The Joke Of Criminalizing Money Laundering -- Part II

Who was it who first came up with the bright idea that if we just criminalize something called "money laundering," and make all the banks involuntary deputies of law enforcement, spying on their customers behind their backs 24/7, we can put a stop to all the nefarious criminality and perfect the world?  The game started with the disgusting Bank Secrecy Act back in 1970, and moved to a new level with the USA PATRIOT Act in 2001.  Today, banks in the U.S. file close to 2 million annual "Suspicious Activity Reports" on their customers.  Did they file one (or a hundred) on you?  You don't know, because they're not allowed to tell you. 

Did you notice that along the way the law enforcement authorities have achieved victory in the drug war?  Yeah, neither did I.  And drug dealing at least involves substantial amounts of real money.  Nobody can even give a coherent explanation of how a money laundering regime that can't make a dent in the multi-billion dollar drug business is supposed to stamp out terrorism, which generally does not involve any substantial amounts of real money.  In this post last June I called criminalization of "money laundering" a "joke" and "an exercise in total futility."  Of course, it may not seem like a joke to people like former House Speaker Denny Hastert, who found himself prosecuted for "money laundering" for engaging in the distasteful but otherwise perfectly legal activity of paying blackmail.  And then there are the banks, who have paid, in the aggregate, in excess of $20 billion in fines over the past decade for supposedly violating anti-money-laundering regulations.  For example, HSBC paid a fine in excess of $1.9 billion in 2012, said to arise mainly out of dealings in Mexico.  (You mean they have drug dealers down there?  Who knew?)

Bringing us up to date on the activities of our genius government, the Wall Street Journal yesterday helpfully carried a front-page article headlined "U.S. Terror-Finance Rules Drive Money Underground."   And guess what?  It seems that after paying the 20 or so billion, the banks have decided that it pays not to take chances, and they have moved to declining to do business with any potential customer who looks the least bit sketchy.  

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.  

Really, who could have guessed that such a thing might happen?

The Journal reporter then tracks the activities of one Abdi Warsame, a Somali native who works for a Midwestern money-transfer company.  Seems that the company has been shut out of the banking system.  No problem!  Warsame neatly stacks and wraps some tens of thousands in mid- to high-denomination dollar bills, packs them into his luggage, and flies off to Dubai.  Along the way, he files all the appropriate forms with the U.S. and Dubai authorities and goes through all the security and customs checks.  Upon his arrival in Dubai, the money disappears into the underground system.  Congratulations to our genius government functionaries!  Really, where did they think this was going?

But don't worry -- as reported here just a few days ago, the government geniuses already have the new plan at the ready, namely the abolition of cash.  Yeah, that'll work!  It's like they have never heard of Bitcoin.  Or then there's my favorite, gold.  At the current price of about $1250, $1 million in gold weighs about 50 pounds -- not so much more than $1 million in hundred dollar bills (which weighs about 20 pounds).  OK, it's a little awkward, but still not so much that you can't get it into your carry-on bag for the flight to Dubai.