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?
Out in the developing world you’ll see all kinds of things that make no sense commercially, because they were really just a way to park a few million dollars in a way that slowly trickles out under the guise of legitimacy. Buildings with rent ROI> 100 years. A motorcycle dealership with 3000 motorcycles in stock, slowly selling them off , many > 10 years old and zero miles…. Etc.
Here in Colombia it's almost a staple to find perpetually-empty restaurants that never go broke. We call them "lavaderos" - kinda like "laundering-stations".
I've always wondered if Baskin Robbins is a front, I used to see them everywhere in Oregon, where they were always empty even during the summer made me wonder how they stayed in business. as a kid I always thought it was a mob front.
This is interesting to me and I see why it would work in a place with lower state capacity but in more developed countries it’s not a great strategy. You want your money laundering to operate through high volume cash businesses. When I lived in Seattle I used to sometimes go to a sketchy cash-only teriyaki joint. The food was great and they were always filled with paying customers. Sadly, they were later caught and shut down.
I'm not sure what good ways there are to manage this generally, other than limiting the size or types of financial transactions that can occur within a system.
Trying to stop money laundering via mass surveillance of people's transactions is futile and creates far more losses than gains for society. It is what's responsible for the epidemic of debanking that has emerged over the last decade.
"The Financial Conduct Authority reported that banks in the UK were closing nearly one thousand accounts daily, with just over 343,000 closed in 2022, compared to about 45,000 in 2017.[4]"
Money transfer is a basic utility and should not be rationed out and gatekept by government regulators.
I remember reading about a case where criminals bought an entire issue of a local lottery, thus collecting all the prizes, and apparently saw that a reasonable cost to launder their cash.
this works quite well even at small scale. In my country you can just go to any tobacconist, buy 1000 € worth of scratch cards with cash, and happily keep whatever comes out. And since they're heavily regulated, you can check winning probabilities in advance so you already know the expected return!
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 expression goes back to the Roman Republic. Coined by former consul Lucius Cassius Longinus Ravilla, who 'gained fame for formulating the question "Cui bono?" ("Who benefits?") as a principle of criminal investigation.'
In my local neighbourhood there are a couple of commercial spaces that keep seeming to become new businesses, go through the expected few months of rebranding and outfitting, stay for a couple more months, then shut down. Only to become new businesses doing the same thing. Repeat ad nauseum.
Which would be fine, except it’s always the same owners. I’m not sure what the grift is, but I’m sure there’s one. Perhaps its simply taking advantage of business loans. Perhaps something more involved with contractors and business expenses charged differently on paper. I’m not sure, but I’m sure I’m curious.
In the same way that buying a company and taking out business loans for expenses isn’t itself fraudulent, but can be done for that purpose, I can’t help but feel like there’s something going on.
This is a fairly common view, but it overstates people's rationality abd assumes you have perfect information, leading people to pretty conspiratorial views.
Often the actual answer to things not making sense is that most things in the world are done poorly and many things are some mish mash of various interests rather than a singular actor.
Incompetence is far more common than malice, and many observers are themselves incompetent.
Apparently in Vancouver BC (money laundering capital of North America), they use luxury watches and cars to launder funds as well, in addition to the obvious local casinos and real estate.
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.
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.
Ending anonymous banking like in Switzerland was a major objective for the US. They said it was because it allowed money laundering for terrorists. People will get upset when the government talks about ending encryption in order to stop terrorism but the same concept applied to money apparently doesn't matter.
In practice we have a system where money laundering has not ended and we have much more financial surveillance for average citizens. That was probably the purpose all along and it never had anything to do with finding tax evaders or stopping terrorism.
What's the point of surveilling the movements of average citizens' money? They usually don't hide anyway. I suppose tax evaders were the target all along, with a smattering of criminal operators, e.g. drug dealers. Terrorists were but a pretext to produce moral panic.
The short answer is that said money is either the proceeds of a crime, or (in the other direction) being sent to or from a sanctioned person, organization, or country.
This is why it's so hard to push back against, like the TSA. "Do you want terrorists using the banking system?" is a killer argument for midwits.
Just replace "money" with a gold bricks. If I have them in the trunk of my car and move it around, you can't arrest my car on the assumption that the bricks are "the proceeds of a crime". You have to reasonably prove it with all the red tape involved, or GTFO of my way.
Money is a call option on the labor of its citizens. When money accumulates to people who operate against the best interests of its citizens more and more of a countries labor and future is traded for less societal value. There exists some tipping point where no societal value is created and money exists just to drain the vitality of its citizens. In other words, no matter how hard you work things only get worse.
This doesn't really have anything to do with "money laundering". For example, you get the same set of problems if the money is accumulating to monopolies or industries with artificial scarcity as a result of regulatory capture even though the law doesn't require them to "launder" the money they're accumulating.
Meanwhile in the case of classical criminal enterprises, the laws against money laundering don't actually work because in practice there are ten thousand ways to exchange value other than with official currency. And then the systems to prevent "money laundering" cause more problems for honest people who get trapped up in them out of ignorance, or become victims of corrupt government officials who use financial surveillance systems for oppression, whereas professional criminal organizations just restructure their activities to bypass the rules.
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.
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..
C'mon, moving money is not a crime but moving money that has been illegally obtained is a crime (drugs, prostitution, illegal sports book,...) as is concealing the source or target of money sent to terrorist organizations and yes it makes certain things harder than they used to be for the rest of us.
Most of the commenters here have zero connection to reality eh.
For the uninformed: if you cannot complete KYC or proof of wealth checks, you do not lose your money.
The institution you're trying to transact will just will not work with you. They might not for any number of other reasons: adverse media, dodgy transaction history, etc. etc. etc.
Just using an unlicensed hawaladar to transmit legally earned and taxed money is money laundering (whether that is the actual statute that would be charged, idk, but it falls under the stuff AML compliance is supposed to catch). The whole system is absolutely insane.
>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.
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.
It is similar in the US, except we call it a currency transaction report [0]. Because the amount — $10,000 — is not indexed to inflation, these reports are extremely numerous, mostly automated, and are almost entirely useless — beyond conveying the ability to charge ordinary people with structuring [1].
> beyond conveying the ability to charge ordinary people with structuring [1].
It doesn't, lol. Structuring is when you make several smaller transactions to avoid a CTR. If a CTR was created, you aren't structuring. And if you are structuring, a CTR isn't created.
The Cullen Commission Report [0] was damning. Canada is “willfully blind” to the issue and is, at this point, knowingly funding international crime and terrorism.
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.
Also, even if you can prove the legitimate origin of the funds you can’t be sure that your bank will accept them. If you can’t find a bank that will accept them then formally you may still have the ”asset” but you can’t really use the money.
Seriously, why would you have a problem explaining where a $5M came from?
In most places this is "proceeds of crime", requiring associated convictions.
In places that have unexplained wealth statutes, the bar is also pretty high - "balance of probabilities" is not hard to argue IF YOU HAVE LEGITIMATE SOURCES OF MONEY.
Any circumstance where the onus is on a private citizen to prove innocence instead of the government to prove guilt is a perversion of justice. Stupid voters and the government will destroy all privacy for the sake of "the guns, the gangs, the children"
It's extremely simple until it's not. Let's say you bought 100$ worth of BTC back in 2012 with cash at a meetup. Now it’s worth $1M, but you can't prove its origin. You now have a perfectly law-abiding person that risks being accused of "money laundering" just to keep what's rightfully theirs.
No, some financial institutions like Binance only allows clients to get statements for the last year or so. P2P transaction details go back only a couple of months.
Sometimes your employer goes out of business. Employees do not always preserve their payslips.
Then there are countries like Georgia, it's culturally acceptable to buy real estate with cash. If no valuation of the property was made, it becomes very difficult to prove where the money came from.
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.
>The money laundering control systems, as well as being ineffective at controlling crime
The point of AML/KYC regulations isn't to stop all crime, just like the point of US sanctions on Russia isn't to stop all Russian exports. In both cases it's to raise the cost of doing business for the entity being targeted. In the case of Russia, they can still sell their oil to India or whatever, but at a steep discount. In the case of drug cartels, they can still get their funds into the regular banking system, but also at a steep discount. Smuggling pallets of dollar bills across the border and setting up a network of front companies is expensive. Doing all that also which implicate them in even more crimes, so even if there's no evidence of them smuggling fentanyl, they can be prosecuted purely on the basis of having a car full of cash.
>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.
The better question is why are you were sitting on cash for 40 years. In that time inflation already ate 66% of the value, and if you factor in the opportunity cost of not investing the money in stocks/bonds, the loss is even greater.
It wasn't in cash. It was in equities to a large extent. But they still ask for the source. Even if it's from selling shares they want to know where the shares came from. At least sort of. The whole thing is a box ticking exercise for compliance to cover their own arses.
In fact it's worse than that in some ways as I had an investment advisor who bought and sold stuff and I don't know if I have records of what exactly.
The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones. Ensuring the greatest threats become even bigger ones, but also that any corrupt politicians/officials/bankers get even bigger payouts and the payouts they get are more predictable from fewer channels.
> The better question is why are you were sitting on cash for 40 years.
That's not a better question; that's just ignoring reality. Who cares why they were sitting on cash for 40 years? People should be able to do whatever they want with their money, even if it's not the most financially advantageous thing.
If I get the OP correctly it wasn't 'cash' that they were sitting on but it was a balance in a bank account. You can turn that into cash (unless lots of other people try to do the same thing at the same time, see also 'bank run') but strictly speaking it isn't cash.
I know a number of people who don't trust banks and so have their cash in a mattris or similer things. Most are dead - they remembered banks failing in the 1930s and said never again.
> 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.
This makes zero sense.
I have bought a house, and they want bank records going back like a few months or maybe a year at most. If that money has been sitting in an account for that long, nobody gives a shit where it originally came from. Like, if you had $100,000 for a down payment, they’re not checking the last twenty years of your paystubs to make sure the math checks out.
The only thing they really are interested in is knowing this money didn’t just appear out of nowhere because you got a personal loan from someone or because you got a conventional loan from a lender that hasn’t reported it to a credit reporting agency yet, and which would affect the decision to underwrite your loan.
If you’ve just been holding on to large sums of literal cash dollar bills for the last 40 years, that is such a comically ridiculous financial decision I don’t even know what to tell you.
> I have bought a house, and they want bank records going back like a few months or maybe a year at most.
I had to juggle with this a little bit because I had sold some crypto for the down payment, but it's crypto that I had been keeping in a hardware wallet for years. As a result, I could certainly generate records showing how long I'd had it, but they'd be my own records based on the blockchain--not from any bank.
They ended up accepting transaction records from Coinbase, though even those mostly just showed some Bitcoin being received into the account and then being sold before transferred to the bank. But I guess that was enough for them.
In any case: I did ask about it and they told me it wasn't actually for KYC laws or money laundering. The reason they want a paper trail is to make sure you didn't actually just borrow the money from someone else. And that makes sense, since they're super picky about you not opening any new lines of credit while trying to close the mortgage.
That requirement isn’t about money laundering at all. They are wanting to make sure that you aren’t borrowing the down payment from someone else, because that would mean you don’t actually have as much (or any) of your own money invested in the property.
The point of a down payment is to make it so the borrower has an incentive to not default on the loan, because the borrower would lose the down payment.
If the down payment is actually borrowed money as well (like suppose you get a credit card advance for the money), then the borrower won’t lose anything if they stop paying the loan, and there is increased risk that the loan defaults.
You shouldn't really need to prove where you got them from; what the system cares about is that you're not laundering it, and it's obvious that nobody launders money on a multi-decade timescale. All you should need to satisfy them is just to show that you've been in possession of it for so long the bank can't even show where it came from anymore. That is itself proof that it's not laundering. You may have good success just pushing back a bit with this point.
One fun way to get around this is to have enough money to sidestep the bank altogether. The title company does not give a shit about where the money came from. All they will want to see is a screenshot of your current balance so they know you aren't wasting everyone's time.
I bought a cheap property (vacant land with no utilities) then built the house literally $20 or $1000 at a time buying blocks/wood/pipes etc as I was building. All the money was legally earned and taxed, but the point is even the title company was sidestepped in this case beyond an amount pretty trivial in comparison to the value of the property and very little of it would have had to of went through the traditional financial system in order to make it possible.
> but you try buying a house and they want proof of the origin of the funds
Fannie Mae's assessment criteria for origin of funds has a time limitation. If that money has been in an account you control, for forty years, "origin of funds" is not a question. I want to say the cut off is something like 36 months, but it may be even less.
Depends on the jurisdiction and it may not be the lender that requires proof of origin but the party handling the transaction. They may even have a reporting requirement for 'suspicious transactions'.
They have them, but not from a web interface. Probably will require talking to a human, and a service fee to retrieve the records from physical storage.
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.
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?
The moment you try to look into the fines governments impose on banks caught money laundering and the rare cases in which bankers actually see a prison cell, your last option is the most likely one, with a sprinkle of the two others.
My main issue is that all the AML/KYC/KYB barriers we have to deal with never seem to be subject to efficiency tests, all the studies I read and the few audits of these system seem content with it's likely better than doing nothing... but never measure the lost opportunities in trade/business they cause.
In a way it's the same hopless fight against so-called piracy for movies/games. The motivated actors who want to break the law find ways to do it at a large scale, mostly without consequences... and the honest people are just hindered when they want to use their content (even lose access to it when DRMs rely on the existence of the developer/publisher and their goodwill to maintain it way past the time when that media was able to generate revenues).
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.
It's my understanding that cannabis is still federally illegal virtually without exception, therefore changing AML law might not do much for your industry since it was always an illegal conspiracy to knowingly aid and abet the commission of a felony.
It hasn't been my industry for years, and the legality of intrastate cannabis is still being fought in the courts, see the Canna Provisions case which has been ongoing since 2023 and is currently on the Supreme Court docket.
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.
In the grand scheme of things crypto-related money laundering is just a drop in the bucket compared to the amounts being laundered using more traditional methods.
Most crypto coins (not Monero) are pseudonymous. If a particular bitcoin wallet comes to somebody's attention they can investigate hassle anybody that this person tries to trade with, tell exchanges not to redeem cash, etc.
Thing is these tactics aren't just available to the authorities but also to anyone like intelligence agencies, the mafia, etc. so the confidentiality problems are much much worse with crypto.
But it’s intentionally set up to be much more accessible than the traditional laundering methods.
Crypto advocates love this “drop in the bucket” excuse. By the same logic, it’s not a problem if I manufacture extra strong alpha-PVP and hand it to school children, because my drug distribution is just a drop in the bucket compared to the global cocaine trade.
USDT is the money launderer’s dream. If they can get it into crypto (and there are a number of firms who are barely disguised criminal finance portals), the world is very much their oyster.
Not very is the answer. When I worked in finance in the UK a few years back, the credit control team had a few ex-commercial bankers. Those guys had wild stories, the best ones were usually how much money they'd find being added to children's accounts for "birthday gift money". Usually with certain groups who have traditionally large families, the children would all have regular four and five figure cash lodgements.
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.
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. We already see instances of debanking (logical evolution of money laundering "control") being used to pressure political opponents and dissenters even in the "free" West. Even worse, governments silently share this power with private entities to pressure stuff they do not like as was recently demonstrated by the MasterCard/Visa debacle.
Ideally, access to the financial system and secrecy of financial transactions should be protected by constitutions in the same way as secrecy of correspondence and right to privacy. Unfortunately, most constitutions were written in the age when it was a given, since most people relied on physical cash and were was no need to explicitly protect this right.
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.
It sounds like an utterly lazy government that cannot go after actual crime. I would never vote for such a government.
Meanwhile, the same corrupt government gives a free pass to its buddies devastating the planet with digging for oil and gas, destroying sea life with major leaks, and stops renewables from succeeding. See the current administration. The government permanently destroys farmland by using PFAS mulch as fertilizer, making the soil poison.
The difference between this country and others is only that corruption is legalized here.
Thr problem with people at such regulatory agencies is they drink their own koolaid a bit much.
It's strange to see otherwise smart people correctly identify the "think of the children" fallacy in E2E encryption or net neutrality issues, but fail to identify the same exact fallacy when network traffic is measured in dollars and not bits.
They falsely assume the major burden of KYC/AML lies on the rich/criminals when in fact, as implemented in the USA, the burden falls largely on the innocent (and most of all on homeless / people with no address to pass KYC) with pretty vague data on whether there is much payback.
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.
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.
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.
You think El Chapo had a lot of banking issues in practice? He went around most of these hurdles with and without the complicity of banks and governments.
HSBC's cash deposit tellers in Mexico were even reported to be wider to accommodate the larger cash deposits from the cartels [1]
The same people we put in charge of watching their own activites are the ones breaking the law, repeatedly... and the governments enable it by arguing that fines are "preferable" to real prosecutions and firm/long prison time for complicit bankers.
They are just taking their share on the illegal traffic revenues, like mob bosses do. No intent to stop them. And in the mean time all these AML hurdles hinder legal activites.
Not always. There are ways to move your money around the globe that are not criminal. Governments don't like it when people get up and take their wealth elsewhere due to the shit conditions they allowed to come about.
> First, disentangling individual accountability within a vast corporate structure is difficult, particularly in determining whether any executives had the requisite knowledge and intent to be held liable.
We just need lower standards of proof. Something like:
1) you had some level of responsibility within the organization (no specific knowledge of wrongdoing required)
2) some kind of violation occurred within the organization
3) your wealth increased over some time period in which such violations were later found to have occurred
If those things happened, you are liable. People who profit should be on the hook for everything a company does, not in proportion to their specific knowledge of or involvement in any particular illegal activities, but in proportion to their nominal or "global" level of responsibility and the magnitude of their profit.
Get some sort of job in the company, do something illegal, threaten your manager with going to the feds, since at this point they are criminally liable for your act.
More generally, i get where you are coming from - its frustrating when the ceos are like, i just work here, totally wasn't me, excuse me while i cash my bonus cheque. But i still think morally its important that we punish people for things they actually did (or failed to do), not just by mere association.
Although perhaps something like an enhanced version of how supervisory responsibility in war crimes works would make sense - basically the way that works is if you are aware or ought to have been aware that someone under you is commiting a crime, and you don't investigate/take measures to punish/take measures to stop them, you are on the hook for the crime.
> Get some sort of job in the company, do something illegal, threaten your manager with going to the feds, since at this point they are criminally liable for your act.
Not if the manager goes to the feds himself.
> But i still think morally its important that we punish people for things they actually did (or failed to do), not just by mere association.
Well imagine you're a CEO and you not only didn't setup protections against wrongdoing but rather created a system of incentives that makes it beneficial to close your eyes to things.
In the Dieselgate the engineer went to jail, in Skyguide the air traffic controller got stabbed, the executives walk free.
> Get some sort of job in the company, do something illegal, threaten your manager with going to the feds, since at this point they are criminally liable for your act.
I guess I left out a key word in my conclusion there: "You are presumptively liable." The point is to shift the burden of proof. If it can be proven that someone else willfully did the violation (especially in order to screw you), that might be a defense. But the point is that the default assumption should be that greater responsibility/authority equals greater liability, and the burden should be on those with that responsibility/authority to prove that they are not liable.
> But i still think morally its important that we punish people for things they actually did (or failed to do), not just by mere association.
But that's it exactly. What they failed to do was ensure that bad things didn't happen while they were in charge.
> Although perhaps something like an enhanced version of how supervisory responsibility in war crimes works would make sense - basically the way that works is if you are aware or ought to have been aware that someone under you is commiting a crime, and you don't investigate/take measures to punish/take measures to stop them, you are on the hook for the crime.
Yes, something like that. The key phrase being "or ought to have been".
I want to agree with the standard “it happened under your watch and it doesn’t matter if it happened without your knowledge”, but wouldn’t it get really messy in practice?
Let’s say one particular org at a company engaged in the activity in question, generating increased profits for the whole company. Taking this approach to the extreme, literally every shareholder could be liable because they benefited from those profits.
I could be persuaded it's worth having a lower standard of liability for "sibling" orgs within a company, so that if, e.g., the billing department does something shady then the HR department doesn't necessarily bear liability for that (but execs above both still would).
But I'm kind of okay with shareholders being liable to a certain extent, as long as their liability is proportional to their benefit. Someone who had a few shares in their 401k and made a couple thousand dollars, okay, no big deal. But the prospect of having gains clawed back could make shareholders more vigilant in ensuring the company is fully aboveboard. It doesn't make sense for me to someone to rake in, say, $50 million in unrealized gains and then say "oh, I had no idea, oh well, I'll just enjoy my $50 million". It's sort of like how if a drug kingpin gets arrested, it may well be that assets of their family members are seized as ill-gotten gains.
I've always wondered about those grimy palm reading or fortune telling shops you'll find across major streets in Manhattan or New York. How are they making rent, even during the retail apocalypse?
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.
Same in Chile. A while ago our version of FBI closed 12000 barber shops along the country under an investigation on money laundering. It's so obvious it's ridiculous. 20 barber shops in the same street (we don't have a barber district btw), many of them working 24/7.
I thought about this and decided if I needed to launder some money, I would paint some pictures and sell them to myself on ebay. Nowadays, that theme got easier with NFTs.
Money laundering at the high level works as unless you are on the USA watchlist, it's the USA and it's allies that are the vehicle which facilitates it.
Offshore vehicles? Most are British islands.
Onshore vehicles? Delaware and similar
Unless the west puts you on a list, it's professionals will happily help anyone in the world.
> 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.
unsurprisingly they killed off the BOI reporting requirement in March [1]:
> ALERT [Updated March 26, 2025]: All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information (BOI) to FinCEN.
Yea, AFTER you had to file the report to go to jail- and BEFORE it could be retroactively shot down nationally in court. (They already lost in some states)
Indirectly holding through multiple entities still counts? How would someone legally get around that? It seems like whatever you do, it's still summing up.
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.
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 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.
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.
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.
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.
That would be the desired effect for those seeking to enter the real estate market for the first time, but it would be disastrous for those who took out mortgages in the last few years, and it would be unwelcome to those who owned their homes longer and consider it a large (or only) asset in their personal wealth. I doubt that real estate prices will be allowed to drop much, simply because homeowners vote more reliably than renters, and they won't vote against their own financial interests.
I see that the more egalitarian world is a must for us NOT going extinct.
And we're in the last minute to do that, if it's not too late already.
World seems to be headed to a short dystopian fascist phase before the collapse. A metacrisis caused by these tax-free metahumans with the tax fee multinational abstraction of individual power called corporations.
Left vs. right doesn't work to solve it, but the true dichotomy of people vs. billionaires with their sycophants.
only if they immediately sold all the confiscated assets. The government that did the confiscation could slowly divest on a schedule to minimize the effect on any markets involved.
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?
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-...
Out in the developing world you’ll see all kinds of things that make no sense commercially, because they were really just a way to park a few million dollars in a way that slowly trickles out under the guise of legitimacy. Buildings with rent ROI> 100 years. A motorcycle dealership with 3000 motorcycles in stock, slowly selling them off , many > 10 years old and zero miles…. Etc.
Here in Colombia it's almost a staple to find perpetually-empty restaurants that never go broke. We call them "lavaderos" - kinda like "laundering-stations".
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I've always wondered if Baskin Robbins is a front, I used to see them everywhere in Oregon, where they were always empty even during the summer made me wonder how they stayed in business. as a kid I always thought it was a mob front.
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This is interesting to me and I see why it would work in a place with lower state capacity but in more developed countries it’s not a great strategy. You want your money laundering to operate through high volume cash businesses. When I lived in Seattle I used to sometimes go to a sketchy cash-only teriyaki joint. The food was great and they were always filled with paying customers. Sadly, they were later caught and shut down.
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Laser tag.
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This is, unfortunately, a problem that many tech companies have made worse and more accessible as they have removed friction from these systems.
Most folks will remember the 2019 temination of lootbox key trading for CS:GO on Steam.
https://www.bbc.com/news/technology-50262447
https://www.gamesindustry.biz/research-identifies-suspicious...
https://www.sciencedirect.com/science/article/pii/S266628172...
I'm not sure what good ways there are to manage this generally, other than limiting the size or types of financial transactions that can occur within a system.
The same thing is happening right now with cases.
You can thank Cryptic Studios for the loot box virus...
Trying to stop money laundering via mass surveillance of people's transactions is futile and creates far more losses than gains for society. It is what's responsible for the epidemic of debanking that has emerged over the last decade.
https://en.wikipedia.org/wiki/Debanking
"The Financial Conduct Authority reported that banks in the UK were closing nearly one thousand accounts daily, with just over 343,000 closed in 2022, compared to about 45,000 in 2017.[4]"
Money transfer is a basic utility and should not be rationed out and gatekept by government regulators.
Lotteries, too: https://www.acamstoday.org/lottery-and-money-laundering-a-ma...
I remember reading about a case where criminals bought an entire issue of a local lottery, thus collecting all the prizes, and apparently saw that a reasonable cost to launder their cash.
this works quite well even at small scale. In my country you can just go to any tobacconist, buy 1000 € worth of scratch cards with cash, and happily keep whatever comes out. And since they're heavily regulated, you can check winning probabilities in advance so you already know the expected return!
A prominent Belgian political figure laundered cash for years using the lottery https://www.euronews.com/my-europe/2024/12/11/revealed-how-t...
Art https://www.artandobject.com/news/how-money-laundering-works...
> Then there is the case of international terrorism, where bands like ISIS have been noted for their laundering of cultural antiquities.
Reminds me of True Lies.
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 expression goes back to the Roman Republic. Coined by former consul Lucius Cassius Longinus Ravilla, who 'gained fame for formulating the question "Cui bono?" ("Who benefits?") as a principle of criminal investigation.'
https://en.m.wikipedia.org/wiki/Cui_bono
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And for a specific example:
In my local neighbourhood there are a couple of commercial spaces that keep seeming to become new businesses, go through the expected few months of rebranding and outfitting, stay for a couple more months, then shut down. Only to become new businesses doing the same thing. Repeat ad nauseum.
Which would be fine, except it’s always the same owners. I’m not sure what the grift is, but I’m sure there’s one. Perhaps its simply taking advantage of business loans. Perhaps something more involved with contractors and business expenses charged differently on paper. I’m not sure, but I’m sure I’m curious.
In the same way that buying a company and taking out business loans for expenses isn’t itself fraudulent, but can be done for that purpose, I can’t help but feel like there’s something going on.
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This is a fairly common view, but it overstates people's rationality abd assumes you have perfect information, leading people to pretty conspiratorial views.
Often the actual answer to things not making sense is that most things in the world are done poorly and many things are some mish mash of various interests rather than a singular actor.
Incompetence is far more common than malice, and many observers are themselves incompetent.
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Apparently in Vancouver BC (money laundering capital of North America), they use luxury watches and cars to launder funds as well, in addition to the obvious local casinos and real estate.
Overly expensive candy stores that only accept cash and have an excess of staff...
Is that laundering or just retail drug sales?
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If you read The Guardian or even The Economist or other UK sources you see there is a drumbeat of concern about "bad businesses" which range from
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.
> which legally evade taxes and
If it's legal I think it's "avoidance".
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.
You’re not wrong. Just enough “legit” to create reasonable doubt.
In Austria we have an infinite amount of middle eastern barbershops and „phone shops“ with about zero customers.
Quick calculations on minimum wages, rent, other costs and the required amount of sales show that they can not be profitable.
Art is another really good example.
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.
Ending anonymous banking like in Switzerland was a major objective for the US. They said it was because it allowed money laundering for terrorists. People will get upset when the government talks about ending encryption in order to stop terrorism but the same concept applied to money apparently doesn't matter.
In practice we have a system where money laundering has not ended and we have much more financial surveillance for average citizens. That was probably the purpose all along and it never had anything to do with finding tax evaders or stopping terrorism.
> much more financial surveillance for average citizens
As with the TSA, any system designed to filter "bad guys" ends up being a huge imposition on average citizens, because there's a lot more of them.
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What's the point of surveilling the movements of average citizens' money? They usually don't hide anyway. I suppose tax evaders were the target all along, with a smattering of criminal operators, e.g. drug dealers. Terrorists were but a pretext to produce moral panic.
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To be fair Switzerland really did (does?) help to launder a lot of money for terrorism.
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Don't forget tax cheats.
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> Moving money around is a crime...why?
The short answer is that said money is either the proceeds of a crime, or (in the other direction) being sent to or from a sanctioned person, organization, or country.
This is why it's so hard to push back against, like the TSA. "Do you want terrorists using the banking system?" is a killer argument for midwits.
> killer argument for midwits
It's a real shame that kind is allowed to vote. IMO, they're more destructive than the 90 IQ and below crowd.
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Just replace "money" with a gold bricks. If I have them in the trunk of my car and move it around, you can't arrest my car on the assumption that the bricks are "the proceeds of a crime". You have to reasonably prove it with all the red tape involved, or GTFO of my way.
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Money is a call option on the labor of its citizens. When money accumulates to people who operate against the best interests of its citizens more and more of a countries labor and future is traded for less societal value. There exists some tipping point where no societal value is created and money exists just to drain the vitality of its citizens. In other words, no matter how hard you work things only get worse.
A great article on this dynamics that is worth a read (https://www.propublica.org/article/china-cartels-xizhi-li-mo...)
This doesn't really have anything to do with "money laundering". For example, you get the same set of problems if the money is accumulating to monopolies or industries with artificial scarcity as a result of regulatory capture even though the law doesn't require them to "launder" the money they're accumulating.
Meanwhile in the case of classical criminal enterprises, the laws against money laundering don't actually work because in practice there are ten thousand ways to exchange value other than with official currency. And then the systems to prevent "money laundering" cause more problems for honest people who get trapped up in them out of ignorance, or become victims of corrupt government officials who use financial surveillance systems for oppression, whereas professional criminal organizations just restructure their activities to bypass the rules.
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It being a crime depends on who you are.
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.
One of the most common abuse is to call political opposition money launderers to freeze their assets
https://www.amnesty.org/en/latest/news/2024/09/india-fatf-ra...
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..
C'mon, moving money is not a crime but moving money that has been illegally obtained is a crime (drugs, prostitution, illegal sports book,...) as is concealing the source or target of money sent to terrorist organizations and yes it makes certain things harder than they used to be for the rest of us.
Only one of 1000 money laundering alerts ends in prosecution of a criminal. 999 are innocent people suffering.
Most of the commenters here have zero connection to reality eh.
For the uninformed: if you cannot complete KYC or proof of wealth checks, you do not lose your money.
The institution you're trying to transact will just will not work with you. They might not for any number of other reasons: adverse media, dodgy transaction history, etc. etc. etc.
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Money launderning is making it look like the taxes have been paid.
After you pay your W2 income taxes for the year, your income for the year is no longer taxable.
edit: I guess I can't argue with the holy writ of wikipedia, but it's how they got Al Capone.
That’s tax evasion.
Money laundering is disguising the source or use of funds (making illegally sourced cash look legally sourced).
Plenty of people would (do) happily pay some tax on cash as part of avoiding difficult questions about the source.
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Just using an unlicensed hawaladar to transmit legally earned and taxed money is money laundering (whether that is the actual statute that would be charged, idk, but it falls under the stuff AML compliance is supposed to catch). The whole system is absolutely insane.
>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.
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.
Source: former RCMP financial crimes consultant.
It is similar in the US, except we call it a currency transaction report [0]. Because the amount — $10,000 — is not indexed to inflation, these reports are extremely numerous, mostly automated, and are almost entirely useless — beyond conveying the ability to charge ordinary people with structuring [1].
[0]: https://en.wikipedia.org/wiki/Currency_transaction_report
[1]: https://en.wikipedia.org/wiki/Structuring
> beyond conveying the ability to charge ordinary people with structuring [1].
It doesn't, lol. Structuring is when you make several smaller transactions to avoid a CTR. If a CTR was created, you aren't structuring. And if you are structuring, a CTR isn't created.
What did you think about the bc government report on money laundering?
The Cullen Commission Report [0] was damning. Canada is “willfully blind” to the issue and is, at this point, knowingly funding international crime and terrorism.
0: https://cullencommission.ca/
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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.
One of my favourite stats is that assets lost to forfeiture overtook assets lost to crime in the US
https://www.nemannlawoffices.com/blog/law-enforcement-seized...
Also, even if you can prove the legitimate origin of the funds you can’t be sure that your bank will accept them. If you can’t find a bank that will accept them then formally you may still have the ”asset” but you can’t really use the money.
Seriously, why would you have a problem explaining where a $5M came from?
In most places this is "proceeds of crime", requiring associated convictions.
In places that have unexplained wealth statutes, the bar is also pretty high - "balance of probabilities" is not hard to argue IF YOU HAVE LEGITIMATE SOURCES OF MONEY.
Please don't use uppercase for emphasis. If you want to emphasize a word or phrase, put asterisks around it and it will get italicized.
https://news.ycombinator.com/newsguidelines.html
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"If you have nothing to hide you have nothing to fear."
It is extremely simple to prove legitimate origin of funds though.
You're acting like the government will charge you for a $100 in your wallet.
Any circumstance where the onus is on a private citizen to prove innocence instead of the government to prove guilt is a perversion of justice. Stupid voters and the government will destroy all privacy for the sake of "the guns, the gangs, the children"
It's extremely simple until it's not. Let's say you bought 100$ worth of BTC back in 2012 with cash at a meetup. Now it’s worth $1M, but you can't prove its origin. You now have a perfectly law-abiding person that risks being accused of "money laundering" just to keep what's rightfully theirs.
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No, some financial institutions like Binance only allows clients to get statements for the last year or so. P2P transaction details go back only a couple of months.
Sometimes your employer goes out of business. Employees do not always preserve their payslips.
Then there are countries like Georgia, it's culturally acceptable to buy real estate with cash. If no valuation of the property was made, it becomes very difficult to prove where the money came from.
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.
>The money laundering control systems, as well as being ineffective at controlling crime
The point of AML/KYC regulations isn't to stop all crime, just like the point of US sanctions on Russia isn't to stop all Russian exports. In both cases it's to raise the cost of doing business for the entity being targeted. In the case of Russia, they can still sell their oil to India or whatever, but at a steep discount. In the case of drug cartels, they can still get their funds into the regular banking system, but also at a steep discount. Smuggling pallets of dollar bills across the border and setting up a network of front companies is expensive. Doing all that also which implicate them in even more crimes, so even if there's no evidence of them smuggling fentanyl, they can be prosecuted purely on the basis of having a car full of cash.
>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.
The better question is why are you were sitting on cash for 40 years. In that time inflation already ate 66% of the value, and if you factor in the opportunity cost of not investing the money in stocks/bonds, the loss is even greater.
It wasn't in cash. It was in equities to a large extent. But they still ask for the source. Even if it's from selling shares they want to know where the shares came from. At least sort of. The whole thing is a box ticking exercise for compliance to cover their own arses.
In fact it's worse than that in some ways as I had an investment advisor who bought and sold stuff and I don't know if I have records of what exactly.
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The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones. Ensuring the greatest threats become even bigger ones, but also that any corrupt politicians/officials/bankers get even bigger payouts and the payouts they get are more predictable from fewer channels.
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> The better question is why are you were sitting on cash for 40 years.
That's not a better question; that's just ignoring reality. Who cares why they were sitting on cash for 40 years? People should be able to do whatever they want with their money, even if it's not the most financially advantageous thing.
I don’t think that really is the better question. It’s their money, if they want to do silly things with it that’s up to them.
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If I get the OP correctly it wasn't 'cash' that they were sitting on but it was a balance in a bank account. You can turn that into cash (unless lots of other people try to do the same thing at the same time, see also 'bank run') but strictly speaking it isn't cash.
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"Sorry, you didn't invest your money optimally, so we confiscated it all"
Okay...
I know a number of people who don't trust banks and so have their cash in a mattris or similer things. Most are dead - they remembered banks failing in the 1930s and said never again.
> 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.
This makes zero sense.
I have bought a house, and they want bank records going back like a few months or maybe a year at most. If that money has been sitting in an account for that long, nobody gives a shit where it originally came from. Like, if you had $100,000 for a down payment, they’re not checking the last twenty years of your paystubs to make sure the math checks out.
The only thing they really are interested in is knowing this money didn’t just appear out of nowhere because you got a personal loan from someone or because you got a conventional loan from a lender that hasn’t reported it to a credit reporting agency yet, and which would affect the decision to underwrite your loan.
If you’ve just been holding on to large sums of literal cash dollar bills for the last 40 years, that is such a comically ridiculous financial decision I don’t even know what to tell you.
> I have bought a house, and they want bank records going back like a few months or maybe a year at most.
I had to juggle with this a little bit because I had sold some crypto for the down payment, but it's crypto that I had been keeping in a hardware wallet for years. As a result, I could certainly generate records showing how long I'd had it, but they'd be my own records based on the blockchain--not from any bank.
They ended up accepting transaction records from Coinbase, though even those mostly just showed some Bitcoin being received into the account and then being sold before transferred to the bank. But I guess that was enough for them.
In any case: I did ask about it and they told me it wasn't actually for KYC laws or money laundering. The reason they want a paper trail is to make sure you didn't actually just borrow the money from someone else. And that makes sense, since they're super picky about you not opening any new lines of credit while trying to close the mortgage.
That requirement isn’t about money laundering at all. They are wanting to make sure that you aren’t borrowing the down payment from someone else, because that would mean you don’t actually have as much (or any) of your own money invested in the property.
The point of a down payment is to make it so the borrower has an incentive to not default on the loan, because the borrower would lose the down payment.
If the down payment is actually borrowed money as well (like suppose you get a credit card advance for the money), then the borrower won’t lose anything if they stop paying the loan, and there is increased risk that the loan defaults.
You shouldn't really need to prove where you got them from; what the system cares about is that you're not laundering it, and it's obvious that nobody launders money on a multi-decade timescale. All you should need to satisfy them is just to show that you've been in possession of it for so long the bank can't even show where it came from anymore. That is itself proof that it's not laundering. You may have good success just pushing back a bit with this point.
One fun way to get around this is to have enough money to sidestep the bank altogether. The title company does not give a shit about where the money came from. All they will want to see is a screenshot of your current balance so they know you aren't wasting everyone's time.
I bought a cheap property (vacant land with no utilities) then built the house literally $20 or $1000 at a time buying blocks/wood/pipes etc as I was building. All the money was legally earned and taxed, but the point is even the title company was sidestepped in this case beyond an amount pretty trivial in comparison to the value of the property and very little of it would have had to of went through the traditional financial system in order to make it possible.
"just be rich bro"
> but you try buying a house and they want proof of the origin of the funds
Fannie Mae's assessment criteria for origin of funds has a time limitation. If that money has been in an account you control, for forty years, "origin of funds" is not a question. I want to say the cut off is something like 36 months, but it may be even less.
Helpfully, all this information is public: https://selling-guide.fanniemae.com/sel/b3-4.3/verification-...
I'm in the UK. You can kind of get around the regulations but they are still a pain.
The lender only needs you to show proof of the origin of funds if they were transferred in the last 60 days
Depends on the jurisdiction and it may not be the lender that requires proof of origin but the party handling the transaction. They may even have a reporting requirement for 'suspicious transactions'.
Your problem isn't AML, it's chain of title. Different things. And yes, you have to show they aren't stolen. Get an indemnity bond if possible.
They have them, but not from a web interface. Probably will require talking to a human, and a service fee to retrieve the records from physical storage.
Wait until the wise people explain to you that generational wealth is inherently evil and this money should be forfeited anyway.
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.
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?
The moment you try to look into the fines governments impose on banks caught money laundering and the rare cases in which bankers actually see a prison cell, your last option is the most likely one, with a sprinkle of the two others.
My main issue is that all the AML/KYC/KYB barriers we have to deal with never seem to be subject to efficiency tests, all the studies I read and the few audits of these system seem content with it's likely better than doing nothing... but never measure the lost opportunities in trade/business they cause.
In a way it's the same hopless fight against so-called piracy for movies/games. The motivated actors who want to break the law find ways to do it at a large scale, mostly without consequences... and the honest people are just hindered when they want to use their content (even lose access to it when DRMs rely on the existence of the developer/publisher and their goodwill to maintain it way past the time when that media was able to generate revenues).
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.
It's my understanding that cannabis is still federally illegal virtually without exception, therefore changing AML law might not do much for your industry since it was always an illegal conspiracy to knowingly aid and abet the commission of a felony.
It hasn't been my industry for years, and the legality of intrastate cannabis is still being fought in the courts, see the Canna Provisions case which has been ongoing since 2023 and is currently on the Supreme Court docket.
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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.
In the grand scheme of things crypto-related money laundering is just a drop in the bucket compared to the amounts being laundered using more traditional methods.
Most crypto coins (not Monero) are pseudonymous. If a particular bitcoin wallet comes to somebody's attention they can investigate hassle anybody that this person tries to trade with, tell exchanges not to redeem cash, etc.
Thing is these tactics aren't just available to the authorities but also to anyone like intelligence agencies, the mafia, etc. so the confidentiality problems are much much worse with crypto.
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But it’s intentionally set up to be much more accessible than the traditional laundering methods.
Crypto advocates love this “drop in the bucket” excuse. By the same logic, it’s not a problem if I manufacture extra strong alpha-PVP and hand it to school children, because my drug distribution is just a drop in the bucket compared to the global cocaine trade.
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It is absolutely not a drop in the bucket.
USDT is the money launderer’s dream. If they can get it into crypto (and there are a number of firms who are barely disguised criminal finance portals), the world is very much their oyster.
No clue, but likely
Here is a good book on the topic of pre-crime society. Not just AML, but censorship, surveillance industry (think Palantir) and so on:
https://www.amazon.com/Compliance-Industrial-Complex-Operati...
Not very is the answer. When I worked in finance in the UK a few years back, the credit control team had a few ex-commercial bankers. Those guys had wild stories, the best ones were usually how much money they'd find being added to children's accounts for "birthday gift money". Usually with certain groups who have traditionally large families, the children would all have regular four and five figure cash lodgements.
Mormons.
Close, travellers mostly.
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.
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. We already see instances of debanking (logical evolution of money laundering "control") being used to pressure political opponents and dissenters even in the "free" West. Even worse, governments silently share this power with private entities to pressure stuff they do not like as was recently demonstrated by the MasterCard/Visa debacle.
Ideally, access to the financial system and secrecy of financial transactions should be protected by constitutions in the same way as secrecy of correspondence and right to privacy. Unfortunately, most constitutions were written in the age when it was a given, since most people relied on physical cash and were was no need to explicitly protect this right.
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.
It sounds like an utterly lazy government that cannot go after actual crime. I would never vote for such a government.
Meanwhile, the same corrupt government gives a free pass to its buddies devastating the planet with digging for oil and gas, destroying sea life with major leaks, and stops renewables from succeeding. See the current administration. The government permanently destroys farmland by using PFAS mulch as fertilizer, making the soil poison.
The difference between this country and others is only that corruption is legalized here.
Thr problem with people at such regulatory agencies is they drink their own koolaid a bit much.
This 100%.
It's strange to see otherwise smart people correctly identify the "think of the children" fallacy in E2E encryption or net neutrality issues, but fail to identify the same exact fallacy when network traffic is measured in dollars and not bits.
They falsely assume the major burden of KYC/AML lies on the rich/criminals when in fact, as implemented in the USA, the burden falls largely on the innocent (and most of all on homeless / people with no address to pass KYC) with pretty vague data on whether there is much payback.
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.
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.
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.
>just freezing/seizing the assets of known criminals once it's in the system.
How does that even work? You think that without an AML system, el chapo is going to be opening a wells fargo account with his real name?
You think El Chapo had a lot of banking issues in practice? He went around most of these hurdles with and without the complicity of banks and governments.
HSBC's cash deposit tellers in Mexico were even reported to be wider to accommodate the larger cash deposits from the cartels [1]
The same people we put in charge of watching their own activites are the ones breaking the law, repeatedly... and the governments enable it by arguing that fines are "preferable" to real prosecutions and firm/long prison time for complicit bankers.
They are just taking their share on the illegal traffic revenues, like mob bosses do. No intent to stop them. And in the mean time all these AML hurdles hinder legal activites.
[1] https://www.theguardian.com/business/2012/dec/11/hsbc-fine-p...
not well, evidently.
It's mainly about tax evation, under the pretense of fighting crime.
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.
Isn't tax evasion a crime?
Also on what basis do you make the second assertion. I struggle to think of historical examples that validate that idea
Not always. There are ways to move your money around the globe that are not criminal. Governments don't like it when people get up and take their wealth elsewhere due to the shit conditions they allowed to come about.
> First, disentangling individual accountability within a vast corporate structure is difficult, particularly in determining whether any executives had the requisite knowledge and intent to be held liable.
We just need lower standards of proof. Something like:
1) you had some level of responsibility within the organization (no specific knowledge of wrongdoing required) 2) some kind of violation occurred within the organization 3) your wealth increased over some time period in which such violations were later found to have occurred
If those things happened, you are liable. People who profit should be on the hook for everything a company does, not in proportion to their specific knowledge of or involvement in any particular illegal activities, but in proportion to their nominal or "global" level of responsibility and the magnitude of their profit.
New blackmail scheme:
Get some sort of job in the company, do something illegal, threaten your manager with going to the feds, since at this point they are criminally liable for your act.
More generally, i get where you are coming from - its frustrating when the ceos are like, i just work here, totally wasn't me, excuse me while i cash my bonus cheque. But i still think morally its important that we punish people for things they actually did (or failed to do), not just by mere association.
Although perhaps something like an enhanced version of how supervisory responsibility in war crimes works would make sense - basically the way that works is if you are aware or ought to have been aware that someone under you is commiting a crime, and you don't investigate/take measures to punish/take measures to stop them, you are on the hook for the crime.
> Get some sort of job in the company, do something illegal, threaten your manager with going to the feds, since at this point they are criminally liable for your act.
Not if the manager goes to the feds himself.
> But i still think morally its important that we punish people for things they actually did (or failed to do), not just by mere association.
Well imagine you're a CEO and you not only didn't setup protections against wrongdoing but rather created a system of incentives that makes it beneficial to close your eyes to things.
In the Dieselgate the engineer went to jail, in Skyguide the air traffic controller got stabbed, the executives walk free.
> Get some sort of job in the company, do something illegal, threaten your manager with going to the feds, since at this point they are criminally liable for your act.
I guess I left out a key word in my conclusion there: "You are presumptively liable." The point is to shift the burden of proof. If it can be proven that someone else willfully did the violation (especially in order to screw you), that might be a defense. But the point is that the default assumption should be that greater responsibility/authority equals greater liability, and the burden should be on those with that responsibility/authority to prove that they are not liable.
> But i still think morally its important that we punish people for things they actually did (or failed to do), not just by mere association.
But that's it exactly. What they failed to do was ensure that bad things didn't happen while they were in charge.
> Although perhaps something like an enhanced version of how supervisory responsibility in war crimes works would make sense - basically the way that works is if you are aware or ought to have been aware that someone under you is commiting a crime, and you don't investigate/take measures to punish/take measures to stop them, you are on the hook for the crime.
Yes, something like that. The key phrase being "or ought to have been".
I want to agree with the standard “it happened under your watch and it doesn’t matter if it happened without your knowledge”, but wouldn’t it get really messy in practice?
Let’s say one particular org at a company engaged in the activity in question, generating increased profits for the whole company. Taking this approach to the extreme, literally every shareholder could be liable because they benefited from those profits.
I could be persuaded it's worth having a lower standard of liability for "sibling" orgs within a company, so that if, e.g., the billing department does something shady then the HR department doesn't necessarily bear liability for that (but execs above both still would).
But I'm kind of okay with shareholders being liable to a certain extent, as long as their liability is proportional to their benefit. Someone who had a few shares in their 401k and made a couple thousand dollars, okay, no big deal. But the prospect of having gains clawed back could make shareholders more vigilant in ensuring the company is fully aboveboard. It doesn't make sense for me to someone to rake in, say, $50 million in unrealized gains and then say "oh, I had no idea, oh well, I'll just enjoy my $50 million". It's sort of like how if a drug kingpin gets arrested, it may well be that assets of their family members are seized as ill-gotten gains.
I've always wondered about those grimy palm reading or fortune telling shops you'll find across major streets in Manhattan or New York. How are they making rent, even during the retail apocalypse?
"major Western banks frequently pay large fines for AML violations, yet bank executives rarely face criminal convictions"
Seems like changing this would fix a lot of the problems.
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.
Same in Chile. A while ago our version of FBI closed 12000 barber shops along the country under an investigation on money laundering. It's so obvious it's ridiculous. 20 barber shops in the same street (we don't have a barber district btw), many of them working 24/7.
This is if you want to launder 50k. If you want to launder 500k, not so much, and if you have 50M, not at all.
It's horizontally scalable
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I thought about this and decided if I needed to launder some money, I would paint some pictures and sell them to myself on ebay. Nowadays, that theme got easier with NFTs.
Money laundering at the high level works as unless you are on the USA watchlist, it's the USA and it's allies that are the vehicle which facilitates it.
Offshore vehicles? Most are British islands.
Onshore vehicles? Delaware and similar
Unless the west puts you on a list, it's professionals will happily help anyone in the world.
> 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:
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.
unsurprisingly they killed off the BOI reporting requirement in March [1]:
> ALERT [Updated March 26, 2025]: All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information (BOI) to FinCEN.
[1] https://www.fincen.gov/boi
Yea, AFTER you had to file the report to go to jail- and BEFORE it could be retroactively shot down nationally in court. (They already lost in some states)
Indirectly holding through multiple entities still counts? How would someone legally get around that? It seems like whatever you do, it's still summing up.
Not all entities count. There are 23 types that are conveniently exempt from this regulation.
https://www.fincen.gov/boi-faqs#C_2
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.
At least in the US, there is a lot of overlap between anti-money-laundering and tax enforcement.
I support it on that basis alone
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.
Not really.
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 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.
It is just an excuse for more survillence
Usually I am a big fan of HN comments. But this thread... So much cynical speculation. So little factual information.
Go ahead and downvote. I've got karma to burn.
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.
No, that was not money laundering, I was just realy smart/lucky on the stock market when someone else was realy dumb.
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I wholeheartedly hope it fails and continues to fail forever.
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.
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.
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.
The proceeds of crime propping up some aspect of our economy seems like a bad reason to let it continue unabated.
You’re absolutely right, but the people holding millions or billions in illiquid assets are going to disagree.
Lucrum ante valores.
Residential real estate costs roughly tice what it did 10 years ago. A "crash" back closer to fair market prices would be the desired effect.
That would be the desired effect for those seeking to enter the real estate market for the first time, but it would be disastrous for those who took out mortgages in the last few years, and it would be unwelcome to those who owned their homes longer and consider it a large (or only) asset in their personal wealth. I doubt that real estate prices will be allowed to drop much, simply because homeowners vote more reliably than renters, and they won't vote against their own financial interests.
And that would be excellent news, because it would be a "great equalizer". And a more egalitarian world would be much happier.
I see that the more egalitarian world is a must for us NOT going extinct.
And we're in the last minute to do that, if it's not too late already.
World seems to be headed to a short dystopian fascist phase before the collapse. A metacrisis caused by these tax-free metahumans with the tax fee multinational abstraction of individual power called corporations.
Left vs. right doesn't work to solve it, but the true dichotomy of people vs. billionaires with their sycophants.
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only if they immediately sold all the confiscated assets. The government that did the confiscation could slowly divest on a schedule to minimize the effect on any markets involved.
It depends on the degree to which the continued flow of ill-gotten gains into the system is priced into current valuations.