Archive for May 16th, 2023

Most people instinctively support anti-money laundering laws, but I wonder whether they would change their minds if they understood two very important facts.

Regarding the second point, let’s look at some excerpts from a recent report in the New York Times by Tara Siegel Bernard and 

There are many anecdotes about consumers losing access to banking services, but let’s look at some macro issues.

…financial institutions are obligated to alert regulators and law enforcement through a Suspicious Activity Report if there’s irregular behavior that they cannot easily explain. …if banks fail to report suspicious activity and regulators discover problematic transactions later, banks and their compliance employees are potentially on the hook for all manner of penalties. “So all their incentives are toward closing accounts,” according to an explanation of SARs on the website of the Bank Policy Institute… a median of just 4 percent of 640,000 suspicious activity reports from a sample of large banks warranted a follow-up from law enforcement, according to the research, which examined 16 million alerts.

By the way, some people may think AML laws are worthwhile because 4 percent of reports generate follow up, but that has to be balanced against the estimated $180 billion cost imposed on the private economy.

In his Washington Times column, Richard Rahn draws the should-be obvious conclusion that these laws fail a cost-benefit test and should be repealed.

Money laundering became a federal crime only in 1986… Because the law is so vague and has been subject to so much prosecutorial abuse, including its weaponization for political purposes, there have been calls for its repeal. …The real purpose of many payments between individuals and other individuals, government, or business entities is difficult to prove, which is why so few “stand-alone” money laundering convictions are made. …There is no evidence that the government’s crusade against money laundering has had any appreciable impact on drug dealing, terrorism, or government corruption. …By any objective standard and given the massive cost per conviction in contrast to the few stand-alone convictions, the war on money laundering has been a colossal failure. It has hurt the taxpayers, financial institutions, and, most importantly, Americans’ civil liberties.

Amen. Richard is right. These laws never should have been enacted.

Sadly, many politicians want to expand AML laws by abolishing cash.

P.S. I’m batting .500 in my career as a global money launderer.

P.P.S. Here’s Barack Obama’s satirical encounter with AML laws.

Read Full Post »

%d bloggers like this: