribes by creating $myshitcoin.
Most cryptocurrencies are open ledgers, quite easy to trace and track the movement of funds.
Pretty much every exchange for on/off ramping funds must comply with KYC and anti money laundering regulations. They use tools such as Chainanalysis (which analyses such addresses) and also reports back to governments.
It's nice to observe in detail this system's behavior, but asking how _well_ it works might be asking an unanswerable question.
This system is the result of compromise among the biggest financial and governance systems. It's basically a melange of the possible and desirable (for many reasons), in service of multiple goals.
It's not its own thing. It's not owned, no one controls it, it's not subject to market forces, it's pretty much required for those who agree and avoided by others, and its benefits are almost exclusively hidden outside the justice and security services.
Even the simplest measures of accuracy seem inapt. False positives are clearly wrong (but so numerous now they are ignored and thus harmless?), but it's not clear that false negatives aren't intentional as a matter of investigational and prosecutorial discretion.
To me it's like asking the EPA to prove health benefits: since it's largely impossible, you end up with a reason to disable the regulatory system as ineffective.
Targeting these controls while the Genius act loads up trillions in stablecoin for a run on treasuries is fomenting a financial crisis.
56 comments
[ 7.4 ms ] story [ 152 ms ] threadIf we stopped money laundering totally and completely, and managed to track down and confiscate all that money, the stock market would crash, hard. So would real estate.
I worked on a front line product for US banks and built a process to verify beneficial ownership for business account openings. I found the current expectations to be laughable:
https://www.federalregister.gov/documents/2022/09/30/2022-21...
> An individual may be a beneficial owner of a reporting company by indirectly holding 25 percent or more of the ownership interests of the reporting company through multiple exempt entities.
Getting around this is not very difficult if you are clever and wealthy.
The overall takeaway I had was that these kinds of rules don't really work in the cases where they need to the most. I don't know how much of a deterrent this could ever hope to be. We even developed an override process for this based on a request from one of our clients.
One thing that consumers can do right now is to petition their favorite online vendors to start accepting cryptocurrency, at least a stablecoin that you can swap to.
I don't know what to tell you - but my experience was that it is the most careless and obvious criminals that get caught. Some even being very rich, rich enough to afford solid defense teams, and rich enough to stay in court for a long time. These were also the very same type of people that would cry to the media about unfair treatment, witch hunts, etc.
But, as for why these agencies go after the money: It is much easier to prove money laundering, rather than the actual crime itself. Many of cases I worked on focused on companies that illegally harvested regulated natural resources, used unreported employees, and did not report their sales / trades. Off the market, under the table.
We co-operated with other regulatory agencies around the world, and I can tell you - in the more corrupt parts of the world, the effects can be devastating on the community: No honest companies can compete against the ones that operate illegally, dire working conditions, less tax funding to the local community. What happens is that these actors eventually become local monopolies, and start operate semi-legally, but that's what the community is stuck with. If you report those companies, you end up losing your own job - should the company go down. And since these players don't care about regulations anyway, whatever natural resources they harvest, can risk being wiped out.
And to re-iterate: It is easier to follow the money. Usually in these cases, where there's smoke, there's fire.
And, yes, this does get abused. Government is people, some of whom are evil, or out for revenge, or whatever. I had an acquaintance whose accounts were periodically frozen by the IRS, because he had pissed off the local office. He would get them unblocked, but only after weeks of missing mortgage payments and other bills.
I'm in an EU country where banks go through all the necessary checks.
As someone who worked for a bank, I got hit by the AML check on a larger transaction, delaying it for over 3 months in the end, causing me to have to spend from my companies war chest instead.
Once, I mistakenly sent a large amount of money from my own account to my own account, which I had to spend multiple emails and phonecalls explaining the mistake to the tax authority.
But, we had cases where people illegaly transferred hundreds of thousands/millions of dollars to accounts without anyone reacting.
We have a large amount of real estate that is "bought in cash". It is especially popular among politicians who declare getting a large "loan in cash from their mother" or "their parents collected money for years". When you compare the salaries to the amount of cash earned, it is obviously impossible unless they were genius investors too.
We have corruption cases in which money was transferred from government companies into personal accounts without anyone's knowledge or anyone triggering a check.
These transactions are somehow legitimate and not investigated.
The AML system as it is is not just inefficient, it is suspect to corruption, human error and vindictiveness.
https://www.amnesty.org/en/latest/news/2024/09/india-fatf-ra...
Because Karen is salty her teenage son's weed dealer isn't paying taxes, basically.
And then there's all the people who see these broad invasive things as a way to get at people who can't otherwise easily be caught, Al Capone and the like.
And don't forget all the idiots who see it as a means for "their guy" in government to exert control over people they don't like such as brown people without papers, uppity truckers with horns, etc.
There are more criminals than abusive IRS agents. And usually when people tell me stories like that, there is more to it..
Gambling: https://www.cbc.ca/news/politics/online-gambling-sites-money...
Casinos themselves: https://www.ibtimes.com/political-capital/trumps-businesses-...
Commerce: https://www.wired.com/story/wired-awake-180518
Crypto: https://financialcrimeacademy.org/cryptocurrency-money-laund...
Shell companies: https://newrepublic.com/post/192244/trump-celebrates-destroy...
Real estate: https://www.firstaml.com/resources/5-ways-criminals-launder-...
Actually, any business that can just add an arbitrarily huge markup for what are otherwise cheap, run of the mill products and services is probably also laundering money. Usually exclusive/luxury places, the ones where in one go they can convert the lowest possible cost into the highest possible clean profit.
Quick calculations on minimum wages, rent, other costs and the required amount of sales show that they can not be profitable.
That’s something that a friend mentioned to me a few years ago, haven’t forgotten it since, and now everything does make sense when viewed from the right context.
http://wormwoodiana.blogspot.com/2025/04/do-charity-bookshop...
which legally evade taxes and
https://www.londoncentric.media/p/asf-aziz-london-candy-shop...
which illegally evade taxes not to mention
https://www.theguardian.com/uk-news/2022/dec/26/more-than-90...
and
https://www.esquire.com/uk/style/grooming/a65829331/high-str...
and these are frequently accused of being involved in all sort of crime not least money laundering.
https://www.nemannlawoffices.com/blog/law-enforcement-seized...
FINTRAC is unable to establish a pattern in those reports and prosecute. Instead, when someone is charged with an indictable offence, their name and related entities are searched for STRs. Any financial crimes are then used to create additional charges.
The net result of this, because of lack of digitization and various privacy guarantees, is that it is almost impossible to be charged with financial crimes as a primary offence in Canada.
Source: former RCMP financial crimes consultant.
Also, people who can't easily move large amounts of money are weaker in organizing against a corrupt government.
It partners well with disarming the populace.
Also on what basis do you make the second assertion. I struggle to think of historical examples that validate that idea
Other than that it is largely ineffectual, it’s just not that hard to work around, for a percentage of course.
Its main function is to protect existing power structures from usurpment by potential up and comers. Oligarchs have no significant issues if they hire the right people, but small organizations can face cash crisis and limited maneuvering room.
Go ahead and downvote. I've got karma to burn.
I've yet to see a single comment here that referrences any of the facts or ideas presented in the article. It is entirely composed of people responding to the headline.
I found the section on MERS particularly interesting. Minimal training on how to asses inconsistent assements between countries, complete failure to mention massive laundering scandals at banks in the asses countries... And this is the primary method of international oversight to see if these systems work and are implemented consistently.
I support it on that basis alone
Crypto is also the currency of corruption. Easiest way to pay/accept bribes by creating $myshitcoin.
Most cryptocurrencies are open ledgers, quite easy to trace and track the movement of funds.
Pretty much every exchange for on/off ramping funds must comply with KYC and anti money laundering regulations. They use tools such as Chainanalysis (which analyses such addresses) and also reports back to governments.
This system is the result of compromise among the biggest financial and governance systems. It's basically a melange of the possible and desirable (for many reasons), in service of multiple goals.
It's not its own thing. It's not owned, no one controls it, it's not subject to market forces, it's pretty much required for those who agree and avoided by others, and its benefits are almost exclusively hidden outside the justice and security services.
Even the simplest measures of accuracy seem inapt. False positives are clearly wrong (but so numerous now they are ignored and thus harmless?), but it's not clear that false negatives aren't intentional as a matter of investigational and prosecutorial discretion.
To me it's like asking the EPA to prove health benefits: since it's largely impossible, you end up with a reason to disable the regulatory system as ineffective.
Targeting these controls while the Genius act loads up trillions in stablecoin for a run on treasuries is fomenting a financial crisis.