Eye-catching data from this article, by Nicolai Heering, on UK anti-money laudering regulations (AMLR) in the UK:
About 170,000 individuals are being debanked in the UK every year due to the AMLR. By comparison, only some 1,000 individuals are actually convicted of money laundering. Thus, the remaining 169,000 individuals are done a very serious injustice as being without a bank account has profoundly negative consequences for most people.
And
How can that be resolved? The electorate needs to understand the scale of the costs of AMLR compliance: that they themselves are ultimately paying those costs, that the AMLR have little to commend them by way of crime-reducing results, and that the AMLR are causing vast numbers of innocent people to be debanked every year. Only then are the politicians likely to sit up and listen.
The article refers to this study from the Institute of Economic Affairs about money laundering controls, debanking, and the perverse consequences of forms of regulation.
Part of the problem, in my view, is that because banks are not purely free enterprise institutions, but are umbilically linked to the central bank as a lender of last resort, and hedged around and protected by all manner of rules, they are almost obliged to treat clients poorly. There is nothing resembling client confidentiality. Under AML rules, bank staff are required, on pain of serious penalties, to report supposedly suspicious transactions. It means that in many cases that people are obliged to prove they aren’t doing anything wrong. And add to that the cookie-cutter approach embedded in a lot of modern “regtech” software, it is easy to see how you can end up with stories of tens of thousands of innocent people “de-banked” for no good reason.
The story last summer of how Reform leader Nigel Farage (he wasn’t leader then, but a GB News presenter) was de-banked by Coutts, (see my related thoughts here) and how evidence surfaced that he was ousted in part because the bank appeared to dislike his views, and also because of possible issues with his being a Politically Exposed Person, hasn’t vanished. There remain serious issues about how banks treat clients. And with a Labour government likely days away from achieving office, I doubt some of the more outrageous examples of “debanking” will be dealt with. As ever, the current Conservative government appears to have missed an opportunity to take decisive action.
I periodically – well, regularly – pull cash from my bank with which to attend auctions of various sorts. Then, if I don’t spend it, I re-deposit the cash. Usually in amounts right around $9k (to avoid the $10k reporting requirements – they’re a pain in the rear.)
I found that doing that will get you on a lot of lists. Not the good kind of lists – the kind where your banks start sending you worrying notices, such as “the IRS has determined that such behavior may indicate “structuring” of cash movements to hide illegal laundering activities.”
I’m not doing anything illegal, or even irrational. But I may be debanked for it.
It’s one thing to structure your financial life to avoid breaking any of the myriad of IRS regulations. It’s just stupid, though, that we have to structure our completely legal activities to avoid even the casual attention of the IRS.
Our employees are taking over the shop. We need to fire them.
I wonder if the 169,000 non-criminals who are debanked each year represent a random cross-section of the political cohorts of the electorate? I suspect that they do not, and that people whose political views are considered “extreme” by the ruling class are overrepresented among the 169,000.
It’s an early trial balloon for CSG policies, and should be fought against tooth and nail.
Yes, well did you read those reports from the 1930s USSR, those purged saying ‘If only someone would tell Stalin‘?
It is not just banks but also solicitors and estate agents who have to report suspicions of money-laundering, whilst oligarchs from the former Commonwealth of Independent States had bought large swathes of property in London, all in the best possible taste.
It’s an early trial balloon for CSG policies, and should be fought against tooth and nail.
Indeed. I find the whole idea of central bank digital currencies extremely concerning, and yet there is among the financial establishment a remarkable complacency about it.
For a long time the banks, and other Corporations, acted “as if” they were operating in a Capitalist economy.
Strictly speaking they were NOT operating in a Capitalist economy as lending was NOT (mostly) from Real Savings (the actual sacrifice of consumption by individual Real Savings), but was really from creating “money” from nothing at all – but the banks and the big Corporations did indeed (as recently as the 1980s) act as-if they were operating in a Capitalist economy – and supported (or at least seemed to support) a sane culture, the traditional family, private property, and-so-on.
However, the left were not idle – they noted what the economy really was (highly concentrated and dependent on the flow of Credit Money – money create from nothing) and reasoned that if they had their people (or at least confused people influenced by the left – people like Bob Iger or Larry Fink, people who are not really ideological leftists, but are confused and influenced) in control of the key banks and other vast corporations they (the left) would have a stranglehold on the economy.
In a real capitalist economy this could not happen – but in the economy as it had become, after many decades of “education” (by the schools, universities and the media – including the entertainment media) the left has indeed managed to create an “ideological hegemony” (Gramsci) and has great power over an economy that is dependent on a few players – a few players dependent on credit money, money created from nothing.
The present situation could be described as “Richard Cantillon meets Antonio Gramsci”.
We have a “Cantillon Effect” (although to an extreme that Richard Cantillon could not have imagined in his worst nightmares) economy – with power concentrated, concentrated by credit money, in a few hands – in America BlackRock, State Street and Vanguard, plus the Credit Bubble banks and the Corporations directly connected to the government bureaucracy such as Pfizer. But it is also an economy and society saturated with “Critical Theory” Marxist ideas – known, in the United States, as Diversity, Equity and Inclusion (DEI) and in the United Kingdom as Equality, Diversity and Inclusion (EDI).
On top of this there is also the “Green” ideology (a form of totalitarianism that does NOT come from Marxism – it has more in common with the ideas of Rousseau and some of the German National Socialists) and a form of “Technocracy” that harks back to the ideas of Henri Saint-Simon two centuries ago, and even to Francis Bacon (“The New Atlantis”) of some four hundred years ago.
I suppose what links all these different things together is PLATO.
Plato opposed the traditional family (which is hated by the doctrines that now dominate the West), Plato supported totalitarian control of every aspect of life by an “enlightened” elite – very much what is desired by the establishment elite in the modern world.
And Plato even opposed the use of gold and silver money.
Although some Credit Bubble bankers (not really honest money lenders at all) setting themselves up as the “Gold Guardians” of Plato might have come as a bit of a shock to the man himself.
As for the present system – it will collapse by the end of next year (2025), but it remains to be seen if liberty (a real capitalist economy) will make a comeback – or whether the world will plunge into tyranny and chaos (tyranny and chaos are NOT opposites – they are very much akin).
Another failure of journalists. Why this do not open the “News”
@Johnathan Pearce (London)
Indeed. I find the whole idea of central bank digital currencies extremely concerning
I find the whole idea of a central bank disturbing, and CBDCs are one of the most tyrannical ideas I have ever heard of. It is this horrible thing that has been happening to the internet where it was supposed to be a tool of freedom and liberation and has slowly but surely been turned into one of the most powerful tools for tyranny. The idea that digital currencies, which it might be fair to say were designed to subvert the control governments had over the money we make, be turned into something to give government control of every financial transaction we have? It is shocking. Imagine not just being de-banked but de-monied, where you can’t even use the money you earned until you bend the knee to your masters in Washington. That is what CBDCs mean.
What we need is a vibrant ecosystem of small independent banks where the banks can compete on the services and security they offer. And a currency that isn’t issued at the whim of people like Janet Yellen. Central banks are anathema to those things.
Fraser Orr – the problem starts with banking itself.
Bankers were not content to be “mere money lenders”, they despised “Shylocks”, they did not want to just lend out money (their own Real Savings and the Real Savings of other people) they insisted on “creating broad money” by clever book keeping tricks.
These clever book keeping tricks, this Credit Bubble finance, always, in the end, blows up – hence the “need” for corrupt courts to uphold “suspension of cash payments” (the so called Free Banking of Scotland was often a one way trip for people who put gold or silver in Scottish banks – putting the gold and silver in the banks was easy, but getting it out again….), and the “need” for bailouts.
Central Bank, Digital Currencies, and all the rest of it, can be traced back to this desire of banks to be more than “mere money lenders”, to be masters-of-the-universe, “creating money” from thin air, rather than being just “Shylocks” (people who lend out cash money – and do not claim to have the money AFTER they have lent it out) that they despise.
I think it was Walter Block who pointed out that the despised “Shylocks” or “Loan Sharks” do NOT do harm to an economy – that “Shylocks” or “Loan Sharks” are in no way responsible for the boom-busts that so discredit Capitalism in the eyes of the public (let alone the “intellectuals”) – because the “Shylocks” or “Loan Sharks” lend out money that existed before they lent it out (the do NOT create Credit Money). Whereas the highly respected bankers, who politicians dance around begging for approval (and campaign contributions), and who the media treat as sages (as oracles of wisdom), are the people who create “money” from nothing – the people who are responsible for the boom-busts.
FWIW, Paul, I sort of half agree with you. The problem is not fractional reserve banking and commercial money per se, the problem is that that is the ONLY choice. How about we have banks with an array of different services and an array of different approaches.
Maybe I want to make more interest on my money, so I bank with a bank that operates at a 10% cash reserve ratio.
Maybe you are more concerned with the security of your money, so you bank with a bank that operates at a 100% cash reserve ratio and willingly pay for the cost of your account service.
Maybe I want a bank that allows me to do ten transactions, or two transactions a month from my savings account rather than the government mandated six.
The point is that we should give the bank customers choice through competition and full disclosure, and let them decide what they want to do, what risks they want to take.
However, in a world of “too big to fail” or a world where Netflix (I think) held $500million in cash in Silicon Valley Bank, and instead of the FDIC paying out the $250,000 they insured the bank for, instead paid the whole amount, in a world where bank screw ups result not in failure of the bank and shame on its managers, but rather a wealth tax on all Americans to make up for their mendacity or stupidity…. such a banking world of competitive small banks is impossible. Instead we have a banking system so controlled by the “government” that they are practically told what type of carpet to put in the lobby.
I believe in free markets, free choices for consumers, the right to contract with an entity however you see fit, where both the risks and rewards are borne by the participants.
That is why we do not need a central bank. But central banks make rich people richer, and so it’ll never happen.
No Fraser Orr – the problem is Credit Bubble banking per se.
If such fraud is legalised, and it has been, then no one can compete against it.
How can an honest money lender, who lends out cash-money, compete with entities who are allowed to create money from nothing?
Honest competition is not possible when some people, people who have “banking licenses”, are allowed to practice this massive fraud.
And, no, allowing everyone (whether they have a banking license or not) to practice this fraud would not make things better.
This is where “Free Banking” collapses – because the “Free Bankers” refuse to face up to the fact that it is all based on fraud – it may be legalised fraud, but it is still fraud.
And the Credit Bubble finance (the creating money from nothing) must always, in the end, collapse.
The “Gods of the Copybook Headings” (reality) comes back – but then the screams of “bailout” start, after all “people must not lose their deposits – their families would starve”.
Even if the “deposits” never had any real existence – which they do not.
The vast majority of the “deposits” do not exist and never existed – the financial system is a vast fraud.
Once such cities as London and New York were major manufacturing centres – they really were, but now these vast cities are based on fraud, on book keeping tricks, on “money” that does not exist. Even their “gold and silver markets” are mostly about gold and silver that does-not-exist (which makes the “gold price” or the “silver price” utterly fake).
These cities, these cities of millions of people, will fall. They will fall because they no longer have any economic foundation.
One of the confusing terms is “fractional reserve banking”.
People hearing that term are likely to think of, say nine tenths of a bank’s cash deposits being lent out.
It is more like 90 tenths of the cash deposits, rather than 9 tenths – 90 tenths may be a “fraction” in pure mathematics, but it is not what ordinary people think of when they hear the word “fraction”.
If some people (call them “bankers” or whatever) are allowed to create credit money from nothing (and they are) honest money lenders can not compete – and neither can any other honest business.
So, eventually, the entire economy is dominated by the money-created-from-nothing – with wealth being concentrated in, or controlled by, a few (institutionally corrupt) entities (in America such entities as BlackRock, not technically a bank, but getting money, created from nothing, at much lower interest rates than other people, spring to mine) – the “Cantillon Effect”, but on a scale that Richard Cantillon could not have dreamed of in his worst nightmares.
I should point out that it is not just “Austrians” who oppose Credit Bubble banking (which is not really “Fractional Reserve” banking – as an ordinary person would understand the word “fraction” i.e. something smaller, not bigger, than CASH deposits).
The Old Chicago School of economists also opposed it – but when Milton Friedman took over the Chicago School this opposition to the Credit Bubble banks stopped, indeed Professor Friedman wrote as if banks were normal business enterprises putting-real-savings-to-work and the only expansion of the money supply came from the government.
I suppose Milton Friedman came to the conclusion that the vast Credit Bubble banks (and the Corporations that depended on them) were politically and economically too powerful to challenge – and he may well have been CORRECT about that.
James Buchanan, a couple of years before his death (his death by natural causes – I hasten to add) launched an attack on Credit Bubble banking – the creation of money from nothing by the banks, but he was not supported by other academic economists – even those who understood that the present monetary and financial system is insane (and it is insane) believed that the Credit Bubble banks and allied Corporations were just too powerful to successfully challenge.
So there we are – there is not going to be any reform (because it is politically impossible) – the insane monetary and financial system will stagger on till it collapses.
James Buchanan was brought up on a farm without electricity or running water – so he was not so terrified of collapse that he could not think straight about how to prevent collapse.
Ironically the people used to a more comfortable life are so scared of collapse that they will not undertake the reforms that could prevent collapse.
Paul:
Did you ever follow the story of Dave Fishwick, the Burnley businessman who tried to start a local bank? It was turned into a TV programme, then a film.
It showed his attempts to get a banking licence. Of course, he did not get one, instead he set up a sort of savings and loan, in other words an honest bank which only lent out real money which had been deposited with it first. A businessman from a small town was never going to be let into the magic circle of “banks”, businesses which are allowed by government to create “money” out of thin air. That would ruin the trick for the rest of them.