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Posts Tagged ‘Crime’

When I write about gun control, I generally make two arguments.

  • First, criminals are lawbreakers, so the notion that they will be disarmed because of gun control is a fantasy. Crooks and thugs who really want a gun will always have access to black-market weapons.
  • Second, to the extent that good people obey bad gun-control laws (and hopefully they won’t), that will encourage more criminal activity since bad people will be less worried about armed resistance.

These points are common sense, but they doesn’t seem to convince many leftists, who have a religious-type faith that good intentions will produce good results (they need to read Bastiat!).

Every so often, however, the other side accidentally messes up.

As part of its never-ending, ideologically driven campaign to undermine gun rights, the New York Times ran a big 5,000-plus word story last month about mass shootings. Creating hostility to guns was the obvious goal of this “news” report.

But buried in all that verbiage was a remarkable admission. A big majority of shooters already are in violation of gun laws.

The New York Times examined all 130 shootings last year in which four or more people were shot, at least one fatally, and investigators identified at least one attacker. …64 percent of the shootings involved at least one attacker who violated an existing gun law.

And for the 36 percent of the nutjobs in the story who purchased or obtained guns legally, almost all of them presumably would have gotten their hands on weapons even if they had to violate minor laws on guns prior to violating major laws against murder.

So what the New York Times and other anti-second amendment activists are really saying is that honest people should be defenseless even though bad guys always will have the ability to arm themselves. And by making such a preposterous claim, they actually provided ammo (pun intended) for those of us who defend the Second Amendment.

P.S. Maybe we should give the New York Times a “Wrong-Way Corrigan Award” for inadvertently helping to make the libertarian case for more freedom! Oh, and give Trevor Noah the Award at the same time.

P.P.S. Years ago, I used to post lots of gun-control humor. I’ve gotten out of the habit, but I can’t resist sharing some items that popped into my inbox yesterday.

This one of my favorites.

And this brought back fond childhood memories. Somehow I avoided becoming a killer even though I grew up watching Yosemite Sam, Elmer Fudd, and other trigger-happy angry white men. Not to mention shows like Combat and Rat Patrol!

Last but not least, this reminds me that crazed mass shooters are always sufficiently un-crazy that they manage to pick out gun-free zones before engaging in their rampages.

So maybe, just maybe, the problem isn’t guns. Indeed, perhaps we can draw the conclusion that society will be safer if more good people are armed.

Heck, even big-city police chiefs are beginning to reach that conclusions.

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The War against Cash is a battle that shouldn’t even exist. But politicians don’t like cash because it’s hard to control something that people can freely trade back and forth. So folks on the left are arguing that governments should ban or restrict paper money.

  • In Part I, we looked at the argument that cash should be banned or restricted so governments could more easily collect additional tax revenue.
  • In Part II, we reviewed the argument that cash should be curtailed so that governments could more easily impose Keynesian-style monetary policy.
  • In Part III, written back in March, we examined additional arguments by people on both sides of the issue and considered the risks of expanded government power.
  • In Part IV, a few months ago, there was additional discussion of the dangers that would be unleashed if politicians banned cash.

Now let’s add a fifth installment in this series, and we’ll focus on the destructive turmoil resulting from India’s decision earlier this month to ban “large” notes.

The Financial Times explains what happened.

India unexpectedly scrapped all larger-denomination banknotes overnight… Prime Minister Narendra Modi said 500 and 1,000 rupee notes — worth around $7.50 and $15, respectively — would cease to be legal tender from midnight on Tuesday. The announcement stunned Indians, who were given four hours’ notice that much of their cash would be “mere paper”. RBI data suggests that the Rs500 and Rs1,000 notes account for 86 per cent of the value of all cash in circulation in India at present. …The shock move is the latest step by Mr Modi’s administration to crack down on the vast shadow economy, which remains beyond the reach of India’s tax authorities.

Before delving into why this is an unfortunate development, I can’t resist pointing out that banknotes worth $7.50 and $15 are neither large nor inappropriate for an economy at India’s level of development.

When the United States had a similar level of per-capita GDP (back in the late 1800s), there were $500 and $1000 notes. Yet America didn’t have serious problems with corruption and tax evasion. So why should the existence of far smaller bills be a problem in India today?

I’ll return to that question in the conclusion, but let’s first look at the impact of Prime Minister Modi’s unilateral attack on currency. A column in the New York Times explains why the policy does more harm than good.

On Nov. 8, the Indian government announced an immediate ban on two major bills that account for the vast majority of all currency in circulation. …In the two weeks after the measure was announced, millions of Indians stricken with small panic rushed out to banks; A.T.M.s and tellers soon ran dry. Some 98 percent of all transactions in India, measured by volume, are conducted in cash. …So far its effects have been disastrous for the middle- and lower-middle classes, as well as the poor. And the worst may be yet to come.

The ripple effect of the policy is large and unpleasant.

…demonetization is a ham-fisted move that will put only a temporary dent in corruption, if even that, and is likely to rock the entire economy. …Anyone seeking to convert more than 250,000 rupees (about $3,650) must explain why they hold so much cash, or failing that, must pay a penalty. The requirement has already spawned a new black market to service people wishing to offload: Large amounts of illicit cash are broken into smaller blocks and deposited by teams of illegal couriers. Demonetization is mostly hurting people who aren’t its intended targets. Because sellers of certain durables, such as jewelry and property, often insist on cash payments, many individuals who have no illegal money build up cash reserves over time. Relatively poor women stash away cash beyond their husbands’ reach.

As is so often the case, the bogeyman of terrorism is being used as a rationale for bad policy, even though everyone realizes that terrorists won’t be affected.

When the government announced demonetization, it also justified the measure as a way to curb terrorism financing that relies on counterfeit rupee notes… Catching fake notes already in circulation neither helps trap the terrorists who minted them nor prevents more such money from being injected into the economy. It simply inconveniences the people who use it as legal tender, the vast majority of whom had no hand in its creation.

I’m sympathetic, by the way, to the notion that the government should fight counterfeiting. Crooks printing up fake notes is even worse than central banks printing up too many real notes.

In any event, this indirect attack on the shadow economy imposes considerable costs on regular Indians.

In a country like India, where the illegal economy is so intimately intertwined with the mainstream economy, one inept government intervention against shadow activities can do a lot of harm to the vast majority, who are just trying to make a legitimate living.

Writing for Bloomberg, Elaine Ou has a negative assessment of this proposal.

India is conducting a big test of the idea that getting rid of cash can help address crime and corruption. Unfortunately, it might achieve nothing more than a lot of inconvenience. Criminals and corrupt officials often conduct business in cash, because it’s hard to trace. So in a sense it’s logical to assume that abolishing cash will help reduce criminal activity. …This rationale has led Indian Prime Minister Narendra Modi to declare a surprise cancellation of the nation’s two highest-denomination notes, effectively invalidating 86 percent of total currency in circulation. Anyone with outstanding notes must either deposit them in a bank — potentially incurring a tax — or exchange them for replacements in strictly limited sums.

Ms. Ou explains that the policy will be traumatic for the hundreds of millions of Indians who don’t have bank accounts.

In a country where most transactions are conducted in cash, many people have been unable to pay for necessities like food or medical services. Banks have had to work overtime to handle the exchange, bringing other financial services to a halt. It’s certainly likely that the sheer trauma will leave people less keen to hoard rupees, creating a big incentive to move economic activity out of cash and into banks. Except that a huge number of Indians don’t have a bank account.

In any event, she points out, banning cash won’t have much impact on corruption since politicians and public officials have plenty of ways to extort wealth from the productive sector.

…the prevalence of cash is far from a foolproof indicator of criminality and corruption. Consider Nigeria, which is perceived as one the world’s most corrupt countries and has a currency-to-GDP ratio even lower than Sweden’s… Nigerians have abandoned cash because they have so little trust in government-issued currency. Instead of using banks, they tend to transact in mobile airtime minutes. …Those with more substantial wealth put it in foreign currency. By undermining faith in its cash notes, India may go the way of Nigeria. Villagers are already resorting to barter. …corrupt public officials were believed to have their wealth in real estate and gold.

A news report highlights the real-world impact of the Indian government’s bad policy. Starting with the impact on a poor single mother.

With demonetisation, Sayyed’s family has been forced to cut costs across the board to make sure their limited cash resources don’t get exhausted faster than the banks can exchange money. “Last week it took me four hours of waiting in line to get my old notes exchanged,” said Sayyed. “And because no one had change for a Rs 2,000 note, I had to buy ration on credit for six whole days.” Vegetables and foodgrains, says Sayyed, have grown more expensive in the past 10 days, because of the impact of demonetisation on wholesalers and retailers.

And the impact on a small-business owner.

His salon, which charges Rs 40 for a haircut, used to make anywhere between Rs 1,000 to Rs 1,200 on the weekend. But now, he said, that has fallen to Rs 500. …How is he coping with this liquidity crunch? Not by going cashless. In part because he doesn’t have a bank account. “I tried to open one but they wanted too many proofs of identity,” Sharma said.

By the way, Sharma is a victim of pointless anti-money laundering laws, something even the World Bank recognizes as being particularly harmful for the poor.

A farmer also has been hit hard.

It has been three weeks since Vedagiri’s single acre of land had been tilled and paddy seedlings had been sown. …“The cooperative bank cannot lend us money now, so for the whole of last week, our crop has been standing without pesticides,” said Vedagiri. Several times last week, Vedagiri and the other farmers of Royalpattu were turned away by bank employees. New currency notes have been slow to reach most rural cooperative banks across India. While sowing the crop, Vedagiri had employed 20 labourers. But he has been unable to pay any of them since he had not still received the rest of the money…Vedagiri does not know how he will get through this cropping season without incurring a loss.

Bloomberg reports on some of the bizarre unintended consequences of this bad policy.

Indian ingenuity is being stretched by Prime Minister Narendra Modi’s cash ban to crackdown on unaccounted money. India’s cash economy has been thrown into turmoil since Modi announced last week that 500 and 1,000 rupee notes would cease to be legal tender and would have to be deposited at banks by year-end, leaving about one-seventh of currency in circulation. …Here are some unintended consequences. Indian defense jets are on standby to airlift cash from mints across India to remote corners of the country. …wealthy Indians rushed to make costly purchases with unaccounted cash. One luxury watch outlet in north-west Mumbai saw 45 units of Rolex watches sold on a single day, according to a representative of a watchmaker, who was present when the sales took place. Demand matched what the shop would usually sell in a month and the store had to turn away customers… A new gold rush also emerged soon after Modi’s announcement. “Jewelers who had shut shop for the day on Nov. 8 had to reopen their stores within a couple of hours and were selling gold up to 4 a.m.,” Chirag Thakkar, a director at gold wholesaler Amrapali Group, said by phone… Customers paid as much as 52,000 rupees per 10 grams, almost double the current prices, he said. …About half of an estimated 9.3 million trucks under the All India Motor Transport Congress were off the road eight days after the announcement as drivers abandoned vehicles mid-way into their trips after running out of cash, according to Naveen Gupta, secretary general of the group. India’s roads carry about 65 percent of the country’s freight. Drivers don’t have enough money for food, truck maintenance and to make payments at border check posts. …Compounding the problem of pumping new money into the system is the need to reconfigure the country’s 220,000 cash machines so that they can dispense the new 500 and 2,000 rupee notes, which do not fit into existing ATM cash trays.

To be fair, some of these costs are transitory in nature, so it’s important to distinguish between those consequences and others that might linger.

Though the part of this story that doesn’t make sense is that the government plans on issuing new high-value banknotes. So the Prime Minister is not actually banning large banknotes (or even all non-digital currency), which is the usual goal of the war-on-cash crowd.

So why did the Modi cause so much turmoil with an overnight ban rather than allow for an orderly transition? I’m assuming that the answer has something to do with inconveniencing those with large cash holdings, some of whom will be crooks or counterfeiters or corrupt public officials.

As already noted, the battle against counterfeit currency surely is worthwhile.

But I have considerable doubts about whether this currency swap will have much impact on the shadow economy or public corruption.

And that brings me back to the rhetorical question I posed early in this column about why the United States didn’t have massive problems with crime and public corruption back in the late 1800s (when our per-capita GDP was akin to India’s today according to the Maddison data), even though we had banknotes that were far more valuable ($500 and $1000 compared to $7.50 and $15).

The answer, at least in part, is that the United States had a very tiny government. Government spending consumed at most 10 percent of economic output, with most of that spending at the state and local level. And there was no income tax.

And since people weren’t penalized for earning money and creating wealth, there was no incentive to be part of the shadow economy. And since government was small, there weren’t that many favors to distribute, so there wasn’t much need to bribe politicians or bureaucrats.

If Prime Minister Modi wants a vibrant, above-ground economy with minimal corruption, maybe that’s the path he should follow.

Let’s close with a very sage warning from Richard Fernandez’s column in PJ Media.

Money in its various forms has become the new battleground between a State that needs to reward its constituencies with and the actual economy which produces most of the real goods and services required to do it. The sad experience of command economies suggests in end the Real always wins over the Official.  As Ramesh Thakur said of India’s demonitization policy: “a better solution would have been to shift the balance of economic decision-making away from the state to firms and consumers; simplify, rationalize and reduce taxes; cut regulations and curtail officials’ discretionary powers; eliminate loopholes; and widen the tax net.”

And my favorite Russian-Irish-Californian economist also has a very apt summary of this issue.

Remember, if the answer is more government, you’ve asked a very silly question.

P.S. If he wants more future prosperity, Modi also should make sure the government no longer attacks private schools.

P.P.S. And it also would be a good idea to reform civil service rules so that it doesn’t take two decades to get rid of no-show bureaucrats.

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When writing about money laundering laws, I’ll sometimes highlight gross abuses by government and I’ll periodically make the usual libertarian arguments about privacy.

But I mostly focus on how the laws simply don’t make sense from a cost-benefit perspective. Anti-money laundering laws and regulations impose large burdens on the private sector, which creates disproportionate hardship for the poor. Yet there’s no evidence that the laws actually hinder criminal activity, which was the rationale for imposing the laws in the first place.

I have the same attitude about the War on Drugs. Yes, I get upset that people are mistreated and it irks me as a libertarian that people aren’t free to make their own choices (even if they are dumb choices) about what to put in their bodies.

But what really gets me angry is the absurd misallocation of law enforcement resources. Consider this info from a recent WonkBlog column in the Washington Post about the ever-expanding efforts of government to harass drug users.

Federal figures on drug arrests and drug use over the past three decades tell the story. Drug-possession arrests skyrocketed, from fewer than 200 arrests for every 100,000 people in 1979…, hovering near 400 arrests per 100,000 people. …despite the tough-on-crime push that led to the surge in arrests in recent decades, illicit drug use today is more common among Americans age 12 and older than it was in the early 1980s. Federal figures show no correlation between drug-possession arrests and rates of drug use during that time.

But here’s the part that should upset all of us, even if we don’t like drugs or even if we think they should be illegal.

Instead of focusing on the fight against crimes that actually have victims (such as robbery, murder, rape, assault, etc), the government is squandering an immense about of time, energy, resources, and money on drug arrests.

…arrests for drug possession continue to make up a significant chunk of modern-day police work. “Around the country, police make more arrests for drug possession than for any other crime,” the report finds, citing FBI data. “More than one of every nine arrests by state law enforcement is for drug possession, amounting to more than 1.25 million arrests each year.” In fact, police make more arrests for marijuana possession alone than for all violent crimes combined.

That last sentence is breathtaking. Does anyone think that busting potheads is more important than fighting genuine crime?!?

Do you want an example of law enforcement resources being misallocated?

Well, this story from New Hampshire tells you everything you need to know.

…an 81-year-old grandmother had been growing…the plant as medicine, a way to ease arthritis and glaucoma and help her sleep at night. Tucked away in a raspberry patch and separated by a fence from any neighbors, the plant was nearly ready for harvest when a military-style helicopter and police descended on Sept. 21. In a joint raid, the Massachusetts National Guard and State Police entered her yard and cut down the solitary plant…authorities are using budgeted funds, prior to the end of the federal fiscal year Saturday, to gas up helicopters and do flyovers. …“Is this the way we want our taxpayer money spent, to hassle an 81-year-old and law-abiding patients?” Cutler said.

Gee, I don’t know about you, but I’ll sleep more comfortably tonight knowing that lots of taxpayer money was squandered to seize a pot plant from this dangerous granny!

Still not convinced that law enforcement resources aren’t being wasted? And still not upset that lives are being disrupted and harmed by heavy-handed government.

Then consider this horror story from Reason.

James Slatic, a California medical marijuana business owner, found out all his family’s bank accounts had been seized by the government one day in January when his 19-year-old daughter tried to buy lunch at the San Jose State University cafeteria and her card was declined. Slatic’s wife tried to transfer money to their daughter, figuring she had simply overdrawn her account, as teenagers are wont to do, but her account wouldn’t work, either. What the Slatics soon learned was the San Diego police had frozen all of their bank accounts: $55,258 from Slatic’s personal checking and savings account; $34,175 from his wife Annette’s account; and a combined $11,260 from the savings accounts of their two teenage daughters, Penny and Lily. …The Slatics’ crimes? None. Or at least, the San Diego District Attorney’s Office hasn’t charged them with any in the nine months since it seized their accounts.

His business also was shut down, which wasn’t good news for him or his employees that are now out on the street.

The trouble for James Slatic began five days before his family’s accounts were frozen, when around 30 San Diego police officers and DEA agents raided Slatic’s medical marijuana business, Med-West Distribution, and seized nearly $325,000 in cash from a safe. …The raid was a crushing blow to Slatic—not to mention his 35 employees, who lost their jobs and benefits without notice.

Here’s a video detailing this disgusting abuse by government.

There is some good news. Voters in several states voted last week to decriminalize pot.

And for those who worry that legalizing marijuana will be a gateway to decriminalizing harder drugs, I encourage you to read this Cato Institute study on what happened after Portugal legalized all drugs early last decade.

This isn’t an argument about whether you should use drugs, like drugs, or approve of drug use. You can be the drug equivalent of a teetotaler like me and still realize that it makes no sense for the government to squander lots of money and hurt lots of lives simply because politicians want to control what people choose to put in their own bodies.

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Beginning in the 1970s and 1980s, the federal government (as well as other governments around the world) began to adopt policies based on the idea that crime could be reduced if you somehow could make it very difficult for criminals to use the money they illegally obtain. So we now have a a bunch of laws and regulations that require financial institutions to spy on their customers in hopes that this will inhibit money laundering.

But while the underlying theory may sound reasonable, such laws in practice have been a failure. There’s no evidence that these laws, which impose heavy costs on business and consumers, have produced a reduction in criminal activity.

Instead, the only tangible result seems to be more power for government and reduced access to financial services for poor people.

And now we have even more evidence that these laws don’t make sense. In a thorough study for the Heritage Foundation, David Burton and Norbert Michel put a price tag on the ridiculous laws, regulations, and mandates that are ostensibly designed to make it hard for crooks to launder cash, but in practice simply undermine legitimate commerce and make it hard for poor people to use banks.

Oh, and these rules also are inconsistent with a free society. Here are the principles they say should guide the discussion.

The United States Constitution’s Bill of Rights, particularly the Fourth, Fifth, and Ninth Amendments, together with structural federalism and separation of powers protections, is designed to…protect…individual rights. The current financial regulatory framework is inconsistent with these principles. …Financial privacy can allow people to protect their life savings when a government tries to confiscate its citizens’ wealth, whether for political, ethnic, religious, or “merely” economic reasons. Businesses need to protect their private financial information, intellectual property, and trade secrets from competitors in order to remain profitable. Financial privacy is of deep and abiding importance to freedom, and many governments have shown themselves willing to routinely abuse private financial information.

And here are the key findings about America’s current regulatory morass, which violates the above principles.

The current U.S. framework is overly complex and burdensome… Reform efforts also need to focus on costs versus benefits. The current framework, particularly the anti-money laundering (AML) rules, is clearly not cost-effective. As demonstrated below, the AML regime costs an estimated $4.8 billion to $8 billion annually. Yet, this AML system results in fewer than 700 convictions annually, a proportion of which are simply additional counts against persons charged with other predicate crimes. Thus, each conviction costs approximately $7 million, potentially much more.

By the way, the authors note that their calculations represent “a significant underestimate of the actual burden” because they didn’t include foregone economic activity, higher consumer prices for financial services, lower returns for shareholders of financial institutions, higher financial expenses for unbanked individuals, and other direct and indirect costs.

And what are the offsetting benefits? Can all these costs be justified?

Hardly. David and Norbert point out that we’re all paying more and getting very little in return for the higher burdens.

The original goal of the BSA/AML rules was to reduce predicate crimes, such as illegal drug distribution, rather than money laundering itself. Judged by this standard, very little empirical evidence suggests that the rules have worked as designed. In fact, even though BSA/AML rules have been expanded consistently throughout the past four decades, it remains difficult to discern any net benefit of the overall BSA/AML regulatory framework. Even though there is no clear evidence that the rules materially reduce crime, the BSA/AML bureaucracy began relentlessly expanding internationally—primarily through the Financial Action Task Force (FATF)—more than two decades ago. One comprehensive study reports that even though the FATF proceeds as if these rules have produced only public benefits, “[t]o date there is no substantial effort by any international organization, including the International Monetary Fund, to assess either the costs or benefits of” this regulatory framework. In fact, BSA/AML regulations have been sharply criticized as a costly, ineffective approach to reducing crime. …compliance costs are high for financial companies, with a disproportionate burden falling on smaller firms…, where hiring even one additional employee can lower the return on assets by more than 20 basis points. Other research suggests that the increasing compliance burden in the banking industry is at least partly responsible for the trend toward consolidation and the disappearance of smaller banks. …an American Bankers Association (ABA) publication highlights a small bank that reports it has to dedicate more than 15 percent of its employees to compliance-related tasks. An ABA survey also suggests that the cumulative cost associated with compliance has caused banks to offer fewer services and raise fees, thus harming consumers. …the BSA/AML regime has been a highly inefficient law enforcement tool. At the very least, a high degree of skepticism about further expansion of these and similar requirements is in order. Given the billions of dollars spent annually by the private sector on the existing elaborate and costly AML bureaucracy, a serious data-driven cost-benefit analysis of the existing system is warranted.

If anything, I think they’re being too nice.

The cost-benefit analysis already exists. The laws and regulations don’t work.

Let’s expand our look at the issue. The Wall Street Journal notes that the current approach has myriad negative consequences as banks sever relationships with customers (in a process called “derisking”) because they don’t want to deal with the hassle, expense, and liability of money-laundering red tape.

…financial firms, faced with strict penalties over counterterror and anti-money-laundering rules, have severed accounts of thousands of customers in recent years over fears of heightened risk. The consequences of shuttered accounts were detailed this week in a Wall Street Journal investigation showing how money-transfer firms whose bank accounts have been closed have been pushed out of the global banking system. In addition, nonprofit organizations operating in Syria and Lebanon have faced challenges after losing their bank accounts. …In February of this year, more than 50 nonprofits asked the U.S. Treasury to publicly affirm that nonprofit organizations aren’t inherently high risk. …Two studies by the World Bank in late 2015 found that money-service businesses—which include money transmitters—and foreign banks were both seeing account closures at increasing rates.

Amen.

This process has made life much more difficult for people and businesses seeking to engage in legitimate commerce.

Not to mention that the government abuses the enormous powers it has accumulated, as we can see from the Obama Administration’s odious “Operation Choke Point.”

Another report from the WSJ explains that the rules actually make it harder for law enforcement to monitor the people who might actually be doing bad things.

U.S. banks have closed thousands of accounts held by people and organizations considered suspicious, high-risk or difficult to monitor—including money-transfer firms, foreign banks and nonprofits working abroad. Closing accounts for fear their customers may be up to no good evicts from the financial system the innocent as well as those the U.S. government would most like to watch, a consequence not anticipated by Washington. Comptroller of the Currency Thomas Curry this month acknowledged the potential danger. “Transactions that would have taken place legally and transparently may be driven underground,” he told an international conference of bankers and regulators in Washington. …Fearing steep financial penalties for failing to spot a wayward customer, many banks now shun anyone who looks risky. That leaves ostracized companies to seek alternatives—such as toting bags of cash overseas—a practice that allows hundreds of millions of dollars to leave the global banking system… “The whole flow of money goes underground, and that becomes counterproductive to the original purpose of being able to track” it, said Dilip Ratha, head economist of the World Bank’s unit that studies remittances. “It’s a bit paradoxical.” U.S. officials said they didn’t intend banks to close whole categories of customer accounts.

So potential bad guys are harder to track.

And financial institutions waste lots of money (which translates into higher costs for consumers).

Risky accounts should be managed, officials said, not avoided altogether. …Western Union said it now spends $200 million a year watching for suspicious activity… J.P. Morgan Chase & Co….now has about 9,000 employees dedicated to anti-money-laundering and has cut off thousands of customers viewed as higher-risk. …Jaikumar Ramaswamy, a Bank of AmericaCorp. compliance executive and former federal prosecutor, said, “I’m surprised at how much of my time is spent not focusing on the guilty but chasing the innocent.” Instead of looking for needles in haystacks, he said, the system demands banks “turn over every piece of hay.”

The good news is that some nations are looking to adopt a more rational approach, as evidenced by this Bloomberg report from 2015.

The U.K. government said it will look to relax anti-money laundering controls as part of a plan to save British companies 10 billion pounds ($15.4 billion) over the next five years. …The government said it wants to protect the country without putting “disproportionate burdens” on legitimate businesses. …“This new review is about making sure the rules we have to protect our strong financial services industry from abuse are not unintentionally holding back new and existing British business,” Business Secretary Sajid Javid said. “I want firms to come forward and tell us where regulation is unclear or its enforcement ineffective.”

Though, as reported by the Times, the U.K. government has a bizarrely inconsistent approach to these issues. Even to the point of threatening to steal people’s property unless they can somehow prove that it was purchased with innocent money.

People who amass suspicious quantities of wealth in Britain will be ordered to prove that it was not obtained through corruption, under proposals being considered by the Home Office. New “unexplained wealth orders”, which would reverse the burden of proof to compel the recipient to justify the source of the questionable cash.

Sigh.

Here’s a novel idea. Why doesn’t law enforcement engage in actual, old-fashioned police work. In other words, instead of having costly burdens imposed on everybody, governments should use the approach which historically has successfully reduced crime – i.e., policies that increase the likelihood of apprehension and/or severity of punishment.

But don’t hold your breath waiting for that to happen.

Instead, we actually get politicians and policy makers coming up with schemes to expand the burden of money laundering laws. Some of them want to ban the $100 bill, or perhaps even ban cash entirely. All so government can more closely monitor the private financial choices of innocent people.

If you want more information, here’s a video I narrated on this topic for the Center for Freedom and Prosperity.

Last but not least, let’s return to the Heritage study, which includes this very important warning about a very risky and dangerous treaty that may be considered by the U.S. Senate.

…the willingness to impose costs on the private sector and to violate the privacy interests of ordinary people should be less in the case of information sharing for tax purposes than for the purposes of preventing terrorism or crime. Moreover, tax-information-sharing programs are quite often a veiled attempt to stifle tax competition from low-tax jurisdictions. Tax competition is salutary and limits the degree to which governments can impose unwarranted taxation. …The U.S. Senate is currently considering the “Protocol Amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters,” which would impose a wide variety of new information-reporting requirements on financial institutions to help foreign governments collect their taxes. A second treaty—worse than this protocol—is the follow-on OECD treaty known as the “Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information.” This follow-on treaty implements both the protocol and the 311-page OECD “Standard for Automatic Exchange of Financial Account Information in Tax Matters.” Together, the protocol, the Multilateral Competent Authority Agreement, and the OECD Standard constitute the three main parts of a new automatic information-exchange regime being promoted by the OECD and international tax bureaucrats. If the U.S. ratifies the protocol and implements the new OECD standard, Washington would automatically, and in bulk, ship private financial and tax information—including Social Security and other tax identification numbers—to Argentina, China, Colombia, Indonesia, Kazakhstan, Nigeria, Russia, and nearly 70 other countries. In other words, foreign governments that are hostile to the U.S., corrupt, or have inadequate data safeguards, would automatically have access to private financial (and other) information of some U.S. taxpayers and most foreigners with accounts in the U.S.

A truly awful pact. And keep in mind it also would be the genesis of a World Tax Organization.

P.S. Since we closed by discussing the intersection of tax and money laundering, I should point out that statists frequently demagogue against so-called tax havens for supposedly being hotbeds of dirty money, but take a look at this map put together a few years ago by the Institute of Governance and you’ll find only one low-tax jurisdiction among the 28 nations listed.

P.P.S. You probably didn’t realize you could make a joke involving money laundering, but here’s one starring President Obama.

P.P.P.S. But when you look at the real-world horror stories that result from these laws, you realize that the current system on money laundering is no laughing matter.

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One of the big challenges for libertarians is that we understand “public choice theory.” In other words, we know that people attracted to government will have both the incentive and the power to do bad things, so our quandary is how to give government the authority to provide so-called public goods without sowing the seeds for an oppressive Leviathan state.

Our Founding Fathers thought they solved this problem by drafting and ratifying a constitution that placed firm limits on the power of government. Sadly, that system largely broke down in the 1930s and 1940s as the Supreme Court ceded its role of protecting economic liberty (with John Roberts a few years ago providing the icing on the cake of untrammeled government power).

That’s the bad news.

The good news is that the judicial branch has done a somewhat better job of protecting personal liberty. Indeed, with the courts leading the way on certain issues (such as whether governments can persecute people for being gay), we may even have more personal liberty than the Founders intended.

Speaking of personal liberty, one of the thorniest challenges is that we want government to fight crime, but we also want to make sure that it doesn’t have the power and authority to trample individual rights.

That’s one of the reasons the Founding Fathers gave us a Bill of Rights that protects our right to a speedy trial, protects us from double jeopardy, and gives us the right to remain silent. And the Bill of Rights also protects us by requiring governments to get judicial approval (search warrants) before snooping into out private property. And that’s the focus of today’s column.

And the case study for our discussion will be the way government is seeking to access electronic data without following proper procedures. Veronique de Rugy provides the background in her column for Reason.

The Electronic Communications Privacy Act was passed in 1986, when data storage was considerably more expensive and primitive. At the time, it was not common for data to be kept online for very long. As such, the ECPA considers emails held online by a third party for more than 180 days to be abandoned and thus open to access by law enforcement without a normal warrant. …Now that free online email hosts are commonplace and terabytes of cloud storage are available at little cost, the ECPA is a troubling anachronism. Today’s internet users expect their data to be protected from prying government eyes for as long as they choose to store it.

Amazingly, some politicians actually want to fix this problem.

There is a bill making its way through Congress that attempts to address these issues. It’s the International Communications Privacy Act. The bipartisan bill—introduced by Sens. Orrin Hatch, R-Utah, Chris Coons, D-Del., and Dean Heller, R-Nev.—…would codify into law a simple and clear standard: A warrant should always be required to access private information from a third party. The reforms in the ICPA would move us away from the current ’80s drama. It also seems that the package could even move through Congress during a contentious election season because it safeguards consumer data while also acknowledging that there must be legitimate and accessible law enforcement tools to pursue digital evidence across borders.

By the way, this has become an issue in part because the courts have intervened to slap down overzealous law enforcement in a cross-border investigation,

…the 2nd U.S. Circuit Court of Appeals rebuked the Justice Department after a three-year legal battle with Microsoft, which hosted data for an Irish citizen being pursued by U.S. authorities. The data was being kept in a server located in Ireland, yet the U.S. government insisted it had jurisdiction to demand access just because the company that held it is a subsidiary of Microsoft, an American corporation. …ECPA…provides no authority for access to data held overseas. The government officials most likely made this overreach rather than go through the mutual legal assistance treaty, or MLAT, process—which would have enabled them to work with the appropriate overseas authority—because of the fact that MLAT procedures are also cumbersome and outdated.

The Hatch-Coons-Heller legislation deals with these issues by both requiring warrants but also improving the MLAT process, which is a win-win situation. Innocent people have their rights protected and governments have a better system for investigating potential bad guys.

Which helps to explain why a coalition of taxpayer organizations and free-market groups have embraced the proposed legislation.

The bill contains provisions that would protect the privacy of American citizens, promote cross-border data flow, provide adequate tools for law enforcement, and enhance the nation’s global trade agenda. …S. 2986/H.R. 5323 would require U.S. law enforcement agencies to obtain a warrant for the content of electronic communications stored with electronic communications service providers and remote computing service providers.  The legal framework will allow authorities to obtain the electronic communications of U.S. persons, regardless of where those communications are located.  …S. 2986/H.R. 5323 reforms the MLAT process and provides greater accessibility, transparency, and accountability by requiring the attorney general to create an online docketing system for MLAT requests and publish new statistics on the number of such requests. …ICPA strikes the right balance between the legitimate needs of law enforcement and the privacy of American citizens, while enhancing international agreements.

Having looked at a specific example of how to enable effective law enforcement while also protecting civil liberties, let’s now zoom out and consider the big picture.

One of the problems in our system is that there are too many laws. Not just too many laws, but laws that are capricious and impossible to understand.

This is why Harvey Silverglate wrote Three Felonies a Day to describe how normal, law-abiding people unintentionally commit crimes (that shouldn’t be crimes).

Here’s a video interview from Reason with Mr. Silverglate.

The bottom line is that when you mix capricious and impossible-to-understand laws with capricious and vindictive bureaucrats, you get horrifying examples of government thuggery.

We can start by getting rid of drug laws, anti-money laundering laws, and civil asset forfeiture laws.

Remember, if we want to fight genuine crime, it’s a good idea to have just laws.

P.S. And if we have fewer bad and needless laws, we’ll have less police abuse.

P.P.S. To close on a humorous note, President Obama’s approach to the Bill of Rights leaves much to be desired.

P.P.P.S. In reference to the public-goods/Leviathan-state quandary discussed at the start of this column, the anarcho-capitalists say the solution is to abolish all government and to allow markets to provide public goods. I’m glad there are scholars pushing this idea (and I certainly had lots of interesting discussions about this concept while in grad school), but given what’s been happening over the past 100 years, I doubt this will be a practical option in my lifetime.

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Another Episode of Drug War Lunacy

Elizabeth Barrett Browning started her famous sonnet with “How do I love thee? Let me count the ways” and then proceeded to provide lots of examples

If I had similar talent, I would produce a sonnet that began “How is the Drug War a failure? Let me count the ways” because I also could give many examples.

All this being said, legalizing drugs is about 99th on my list of 100 most-preferred policy reforms.

In part, this is because I’m stuffy and boring in my personal life and have never used drugs.

But I also worry about what will happen if we end drug prohibition while maintaining our bloated welfare state. The maze of handouts provided by Uncle Sam – for all intents and purposes – enables bad decisions. Would there be a significant number of people who basically drop out of society and become druggies while mooching off taxpayers?

Heck, I’m so libertarian I even worry that legalized drugs will even have bad fiscal policy effects since governments will figure out how to extract lots of tax revenue.

Though none of my concerns would prevent me from engaging in nullification if I wound up on a jury deciding a drug case.

And you’ll understand why I think we should get the government out of the business when you check out these details from a story in the Washington Post about someone whose life was turned upside down by the Drug War.

…a Florida man…was arrested when an officer mistook doughnut glaze for methamphetamine. Now Daniel Frederick Rushing is looking to sue the Orlando Police Department, which is also facing heat for its inaccurate roadside drug test.

When you read about what happened to him, you can understand why he’s unhappy.

Rushing told the Orlando Sentinel that he had been playing taxi driver for friends that day. He had just dropped off a neighbor at a hospital for a chemotherapy session and was giving another friend who worked at the 7-Eleven a ride home. But when officers saw Rushing go into the store twice without making a purchase, they grew suspicious. Officer Shelby Riggs-Hopkins followed Rushing’s car and pulled him over. …Riggs-Hopkins saw what she thought were drugs on the floorboard. “I recognized, through my 11 years of training and experience as a law enforcement officer, the substance to be some sort of narcotic,” Riggs-Hopkins wrote in the report. The officer retrieved several pieces of the white substance from the floorboard, ran a test and “received a positive indication for the presence of amphetamines.” Twice.

If this was the entire story, I would be upset. Why harass some guy if his only sin is being a drug user? He’s not hurting anyone else, so why not leave him alone?

And don’t Orlando cops have anything better to do than bust drug users? Are there really no murders, rapes, burglaries, and assaults in the city? You know, crimes that actually have victims.

But this isn’t the entire story.

As the officer placed Rushing in handcuffs and read him his rights, …“Rushing stated that the substance is sugar from a (Krispy) Kreme Donut that he ate.” …Still, Rushing was booked into jail and had to post $2,500 bail, according to court documents. He was vindicated a month later — and the meth possession charges were dropped — when the Florida Department of Law Enforcement’s chemistry section tested the substance found in his car. It detected no signs of drugs.

By the way, this wasn’t a one-time mistake.

The Washington Post column cites a related story from the New York Times that delved into the accuracy of roadside drug tests.

Data from the Florida Department of Law Enforcement lab system show that 21 percent of evidence that the police listed as methamphetamine after identifying it was not methamphetamine, and half of those false

positives were not any kind of illegal drug at all. In one notable Florida episode, Hillsborough County sheriff’s deputies produced 15 false positives for methamphetamine in the first seven months of 2014.

So the bottom line is that law enforcement resources are being misallocated, innocent people are having their lives wrecked, and government is being incompetent. That’s the holy trinity of big government.

But some people say we have to accept these awful consequences because decriminalization would lead to catastrophic results.

Not true, as Johan Norberg explains.

P.S. You may think only “crazy” libertarians favor liberalization, but there’s actually a very broad coalition of people who favor reform. Folks such as John Stossel, Gary Johnson, John McCain, Mona Charen, Pat Robertson, Cory Booker, Rick Perry, and Richard Branson.

P.P.S. For folks who don’t like having to choose between Hillary Clinton and Donald Trump, there’s a presidential candidate who has a very sensible view of the War on Drugs.

P.P.P.S. Speaking of Hillary Clinton, her understanding of the economics of drug prohibition may be even more inane and uninformed than her understanding of the economics of taxation.

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While I’m depressed about the election and America’s economic future, the news isn’t completely grim. Advocates of personal freedom are winning on the issue of guns.

Gun ownership has become more pervasive and legal protections for the Second Amendment have expanded, all of which is very good news for those of us who want a more law-abiding society.

And we also get lots of clever humor on the issue. Though I must confess that I’ve been negligent about collecting and sharing examples of anti-gun control humor in recent months. I did have an amusing comparison of how Texans and Europeans fight terrorism last month, but otherwise you have to go back to 2015 (see here, here, here, here, and here) and earlier.

So it’s time to atone for this oversight with some new humor targeting the pro-gun control crowd.

We’ll start with a visit to the University of Texas, which has been the scene of protests because a handful of students are upset that the law has been reformed to allow concealed carry on campus.

David French of National Review looks at this issue with an appropriately sarcastic piece that mocks the left-wing students for their silly tactics.

On January 16, 2002, a former student at Appalachian Law School walked into the office of the school’s dean and opened fire. His rampage ultimately took the lives of the dean, a professor, and a student. As the shots rang out, most bystanders ran for their lives, but not all. Three students approached the shooter. One, a Marine veteran, was unarmed. The other two had raced to their personal vehicles the instant they heard shots fired and returned with their dildos. Wait. No. That’s not what happened. Sorry. They returned with their guns. As two students held the shooter at gunpoint, the Marine tackled him, ending the threat. The cost was still high: Three people died, and three more lay wounded. But at the end of the day, a bad guy with a gun was stopped by good guys with guns. I thought of this story while reading the fawning media coverage of Texas students protesting a new state law permitting license-holders to carry concealed firearms on campus. Students are out in force, waving . . . sex toys. The inevitable hashtag? #CocksNotGlocks.

Yes, you read correctly.

The protesting students think that brandishing dildos will somehow persuade the general population that law-abiding students should be denied the right to bear arms.

Mr. French points out the silliness of their anti-gun position.

…if University of Texas protesters, teachers, and officials believe that until classes started yesterday UT was, in fact, a gun-free campus, they’ve lost their minds. Before this new law, there were two types of people who had guns on campus: criminals and the handful of law-enforcement officers scattered across a vast university. Every single other responsible, law-abiding citizen was disarmed — utterly dependent on officers who could be minutes away. …if one a person thinks that a licensed concealed-carry holder makes the UT’s campus more dangerous, they’ve lost their minds. Let’s make this concrete. Imagine you’re teaching a class, and you know that Amy, a student in the front row, has a concealed-carry permit. Sitting next to her is Roxanne, who does not. You have no idea if either one of them is actually armed. Who’s more likely to shoot the teacher? Roxanne, and it’s not even close. Who’s more likely to save your life? Amy, and it’s not even close. …If you are in a classroom, and a criminal opens fire, would you rather have a dildo on your desk or a revolver in your backpack?

Gee, that’s a tough question. Maybe a really skilled student could use a dildo like a Jedi light saber and deflect bullets, right?

By the way, if you’re wondering why Mr. French is so bold in his claim that Amy is likely to save lives with her concealed-carry weapon, that’s because John Lott of the Crime Prevention Research Center has crunched the numbers and determined that people with concealed-carry permits are about the most law-abiding group of people in the nation.

Here are some excerpts from a story in The National Interest.

Concealed-carry permit holders are nearly the most law-abiding demographic of Americans, a new report by the Crime Prevention Research Center says… “Indeed, it is impossible to think of any other group in the U.S. that is anywhere near as law-abiding,” says the report, titled “Concealed Carry Permit Holders Across the United States 2016.”

So what group in the nation is better about obeying the law?

The article doesn’t say, though my guess is nuns.

If you guessed police officers, you’d be wrong.

The study compared permit holders to police, who committed 703 crimes from 2005 to 2007, and 113 of those were firearm violations. “With about 685,464 full-time police officers in the U.S. from 2005 to 2007, we find that there were about 103 crimes per hundred thousand officers,” the report reads. “For the U.S. population as a whole, the crime rate was 37 times higher—3,813 per hundred thousand people.” …“We find that permit holders are convicted of misdemeanors and felonies at less than a sixth the rate for police officers,” the report says. “Among police, firearms violations occur at a rate of 16.5 per 100,000 officers. Among permit holders in Florida and Texas, the rate is only 2.4 per 100,000.10. That is just one-seventh of the rate for police officers.”

In other words, the folks in Texas (like the hypothetical Amy in David French’s article) are statistically the one most likely to obey the law and protect against crime.

So the protesters at the University of Texas should be thankful the law has been changed and their campus is no longer a “gun-free zone,” which means that only law-abiding people are disarmed.

Rather than carrying dildos as a form of protest, they should therefore use their sex toys for other purposes (particularly if they have Pajama Boy-type partners).

Speaking of gun-free zones, here’s a very clever video exposing why signs don’t keep people safe.

I’ll have to add this to my collection of humorous anti-gun control videos.

Let’s close by addressing the leftist argument that the Second Amendment only applies to the weapons that existed in the late 1700s.

I addressed that issue earlier this year in a tweet, but this poster does it far more effectively.

Amen.

P.S. The best evidence that we’re winning on the issue of gun control is that more and more and more leftists are now admitting that private gun ownership is a good idea.

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