Dear Computrix: Turning the Tide on Money Laundering Gains

Dear Computrix, I’m home recovering from knee surgery (too many times jumping out of perfectly good airplanes). I’ve run through every Netflix series there is and ended up watching CSPAN. I found a livelier session than most called “Combating Money Laundering and Other Forms of Illicit Finance: Administration Perspectives on Reforming and Strengthening BSA Enforcement” by the Senate Committee on Banking, Housing, and Urban Affairs. The last Netflix show I binged on was Ozark, which is about money laundering (“FinCEN” is mentioned), so I felt I had some background to appreciate what the good senators would be saying. In a nutshell, they want to modernize the money laundering to make it easier for banks to comply (some banks have more compliance officers than lending officers) and also account for Bitcoin. Everything they said made sense (and both groups were getting along, surprise, surprise), but I couldn’t help wondering about a scene in the first episode of the Ozark series where the main character tries to take all his money out of the bank and the FBI is asking him why – that must be these banking laws. Anyhow, he says it’s his money and if he wants to put it all in a hot tub and sit with it that’s his business. That got me thinking: why does the government have the right to track our money like this? Shouldn’t they be worried about those banks like the one in the hearing that cleaned over half a trillion for some Mexican drug lords and got away with just a slap on the wrist? Signed, So Desperate I Watched CSPAN

Dear So Desperate, Ozark is a good series – you probably heard they’re bringing it back for a second season! I wondered about that bank vault scene myself, knowing the Bank Safety Act (BSA) law and other anti-money laundering (AML) laws would mean the bank had to notify the federal authorities - that amount was clearly over the $10,000 threshold for currency transactions reporting. The series is obviously fictional – I can’t imagine someone in real life being allowed to take $8 million dollars in cash out the door – but at least the FBI is following him. The Senate Banking committee hearing you watched is an engaging one – and available online for watching, as well (see the list of references at the end). The bank you mentioned from the hearing - that’s been in the news lately for other misdeeds related to currency rigging - is HSBC, a British bank. HSBC, through supposed negligence, allowed billions of dollars associated with Mexican drug cartels to go unmonitored and unreported. They were fined and put on a deferred prosecution agreement, meaning that if they behaved the charges would be dropped. The US government seems satisfied that HSBC has reformed its processes related to AML; I cannot speak for the US government but it seems the end game is to have banks’ cooperation in AML, which may be worth more than stronger fines or jail time for the banking executives.

Money laundering – the taking of money that you don’t want someone to know you got, and “cleaning” it to make it look like legitimately-gained assets – as a concept has been around since governments, such as they were at the time, started to care about getting taxes. Modern anti-money-laundering laws exist to thwart mainly drug trafficking and terrorism, but also to curb tax evasion and non-drug-trafficking-derived income. The government feels that the surveillance and inconvenience to the ordinary person who wishes to engage in financial transactions of large sums (this includes jewelers, as well) is worth it to protect society as a whole against the effects of drug trafficking, terrorism, tax evasion, and other financial crimes. Some Libertarian groups disagree, finding the laws ineffective and too invasive, citing the Bill of Rights. That’s the beauty of our country, though, that we can disagree. For now, the various AML regulations are the law of the land and financial institutions (and jewelers), along with citizens, have to comply. If you feel strongly about these measures I encourage you to write to our legislators. The Banking committee is having another hearing next month and they won’t know how you feel unless you let them know.

Speedy recovery on that knee!

- The Computrix 


Sources

Bray, C. (2017). HSBC says US is preparing to dismiss criminal charges against it. The New York Times. Retrieved from https://www.nytimes.com/2017/12/11/business/dealbook/hsbc-us-charges.html

Mitchell, D. (2016). Money laundering laws: ineffective and expensive. International Liberty. Retrieved from https://danieljmitchell.wordpress.com/2016/10/11/money-laundering-laws-ineffective-and-expensive/

Netflix. (2017). Ozark. Netflix.com. Retrieved from https://www.netflix.com/title/80117552

Otterson, J. (2017). ‘Ozark’ renewed for season 2 at Netflix. Variety. Retrieved from http://variety.com/2017/tv/news/ozark-renewed-season-2-netflix-1202527992/

Schoenberg, T. (2018). HSBC to Pay $100 Million to end U.S. currency-rigging probe. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2018-01-18/hsbc-to-pay-100-million-to-end-u-s-currency-rigging-probe

United States Department of Justice Office of Public Affairs. (2012). HSBC Holdings Plc. and HSBC Bank USA N.A. admit to anti-money laundering and sanctions violations, forfeit $1.256 billion in deferred prosecution agreement. United States Department of Justice. Retrieved from https://www.justice.gov/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations

United States Department of the Treasury. (2018). FinCEN: Financial Crimes Enforcement Network. Fincen.gov. Retrieved from https://www.fincen.gov/

United States Senate Committee on Banking, Housing, & Urban Affairs. (2018). Executive session and combating money laundering and other forms of illicit finance: administration perspectives on reforming and strengthening BSA enforcement. United States Senate. Retrieved from https://www.banking.senate.gov/public/index.cfm/2018/1/executive-session-and-combating-money-laundering-and-other-forms-of-illicit-finance-administration-perspectives-on-reforming-and-strengthening-bsa-enforcement