Comment by alwa
3 days ago
> This is exactly the behavior that “never happens from a legitimate business” except when it does by the tens of billions of dollars.
> As Bits about Money has frequently observed, people who write professionally about money—including professional advocates for financially vulnerable populations—often misunderstand alternative financial services, largely because those services are designed to serve a social class that professionals themselves do not belong to, rarely interact with directly, and do not habitually ask how they pay rent, utilities, or phone bills.
This resonated for me, and reminded me of the way I and my formally-banked and formally-employed colleagues sometimes struggle to wrap our minds around payday lending (sure looks like usury from the security and comfort of a formal banking relationship!), remittances, hawala, pawn shops, Cash App, gift card exchanges, video game economies… for all the normative thinking in the professional classes, people sure do develop a kaleidoscopic array of approaches to storing and transmitting value.
“Just sanction [whoever]” or “just debank [whoever]” sounds to certain circles like an appealing tool to have—the modern equivalent of exile—but I have to imagine it’s probably healthy that such a tactic is hard for a state actor to apply in a totally watertight kind of way.
Rarely does it look like a clear "debank X" system; it's more like "you look suspiciously like someone who might use our systems in a crime, in a way that will cost us money and get in trouble with the law, so we're not going to touch you". Which is much harder for an innocent person to deal with.
I do think there ought to be some sort of fallback banking and account denial review process, if we're going to make it that critical to society.
I agree, that’s what makes it so insidious: it’s murky how you get flagged as risky, and you normally don’t even see the evidence (if any!), much less have a means to appeal. Which would be one thing if financial institutions’ risk decisions were independent, but they’re not—see again the inimitable @patio on this [0].
That serves the integrity of the risk-identification system by making it harder to game or evade, but we’re rightly allergic to other forms of justice meted out “because trust me, he’s probably no good…”
[0] https://www.bitsaboutmoney.com/archive/debanking-and-debunki...
It's clear, from watching Russia fail to be completely sanctioned that this is not watertight. The question I have is: have these sanctions added a money laundering tax to doing business? How much? What is the cost of enforcing the sanctions vs the added cost and is that worth it?
I don't know if this has been explored, bit I think it's an interesting follow on to "all or nothing" watertight sanctions.
Yes, that's pretty much the main goal with sanctions (and things like export controls): no-one expects them to be impossible to work around, but they should impose some (ideally very large) extra costs and limit the scale. For some things this is more or less built into the regulations with de-minimis rules that tacitly cap the cost multiplier at 10x or so.
On a national scale sanctions aren't there to stop a country from doing things or forcing regime change. They're there to cost enough money to circumvent that it robs them of growth over time to make them into a non-threatening poor backwater over a decades long period.
This is basically what the US did to most of its "makes actual stuff" economy over the past 50yr.
When it comes to banking laws and the like it's not about being watertight. It's about holding enough water that what leaks out is small enough you can crush it with the state jackboot without enough collateral damage to really piss people off and that the cost of circumvention is high enough that you can't make "real money" outside the law at scale.
> struggle to wrap our minds around [..] remittances
You have family you care about back in your home country, so you send them money from your better-paid foreign job - what's confusing about that?
Nothing at all, unless you’re someone who doesn’t have family in a different country. In which case it may not have occurred to you that it’s even a thing, with its own rules and hazards and ways things are done.
Even if you’re such a person in the professional class, who sends money back to their family via formal means, you might not be sensitive to the means informally-employed people use to send money (or value) back to their families.
Any more than it occurs to you to go to a payday lender and pay $5 to get $50 today against your $250 paycheck next week, in order to make rent…