I've come to realize that viewing the world through the simple lens of laundering causes dumb systems to suddenly make sense. Silly rabbit, you thought these industries were there for the normal public?
I'm not sure what good ways there are to manage this generally, other than limiting the size or types of financial transactions that can occur within a system.
I remember reading about a case where criminals bought an entire issue of a local lottery, thus collecting all the prizes, and apparently saw that a reasonable cost to launder their cash.
Moving money around is a crime...why? It results in massive intrusiveness by government: full insight into everyone's finances, without evidence of a crime.
And, yes, this does get abused. Government is people, some of whom are evil, or out for revenge, or whatever. I had an acquaintance whose accounts were periodically frozen by the IRS, because he had pissed off the local office. He would get them unblocked, but only after weeks of missing mortgage payments and other bills.
Ending anonymous banking like in Switzerland was a major objective for the US. They said it was because it allowed money laundering for terrorists. People will get upset when the government talks about ending encryption in order to stop terrorism but the same concept applied to money apparently doesn't matter.
In practice we have a system where money laundering has not ended and we have much more financial surveillance for average citizens. That was probably the purpose all along and it never had anything to do with finding tax evaders or stopping terrorism.
What's the point of surveilling the movements of average citizens' money? They usually don't hide anyway. I suppose tax evaders were the target all along, with a smattering of criminal operators, e.g. drug dealers. Terrorists were but a pretext to produce moral panic.
You justify surveillance in the wake of terrorist attacks, etc. and when public sentiment toward government is mostly good (the financial surveillance here is an example)
You make moves to constrict the available information and permitted behavior of residents and citizens in excess of what is defined by law through pressure on culture and public marketplaces, etc. and not legal action by government. (e.g. the stuff going on with erotic content on Steam recently, but not limited to stuff like that). You start with more questionable and controversial things like e.g. sexually explicit content, then progress to all content or ideas that are inconvenient to your regime.
You boil the frog of authority over the public at a rate where only a minority starts noticing problems and looking for solutions in educating themselves using politically inconvenient media (and flagging themselves as enemies in the surveillance tools) or taking action that is inconvenient to you
You start making court cases against these inconvenient people and start deporting them or incarcerating them. First with e.g. illegal immigrants or foreign national students that are saying things that are unpopular, but slowly escalate to all the people that disagree with you.
If you don't think all these things are well established, I'm not sure what to tell you.
> What's the point of surveilling the movements of average citizens' money?
The most important is taxation. People pay their babysitters or gardeners under the table, or transact with friends and family without reporting income, and this is a huge amount of lost tax revenue.
Another reason are policy options. For one, there are certain decidedly "non-terrorist" goods and services that the government might not want you to purchase. Heck, in the era of ZERP, many economists were seriously talking about negative interest rates. You can't do that if a person has the option of taking out cash and hiding it under the mattress.
My point that authorities already exercised enough control over normal citizens anyway. Most Americans live paycheck to paycheck, and never cared to have a bank account in Switzerland, let alone an anonymous bank account.
But the few certain Americans, and especially non-Americans, who did apparently bothered the US administration enough.
If you can make private and uncensorable payments, you can pay an army.
The “only one army” concept is how governments remain governments.
If you could raise and pay a competing army, the state’s monopoly on “legitimate” violence becomes threatened.
This is why most states also heavily restrict private access to arms. Interestingly enough, it is also why the United States explicitly protected it: to specifically prepare for (and protect the right to) violent revolution.
17% of the USA smokes weed (makes them a prohibited possessor), 8+% are felons, DV convictions are harder to find but incredibly common, 4+% of USA are immigrants who have no right to bear arms (illegal or non-immigrant visa).
So maybe 1/4 or more of the adult USA is explicitly barred from the right to bear arms. When you consider those same people would have been much of the ~3% that had high enough risk tolerance to fight the American revolution, basically the USA has barred a very large proportion of those with the risk taking temperament that would enable them to become part of the ~3%.
They've effectively made it illegal for revolution type of risk taker to have arms unless those risk takers used the police/military as that outlet. Note this is a relatively new development -- the M1 carbine was invented by a prisoner inside a prison!
The short answer is that said money is either the proceeds of a crime, or (in the other direction) being sent to or from a sanctioned person, organization, or country.
This is why it's so hard to push back against, like the TSA. "Do you want terrorists using the banking system?" is a killer argument for midwits.
Just replace "money" with a gold bricks. If I have them in the trunk of my car and move it around, you can't arrest my car on the assumption that the bricks are "the proceeds of a crime". You have to reasonably prove it with all the red tape involved, or GTFO of my way.
Civil asset forfeiture- a law enforcement officer in many jurisdictions in the US can seize the gold bar without charging you with anything, under the assumption that it is proceeds for a crime, and in an insane twist, they get to keep part or most of the value of the seized property when it is sold at auction. It’s insane.
Everyone else telling you about civil forfeiture; I'm going to mention the original James Bond novel Goldfinger, in which part of the early plot is exactly Auric Goldfinger hiding gold in the panels of his Rolls-Royce in order to smuggle it out of the UK, which was illegal at the time. Even for gold legitimately owned.
Just using an unlicensed hawaladar to transmit legally earned and taxed money is money laundering (whether that is the actual statute that would be charged, idk, but it falls under the stuff AML compliance is supposed to catch). The whole system is absolutely insane.
They are often related though as if you have illegal money you also didn't pap taxes on it and in turn they can get you because they may not know where the money is from they know you spent more than your taxes indicate is possible.
Related but entirely different purposes. Paying taxes on illegally sourced money is basically the goal, because it makes it legal - it gives you a declared income and means future transactions look within your means.
Tax evasion conversely makes legally earned money somewhat illegal to the evader (though generally fine for anyone else to handle accidentally).
Paying taxes doesn't make illegal things legal. However it hides evidence. Al Capon was got on tax evasion because exidence of that was easier to prove. Everyone knew is other crimes - but there wasn't enough evidence to convict.
In Canada any transactions over a certain limit require the regulated counterparty to file a Suspicious Transaction Report with FINTRAC.
FINTRAC is unable to establish a pattern in those reports and prosecute. Instead, when someone is charged with an indictable offence, their name and related entities are searched for STRs. Any financial crimes are then used to create additional charges.
The net result of this, because of lack of digitization and various privacy guarantees, is that it is almost impossible to be charged with financial crimes as a primary offence in Canada.
It is similar in the US, except we call it a currency transaction report [0]. Because the amount — $10,000 — is not indexed to inflation, these reports are extremely numerous, mostly automated, and are almost entirely useless — beyond conveying the ability to charge ordinary people with structuring [1].
The crazy thing about money laundering laws is that in many jurisdictions, just failing to prove the legitimate origin of your funds can be enough to lose assets, and face criminal prosecution, without the state ever proving an underlying crime. It effectively shifts the burden of proof.
Also, even if you can prove the legitimate origin of the funds you can’t be sure that your bank will accept them. If you can’t find a bank that will accept them then formally you may still have the ”asset” but you can’t really use the money.
Any circumstance where the onus is on a private citizen to prove innocence instead of the government to prove guilt is a perversion of justice. Stupid voters and the government will destroy all privacy for the sake of "the guns, the gangs, the children"
No, some financial institutions like Binance only allows clients to get statements for the last year or so. P2P transaction details go back only a couple of months.
Sometimes your employer goes out of business. Employees do not always preserve their payslips.
Then there are countries like Georgia, it's culturally acceptable to buy real estate with cash. If no valuation of the property was made, it becomes very difficult to prove where the money came from.
It's extremely simple until it's not. Let's say you bought 100$ worth of BTC back in 2012 with cash at a meetup. Now it’s worth $1M, but you can't prove its origin. You now have a perfectly law-abiding person that risks being accused of "money laundering" just to keep what's rightfully theirs.
That example doesn't work. The blockchain shows that you purchased it for $100! At absolute worst, you "laundered" $100. Likely the statutes don't even apply to numbers that low.
Your other replies rely on "assume the government has powers it does not and/or the judiciary is willing to suspend the burden of proof in criminal cases". I mean... yeah. It's true. If you assume we live in a totalitarian dystopia then sure, the government can do terrible things.
But needless to say such a government doesn't need to pass boring AML laws to do that. It can just throw you in jail because it wants to. The actual rule of law under which we live doesn't have that property.
There's no KYC to take possession of a wallet, how would you prove the wallet wasn't just traded to you (maybe even yesterday) instead of moving the bitcoins?
AML statutes don't invert the burden of proof! If the government wants to prosecute you for taking money, they still have to prove you took the money beyond a reasonable doubt.
I'm always amused by the paranoia in the xxxcoin communities. If the government had and exercised the power you believe it does, why on earth do you think putting your money in bitcoin or whatever would provide any protection at all?
Edit: case in point:
> KYC and AML invert the burden of proof and are essentially an exception to the 4th amendment
Their point is that the government does not prosecute you, they threaten the banks with "regulatory incidents" if they don't comply. The result is that some people find it difficult to ever open a bank account with no means to "clear their name" as it were.
KYC and AML invert the burden of proof and are essentially an exception to the 4th amendment, that's why they're so controversial.
I tried to open a bank account when I was moving states before I had a local state ID or any utility bill or proof of address, no one would do it because they stated the standard the feds hold them to for KYC would essentially presume I am guilty of lying and require me to provide documentation to prove I'm not.
That works until it does not. What if you transferred the BTC to other wallets or exchanges in the meanwhile? Even if you still had access to the original wallet, what proves that it was really yours? etc.
Sure, you can trace the full transaction history of any BTC through the blockchain... but that doesn't prove anything. At minimum, you need all the private keys involved (e.g. not possible if you used an exchange or deposited/withdrew from some online service or lost/deleted an old wallet). Even if you had the full list of private keys involved, going back to 2012, what proves that they were really yours and, like another commenter pointed out, that you didn't just acquire them yesterday?
What if you tried your best to do everything that a money launderer does without actually doing any money laundering?
If you and your friends are just innocently idling in a your car wearing a ski mask in the middle of summer with a shotgun and a large duffel bag, in front of a bank that was robbed in this manner four times last month, you're highly unlikely to, at minimum, beat the ride.
What I described is actually extremely mundane. Maybe you started with Bitcoin Core and later switched to a lighter SPV wallet like Electrum when the blockchain got too big. Maybe you bought a hardware wallet and moved your BTC offline. Maybe you sent some to Binance to invest in Ethereum at some point. There are countless reasons to shuffle BTC around - and countless reasons why you couldn't prove your full transaction history dating back to 2012 - none of which involve any crimes.
Has anyone ever been convicted for doing a few on-exchange trades and conversions? You should be keeping your receipts for tax purposes, it's on you to provide them up to a statue of limitations.
Or is this just a theoretical concern for anyone who isn't laundering Bitcoin stolen through ransomware or from exchanges?
You missed the point. The point was that there are many ordinary and mundane reasons why you wouldn't be able to prove the full chain of custody for the BTC you acquired in 2012. It would be a real practical concern if you are a law-abiding person. If you're a criminal, it's not much of a concern since laundering money is relatively easy.
The money laundering control systems, as well as being ineffective at controlling crime can be a pain in the neck for the law abiding. I have money from my grandad, received 40 years ago. No one really has records going back that far but you try buying a house and they want proof of the origin of the funds. Trying going to your bank to get records from five years ago often gives a date out of range error.
>The money laundering control systems, as well as being ineffective at controlling crime
The point of AML/KYC regulations isn't to stop all crime, just like the point of US sanctions on Russia isn't to stop all Russian exports. In both cases it's to raise the cost of doing business for the entity being targeted. In the case of Russia, they can still sell their oil to India or whatever, but at a steep discount. In the case of drug cartels, they can still get their funds into the regular banking system, but also at a steep discount. Smuggling pallets of dollar bills across the border and setting up a network of front companies is expensive. Doing all that also which implicate them in even more crimes, so even if there's no evidence of them smuggling fentanyl, they can be prosecuted purely on the basis of having a car full of cash.
>I have money from my grandad, received 40 years ago. No one really has records going back that far but you try buying a house and they want proof of the origin of the funds.
The better question is why are you were sitting on cash for 40 years. In that time inflation already ate 66% of the value, and if you factor in the opportunity cost of not investing the money in stocks/bonds, the loss is even greater.
The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones. Ensuring the greatest threats become even bigger ones, but also that any corrupt politicians/officials/bankers get even bigger payouts and the payouts they get are more predictable from fewer channels.
>The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones.
You can make the same argument about literally any crime deterrence measure though? For instance having drug search dogs at airports probably makes it harder for the indie drug trafficker to get drugs through, but probably isn't going to do much against organized crime networks with insiders working at the airports and/or bribed officials.
Ignoring the obvious problems with drug dogs, which I have a very personal extremely degrading and humiliating tale about involving a fraudulent search warrant that turned up nothing, a key difference here is the thing being monitored here is primae facie legal and involving forcing private parties to be the drug dog handler on behalf of the government on private property in a private transaction. In such case there is a presumption of innocence and government should need a warrant before requiring client to satisfy AML or KYC documentation.
I can't just walk up to your doorstep, make your sister take my drug dog, and force her to walk it around your bedroom and then punish her if she doesn't do it.
> In such case there is a presumption of innocence and government should need a warrant before requiring client to satisfy AML or KYC documentation.
But since you don't know when the government is going to ask for it, you need to collect it from everyone all the time, otherwise you won't have it to satisfy the request. "What do you mean you don't know who your customers are?" is not a question you want to have to answer in the face of a warrant.
If I get the OP correctly it wasn't 'cash' that they were sitting on but it was a balance in a bank account. You can turn that into cash (unless lots of other people try to do the same thing at the same time, see also 'bank run') but strictly speaking it isn't cash.
Nobody is questioning the source of funds for the balance in a bank account that’s been there for forty years.
OP could literally just put it in the bank, sit on it for a year, and there’d be zero questions. They are mostly only interested in knowing that you didn’t get this money from a different loan that they aren’t aware of (like a personal loan, or one you got two days ago that hasn’t yet been reported).
It wasn't in cash. It was in equities to a large extent. But they still ask for the source. Even if it's from selling shares they want to know where the shares came from. At least sort of. The whole thing is a box ticking exercise for compliance to cover their own arses.
In fact it's worse than that in some ways as I had an investment advisor who bought and sold stuff and I don't know if I have records of what exactly.
>It wasn't in cash. It was in equities to a large extent. But they still ask for the source.
And saying "gift from dead parents" wasn't enough to placate them? They wanted receipts? I get asked about source of funds all the time, but I don't think I've ever been asked to provide proof.
Yes, but they are now aiming to use these funds to buy real estate and of course that is going to raise a bunch of flags. If the government would accept this without challenge criminals would suddenly be left all kinds of crazy inheritances. At a minimum you'd expect some documentation of how that money landed in their possession in the first place, for instance a will, a final balance of an estate and so on.
I've handled a couple of these for family members and the amount of paperwork around even a minor inheritance can be pretty impressive.
I'd expect a presumption of innocence, and at the very least I'd expect some documentation from the government showing probable cause of a specific crime the money was involved in before blocking the transaction. The presumptive innocent party shouldn't have to provide anything by default.
You have a presumption of innocence up to a certain amount. After that there is a - minor - burden of proof. Not a single time that this happened to me did any of this appear to me to be unduly burdensome or invasive, and whoever did the investigation went out of their way to state that they did these checks as a formality, not because I was suspected to be in any way out of line. I don't recall it ever taking more than a few minutes (if that) either.
If I showed up with 50K in cash at the tellers window or a local notary to pay in part for a house tomorrow morning though I would expect the conversation would be an entirely different one.
50K cash is under the real value of the $10k CTR cutoff when congress passed the bank secrecy act (around 85k in current USD), so you can see how this slippery slope of the erosion of the 'up to a certain amount' has only gotten worse.
The amount was just an example. Any kind of transaction using large amounts of cash is going to trigger flags all over the system and you can be expected to be quizzed on the origin of the funds. The only time I've seen someone that legitimately came by a suitcase full of cash it was when a waitress left her daughter said suitcase, which contained decades of tip money that she never spent. It was insanely heavy and it caused quite a few problems when she tried to do a deposit with her local bank.
Well, if you are law abiding then you really should abide by the law and this particular thing has the force of law in many countries. Not doing it is by definition not being law abiding!
I've been in business for 42 years now. In all that time I have never seen more than 1000 Euros cash in any kind of business transaction, and I have never been offered to be paid in cash. It's always bank transfers on invoice. I've never bought a vehicle cash, I can't even begin to understand why or how someone would want to buy real estate cash. Besides the obvious risks of being robbed the whole idea of keeping that much money or more around in physical form feels strange to me.
Even in the 1980s when I would buy a vehicle it would be through a bank transfer. The only people that sometimes insist they want to do some transaction in cash are usually marketplace sellers that I suspect are professional sellers that are keeping their income out of sight of the taxman and restaurants where the POS machine 'just broke' that are doing the same. And when I say I do not have any cash and it's ok they can send me an invoice or give me their bank account number suddenly their machine starts working again. Ditto with cab drivers.
The fact that you think some small timers dodging paltry amounts of taxes is somehow justification is laughable. You can trot out any kind of criminal you want and it will not change my answer. People deserve the right to be able to transact, for any size transaction, without being forced under threat of violence to leave a paper trail. Now, many times they will leave a paper trail out of connivence, but that does not change the fact that they ought to have the option not to without threat of violence.
I know a number of people who don't trust banks and so have their cash in a mattris or similer things. Most are dead - they remembered banks failing in the 1930s and said never again.
You shouldn't really need to prove where you got them from; what the system cares about is that you're not laundering it, and it's obvious that nobody launders money on a multi-decade timescale. All you should need to satisfy them is just to show that you've been in possession of it for so long the bank can't even show where it came from anymore. That is itself proof that it's not laundering. You may have good success just pushing back a bit with this point.
That requirement isn’t about money laundering at all. They are wanting to make sure that you aren’t borrowing the down payment from someone else, because that would mean you don’t actually have as much (or any) of your own money invested in the property.
The point of a down payment is to make it so the borrower has an incentive to not default on the loan, because the borrower would lose the down payment.
If the down payment is actually borrowed money as well (like suppose you get a credit card advance for the money), then the borrower won’t lose anything if they stop paying the loan, and there is increased risk that the loan defaults.
One fun way to get around this is to have enough money to sidestep the bank altogether. The title company does not give a shit about where the money came from. All they will want to see is a screenshot of your current balance so they know you aren't wasting everyone's time.
I bought a cheap property (vacant land with no utilities) then built the house literally $20 or $1000 at a time buying blocks/wood/pipes etc as I was building. All the money was legally earned and taxed, but the point is even the title company was sidestepped in this case beyond an amount pretty trivial in comparison to the value of the property and very little of it would have had to of went through the traditional financial system in order to make it possible.
Depends on the jurisdiction and it may not be the lender that requires proof of origin but the party handling the transaction. They may even have a reporting requirement for 'suspicious transactions'.
They have them, but not from a web interface. Probably will require talking to a human, and a service fee to retrieve the records from physical storage.
> but you try buying a house and they want proof of the origin of the funds
Fannie Mae's assessment criteria for origin of funds has a time limitation. If that money has been in an account you control, for forty years, "origin of funds" is not a question. I want to say the cut off is something like 36 months, but it may be even less.
We all complain about big brother, new surveillance tech, and the easy sharing of personal data with government. And yet, some of the biggest problems seem to be untouched. Is this incompetence, beuacracy, complicity?
The moment you try to look into the fines governments impose on banks caught money laundering and the rare cases in which bankers actually see a prison cell, your last option is the most likely one, with a sprinkle of the two others.
My main issue is that all the AML/KYC/KYB barriers we have to deal with never seem to be subject to efficiency tests, all the studies I read and the few audits of these system seem content with it's likely better than doing nothing... but never measure the lost opportunities in trade/business they cause.
In a way it's the same hopless fight against so-called piracy for movies/games. The motivated actors who want to break the law find ways to do it at a large scale, mostly without consequences... and the honest people are just hindered when they want to use their content (even lose access to it when DRMs rely on the existence of the developer/publisher and their goodwill to maintain it way past the time when that media was able to generate revenues).
Well, sometimes they really gum up the works. I have developers in Ukraine and several times in the last year a wire transfer to them to pay them their monthly salary was held up for more than a month in transit. It was stuck at a bank in NYC and no amount of me pushing on my rep at Wells Fargo could get it unstuck OR returned. Last one ended up taking almost 2 months to get there! And, they told us it was going to be returned, so we paid the person via other means (BTC). Very frustrating.
I worked in the legal cannabis industry in California before the pandemic. The business I worked for had to jump through a lot of hoops, including dividing itself into multiple LLCs, in order to deal with the disparity between state and federal laws, and the business policies of banks and even some of our equipment vendors (I remember specifically that McMaster-Carr would not do business with you if you were a cannabis company). Most cannabis businesses were forced to work in cash, which made a lot of financial transactions difficult, but also made it easier to do business with those still in the "traditional market". In the end, the stricter regulations had the effect of greater concentration of ownership, but questionable efficacy in stopping illegal exports.
It's my understanding that cannabis is still federally illegal virtually without exception, therefore changing AML law might not do much for your industry since it was always an illegal conspiracy to knowingly aid and abet the commission of a felony.
It hasn't been my industry for years, and the legality of intrastate cannabis is still being fought in the courts, see the Canna Provisions case which has been ongoing since 2023 and is currently on the Supreme Court docket.
I'd like to see intrastate commerce of plants not be interstate commerce, but until the supreme court decides otherwise most of the legal finding in Wickard v Filburn are still intact that it is interstate commerce to even grow a crop (in this case weed) on your own property and consume it even if you don't sell or transfer it.
Finding intrastate regulation of cannabis as outside of interstate commerce would basically implode most the government at this point, which I'm doubtful they would allow. The Civil Rights Act, ADA, FDA, EPA, OSHA and a myriad of other stuff all squarely rely on the same precedent that makes federal intrastate marijuana regulation legal.
Thanks for the reference to Wickard v Filburn, definitely an interesting read. On it's face it looks like a questionable decision and politically motivated, but I see your point about how it helped to create the current regulatory environment, for better or worse.
Only read the abstract, but this doesn't seem surprising seeing that crypto, despite maybe noble intentions, has evolved in the worlds' easiest way to launder money and the president himself happily makes a couple of 100 mil with his own shitcoin.
In the grand scheme of things crypto-related money laundering is just a drop in the bucket compared to the amounts being laundered using more traditional methods.
Most crypto coins (not Monero) are pseudonymous. If a particular bitcoin wallet comes to somebody's attention they can investigate hassle anybody that this person tries to trade with, tell exchanges not to redeem cash, etc.
Thing is these tactics aren't just available to the authorities but also to anyone like intelligence agencies, the mafia, etc. so the confidentiality problems are much much worse with crypto.
> Monero users with extreme threat models should be aware that anti-privacy adversaries can leverage timing information to increase the probability of guessing the real spend in a ring signature to approximately 1-in-4.2 instead of 1-in-16.
So slightly worse odds than Russian Roulette. Cool. Cool.
What if it is the Chinese or Russian or Indian governments you're worried about? None of those have a libertarian attitude, even if they think it's cool to thumb their nose at Uncle Sam from time to time.
But it’s intentionally set up to be much more accessible than the traditional laundering methods.
Crypto advocates love this “drop in the bucket” excuse. By the same logic, it’s not a problem if I manufacture extra strong alpha-PVP and hand it to school children, because my drug distribution is just a drop in the bucket compared to the global cocaine trade.
"This isn't a problem yet" is the argument, but... if you do enough money laundering for long enough and grow the share of crypto as a share of the economy....
USDT is the money launderer’s dream. If they can get it into crypto (and there are a number of firms who are barely disguised criminal finance portals), the world is very much their oyster.
You'd be better off not implementing the majority of the AML stuff and then just freezing/seizing the assets of known criminals once it's in the system.
You think El Chapo had a lot of banking issues in practice? He went around most of these hurdles with and without the complicity of banks and governments.
HSBC's cash deposit tellers in Mexico were even reported to be wider to accommodate the larger cash deposits from the cartels [1]
The same people we put in charge of watching their own activites are the ones breaking the law, repeatedly... and the governments enable it by arguing that fines are "preferable" to real prosecutions and firm/long prison time for complicit bankers.
They are just taking their share on the illegal traffic revenues, like mob bosses do. No intent to stop them. And in the mean time all these AML hurdles hinder legal activites.
I generally like having these systems in place, because I find when dealing with certain vendors and businesses that following these helps me weed out many scammers when dealing with large amounts of money. Every transfer required a discussion with the teller asking questions about transfers and if the transaction is suspicious. Yes, criminals will find a way, but I find it provides me an easier screening to ensure some businesses are more likely legit.
In the UK one of the best ways to launder money is to open a barber shop. Most people pay cash and unless they are going to watch every shop to see how many customers go through there's simply no way to police it effectively. I have heard that the shop owner will get a commission on any laundered money.
Same in Chile. A while ago our version of FBI closed 12000 barber shops along the country under an investigation on money laundering. It's so obvious it's ridiculous. 20 barber shops in the same street (we don't have a barber district btw), many of them working 24/7.
> For example, the United States has not required the disclosure of beneficial ownership information for establishing corporations (violating rec. 24) until recently.
I worked on a front line product for US banks and built a process to verify beneficial ownership for business account openings. I found the current expectations to be laughable:
> An individual may be a beneficial owner of a reporting company by indirectly holding 25 percent or more of the ownership interests of the reporting company through multiple exempt entities.
Getting around this is not very difficult if you are clever and wealthy.
The overall takeaway I had was that these kinds of rules don't really work in the cases where they need to the most. I don't know how much of a deterrent this could ever hope to be. We even developed an override process for this based on a request from one of our clients.
unsurprisingly they killed off the BOI reporting requirement in March [1]:
> ALERT [Updated March 26, 2025]: All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information (BOI) to FinCEN.
Yea, AFTER you had to file the report to go to jail- and BEFORE it could be retroactively shot down nationally in court. (They already lost in some states)
Indirectly holding through multiple entities still counts? How would someone legally get around that? It seems like whatever you do, it's still summing up.
Money laundering is an absurd concept made up by a lazy government that fails to go after the actual underlying crime or criminals. They don't really have evidence of actual crime, so instead they target anyone they don't like. The ultimate effect it will have is of people exiting the government controlled financial system altogether.
One thing that consumers can do right now is to petition their favorite online vendors to start accepting cryptocurrency, at least a stablecoin that you can swap to.
I agree. We already see instances of debanking (logical evolution of money laundering "control") being used to pressure political opponents and dissenters even in the "free" West. Even worse, governments silently share this power with private entities to pressure stuff they do not like as was recently demonstrated by the MasterCard/Visa debacle.
Ideally, access to the financial system and secrecy of financial transactions should be protected by constitutions in the same way as secrecy of correspondence and right to privacy. Unfortunately, most constitutions were written in the age when it was a given, since most people relied on physical cash and were was no need to explicitly protect this right.
It's strange to see otherwise smart people correctly identify the "think of the children" fallacy in E2E encryption or net neutrality issues, but fail to identify the same exact fallacy when network traffic is measured in dollars and not bits.
They falsely assume the major burden of KYC/AML lies on the rich/criminals when in fact, as implemented in the USA, the burden falls largely on the innocent (and most of all on homeless / people with no address to pass KYC) with pretty vague data on whether there is much payback.
This is such an eye-opening overview of the AML system. It really highlights how much effort, money, and regulation goes into preventing money laundering, yet the results seem limited.
It works as intended, it allows the US to pay bribes around the world while also allowing law enforcement to prevent criminal enterprises from competing with the regulated financial services industry.
Considering the amounts being laundered, it seems likely that a lot of the money is ultimately being invested.
If we stopped money laundering totally and completely, and managed to track down and confiscate all that money, the stock market would crash, hard. So would real estate.
That would be the desired effect for those seeking to enter the real estate market for the first time, but it would be disastrous for those who took out mortgages in the last few years, and it would be unwelcome to those who owned their homes longer and consider it a large (or only) asset in their personal wealth. I doubt that real estate prices will be allowed to drop much, simply because homeowners vote more reliably than renters, and they won't vote against their own financial interests.
only if they immediately sold all the confiscated assets. The government that did the confiscation could slowly divest on a schedule to minimize the effect on any markets involved.
I see that the more egalitarian world is a must for us NOT going extinct.
And we're in the last minute to do that, if it's not too late already.
World seems to be headed to a short dystopian fascist phase before the collapse. A metacrisis caused by these tax-free metahumans with the tax fee multinational abstraction of individual power called corporations.
Left vs. right doesn't work to solve it, but the true dichotomy of people vs. billionaires with their sycophants.
I've come to realize that viewing the world through the simple lens of laundering causes dumb systems to suddenly make sense. Silly rabbit, you thought these industries were there for the normal public?
Gambling: https://www.cbc.ca/news/politics/online-gambling-sites-money...
Casinos themselves: https://www.ibtimes.com/political-capital/trumps-businesses-...
Commerce: https://www.wired.com/story/wired-awake-180518
Crypto: https://financialcrimeacademy.org/cryptocurrency-money-laund...
Shell companies: https://newrepublic.com/post/192244/trump-celebrates-destroy...
Real estate: https://www.firstaml.com/resources/5-ways-criminals-launder-...
This is, unfortunately, a problem that many tech companies have made worse and more accessible as they have removed friction from these systems.
Most folks will remember the 2019 temination of lootbox key trading for CS:GO on Steam.
https://www.bbc.com/news/technology-50262447
https://www.gamesindustry.biz/research-identifies-suspicious...
https://www.sciencedirect.com/science/article/pii/S266628172...
I'm not sure what good ways there are to manage this generally, other than limiting the size or types of financial transactions that can occur within a system.
Art https://www.artandobject.com/news/how-money-laundering-works...
Lotteries, too: https://www.acamstoday.org/lottery-and-money-laundering-a-ma...
I remember reading about a case where criminals bought an entire issue of a local lottery, thus collecting all the prizes, and apparently saw that a reasonable cost to launder their cash.
Moving money around is a crime...why? It results in massive intrusiveness by government: full insight into everyone's finances, without evidence of a crime.
And, yes, this does get abused. Government is people, some of whom are evil, or out for revenge, or whatever. I had an acquaintance whose accounts were periodically frozen by the IRS, because he had pissed off the local office. He would get them unblocked, but only after weeks of missing mortgage payments and other bills.
Ending anonymous banking like in Switzerland was a major objective for the US. They said it was because it allowed money laundering for terrorists. People will get upset when the government talks about ending encryption in order to stop terrorism but the same concept applied to money apparently doesn't matter.
In practice we have a system where money laundering has not ended and we have much more financial surveillance for average citizens. That was probably the purpose all along and it never had anything to do with finding tax evaders or stopping terrorism.
What's the point of surveilling the movements of average citizens' money? They usually don't hide anyway. I suppose tax evaders were the target all along, with a smattering of criminal operators, e.g. drug dealers. Terrorists were but a pretext to produce moral panic.
You justify surveillance in the wake of terrorist attacks, etc. and when public sentiment toward government is mostly good (the financial surveillance here is an example)
You make moves to constrict the available information and permitted behavior of residents and citizens in excess of what is defined by law through pressure on culture and public marketplaces, etc. and not legal action by government. (e.g. the stuff going on with erotic content on Steam recently, but not limited to stuff like that). You start with more questionable and controversial things like e.g. sexually explicit content, then progress to all content or ideas that are inconvenient to your regime.
You boil the frog of authority over the public at a rate where only a minority starts noticing problems and looking for solutions in educating themselves using politically inconvenient media (and flagging themselves as enemies in the surveillance tools) or taking action that is inconvenient to you
You start making court cases against these inconvenient people and start deporting them or incarcerating them. First with e.g. illegal immigrants or foreign national students that are saying things that are unpopular, but slowly escalate to all the people that disagree with you.
If you don't think all these things are well established, I'm not sure what to tell you.
Yes. Sadly, 9/11 is the classic case of terrorists having won :(
> What's the point of surveilling the movements of average citizens' money?
The most important is taxation. People pay their babysitters or gardeners under the table, or transact with friends and family without reporting income, and this is a huge amount of lost tax revenue.
Another reason are policy options. For one, there are certain decidedly "non-terrorist" goods and services that the government might not want you to purchase. Heck, in the era of ZERP, many economists were seriously talking about negative interest rates. You can't do that if a person has the option of taking out cash and hiding it under the mattress.
Control
My point that authorities already exercised enough control over normal citizens anyway. Most Americans live paycheck to paycheck, and never cared to have a bank account in Switzerland, let alone an anonymous bank account.
But the few certain Americans, and especially non-Americans, who did apparently bothered the US administration enough.
If you can make private and uncensorable payments, you can pay an army.
The “only one army” concept is how governments remain governments.
If you could raise and pay a competing army, the state’s monopoly on “legitimate” violence becomes threatened.
This is why most states also heavily restrict private access to arms. Interestingly enough, it is also why the United States explicitly protected it: to specifically prepare for (and protect the right to) violent revolution.
17% of the USA smokes weed (makes them a prohibited possessor), 8+% are felons, DV convictions are harder to find but incredibly common, 4+% of USA are immigrants who have no right to bear arms (illegal or non-immigrant visa).
So maybe 1/4 or more of the adult USA is explicitly barred from the right to bear arms. When you consider those same people would have been much of the ~3% that had high enough risk tolerance to fight the American revolution, basically the USA has barred a very large proportion of those with the risk taking temperament that would enable them to become part of the ~3%.
They've effectively made it illegal for revolution type of risk taker to have arms unless those risk takers used the police/military as that outlet. Note this is a relatively new development -- the M1 carbine was invented by a prisoner inside a prison!
> much more financial surveillance for average citizens
As with the TSA, any system designed to filter "bad guys" ends up being a huge imposition on average citizens, because there's a lot more of them.
To be fair Switzerland really did (does?) help to launder a lot of money for terrorism.
very strong claims, any facts to back them up?
> Moving money around is a crime...why?
The short answer is that said money is either the proceeds of a crime, or (in the other direction) being sent to or from a sanctioned person, organization, or country.
This is why it's so hard to push back against, like the TSA. "Do you want terrorists using the banking system?" is a killer argument for midwits.
Just replace "money" with a gold bricks. If I have them in the trunk of my car and move it around, you can't arrest my car on the assumption that the bricks are "the proceeds of a crime". You have to reasonably prove it with all the red tape involved, or GTFO of my way.
Civil asset forfeiture- a law enforcement officer in many jurisdictions in the US can seize the gold bar without charging you with anything, under the assumption that it is proceeds for a crime, and in an insane twist, they get to keep part or most of the value of the seized property when it is sold at auction. It’s insane.
Everyone else telling you about civil forfeiture; I'm going to mention the original James Bond novel Goldfinger, in which part of the early plot is exactly Auric Goldfinger hiding gold in the panels of his Rolls-Royce in order to smuggle it out of the UK, which was illegal at the time. Even for gold legitimately owned.
(historical background: https://www.chards.co.uk/guides/exchange-control-act/785 )
My understanding was the police were able to do this in the US using civil forfeiture.
lol, you absolutely can.
lol look up Civil Asset Forfeiture.
Money launderning is making it look like the taxes have been paid.
After you pay your W2 income taxes for the year, your income for the year is no longer taxable.
edit: I guess I can't argue with the holy writ of wikipedia, but it's how they got Al Capone.
Just using an unlicensed hawaladar to transmit legally earned and taxed money is money laundering (whether that is the actual statute that would be charged, idk, but it falls under the stuff AML compliance is supposed to catch). The whole system is absolutely insane.
That’s tax evasion.
Money laundering is disguising the source or use of funds (making illegally sourced cash look legally sourced).
Plenty of people would (do) happily pay some tax on cash as part of avoiding difficult questions about the source.
They are often related though as if you have illegal money you also didn't pap taxes on it and in turn they can get you because they may not know where the money is from they know you spent more than your taxes indicate is possible.
Related but entirely different purposes. Paying taxes on illegally sourced money is basically the goal, because it makes it legal - it gives you a declared income and means future transactions look within your means.
Tax evasion conversely makes legally earned money somewhat illegal to the evader (though generally fine for anyone else to handle accidentally).
Paying taxes doesn't make illegal things legal. However it hides evidence. Al Capon was got on tax evasion because exidence of that was easier to prove. Everyone knew is other crimes - but there wasn't enough evidence to convict.
In Canada any transactions over a certain limit require the regulated counterparty to file a Suspicious Transaction Report with FINTRAC.
FINTRAC is unable to establish a pattern in those reports and prosecute. Instead, when someone is charged with an indictable offence, their name and related entities are searched for STRs. Any financial crimes are then used to create additional charges.
The net result of this, because of lack of digitization and various privacy guarantees, is that it is almost impossible to be charged with financial crimes as a primary offence in Canada.
Source: former RCMP financial crimes consultant.
It is similar in the US, except we call it a currency transaction report [0]. Because the amount — $10,000 — is not indexed to inflation, these reports are extremely numerous, mostly automated, and are almost entirely useless — beyond conveying the ability to charge ordinary people with structuring [1].
[0]: https://en.wikipedia.org/wiki/Currency_transaction_report
[1]: https://en.wikipedia.org/wiki/Structuring
What did you think about the bc government report on money laundering?
The crazy thing about money laundering laws is that in many jurisdictions, just failing to prove the legitimate origin of your funds can be enough to lose assets, and face criminal prosecution, without the state ever proving an underlying crime. It effectively shifts the burden of proof.
Also, even if you can prove the legitimate origin of the funds you can’t be sure that your bank will accept them. If you can’t find a bank that will accept them then formally you may still have the ”asset” but you can’t really use the money.
It is extremely simple to prove legitimate origin of funds though.
You're acting like the government will charge you for a $100 in your wallet.
Any circumstance where the onus is on a private citizen to prove innocence instead of the government to prove guilt is a perversion of justice. Stupid voters and the government will destroy all privacy for the sake of "the guns, the gangs, the children"
No, some financial institutions like Binance only allows clients to get statements for the last year or so. P2P transaction details go back only a couple of months.
Sometimes your employer goes out of business. Employees do not always preserve their payslips.
Then there are countries like Georgia, it's culturally acceptable to buy real estate with cash. If no valuation of the property was made, it becomes very difficult to prove where the money came from.
It's extremely simple until it's not. Let's say you bought 100$ worth of BTC back in 2012 with cash at a meetup. Now it’s worth $1M, but you can't prove its origin. You now have a perfectly law-abiding person that risks being accused of "money laundering" just to keep what's rightfully theirs.
That example doesn't work. The blockchain shows that you purchased it for $100! At absolute worst, you "laundered" $100. Likely the statutes don't even apply to numbers that low.
See my other replies for why that doesn't work.
Your other replies rely on "assume the government has powers it does not and/or the judiciary is willing to suspend the burden of proof in criminal cases". I mean... yeah. It's true. If you assume we live in a totalitarian dystopia then sure, the government can do terrible things.
But needless to say such a government doesn't need to pass boring AML laws to do that. It can just throw you in jail because it wants to. The actual rule of law under which we live doesn't have that property.
Bitcoin literally has an immutable transaction record baked into it's model.
You would be able to point to the timestamp when you took possession of the wallet which would prove providence unambiguously.
There's no KYC to take possession of a wallet, how would you prove the wallet wasn't just traded to you (maybe even yesterday) instead of moving the bitcoins?
AML statutes don't invert the burden of proof! If the government wants to prosecute you for taking money, they still have to prove you took the money beyond a reasonable doubt.
I'm always amused by the paranoia in the xxxcoin communities. If the government had and exercised the power you believe it does, why on earth do you think putting your money in bitcoin or whatever would provide any protection at all?
Edit: case in point:
> KYC and AML invert the burden of proof and are essentially an exception to the 4th amendment
Oooph.
> If the government wants to prosecute you
Their point is that the government does not prosecute you, they threaten the banks with "regulatory incidents" if they don't comply. The result is that some people find it difficult to ever open a bank account with no means to "clear their name" as it were.
KYC and AML invert the burden of proof and are essentially an exception to the 4th amendment, that's why they're so controversial.
I tried to open a bank account when I was moving states before I had a local state ID or any utility bill or proof of address, no one would do it because they stated the standard the feds hold them to for KYC would essentially presume I am guilty of lying and require me to provide documentation to prove I'm not.
That works until it does not. What if you transferred the BTC to other wallets or exchanges in the meanwhile? Even if you still had access to the original wallet, what proves that it was really yours? etc.
Unless you’re using mixers then it is relatively trivial to follow your BTC around the blockchain. That is the very point of it.
The issue of provenance is an issue regardless of the type of funds.
In most jurisdictions the burden of proof is civil, so more likely than not.
Sure, you can trace the full transaction history of any BTC through the blockchain... but that doesn't prove anything. At minimum, you need all the private keys involved (e.g. not possible if you used an exchange or deposited/withdrew from some online service or lost/deleted an old wallet). Even if you had the full list of private keys involved, going back to 2012, what proves that they were really yours and, like another commenter pointed out, that you didn't just acquire them yesterday?
Forget on-chain, how do you prove you had control of the wallet IRL off-chain at the time of the trasnactions?
What if you tried your best to do everything that a money launderer does without actually doing any money laundering?
If you and your friends are just innocently idling in a your car wearing a ski mask in the middle of summer with a shotgun and a large duffel bag, in front of a bank that was robbed in this manner four times last month, you're highly unlikely to, at minimum, beat the ride.
What I described is actually extremely mundane. Maybe you started with Bitcoin Core and later switched to a lighter SPV wallet like Electrum when the blockchain got too big. Maybe you bought a hardware wallet and moved your BTC offline. Maybe you sent some to Binance to invest in Ethereum at some point. There are countless reasons to shuffle BTC around - and countless reasons why you couldn't prove your full transaction history dating back to 2012 - none of which involve any crimes.
Has anyone ever been convicted for doing a few on-exchange trades and conversions? You should be keeping your receipts for tax purposes, it's on you to provide them up to a statue of limitations.
Or is this just a theoretical concern for anyone who isn't laundering Bitcoin stolen through ransomware or from exchanges?
You missed the point. The point was that there are many ordinary and mundane reasons why you wouldn't be able to prove the full chain of custody for the BTC you acquired in 2012. It would be a real practical concern if you are a law-abiding person. If you're a criminal, it's not much of a concern since laundering money is relatively easy.
Sounds like that criteria would match about 50% of people with child support or alimony orders.
The money laundering control systems, as well as being ineffective at controlling crime can be a pain in the neck for the law abiding. I have money from my grandad, received 40 years ago. No one really has records going back that far but you try buying a house and they want proof of the origin of the funds. Trying going to your bank to get records from five years ago often gives a date out of range error.
>The money laundering control systems, as well as being ineffective at controlling crime
The point of AML/KYC regulations isn't to stop all crime, just like the point of US sanctions on Russia isn't to stop all Russian exports. In both cases it's to raise the cost of doing business for the entity being targeted. In the case of Russia, they can still sell their oil to India or whatever, but at a steep discount. In the case of drug cartels, they can still get their funds into the regular banking system, but also at a steep discount. Smuggling pallets of dollar bills across the border and setting up a network of front companies is expensive. Doing all that also which implicate them in even more crimes, so even if there's no evidence of them smuggling fentanyl, they can be prosecuted purely on the basis of having a car full of cash.
>I have money from my grandad, received 40 years ago. No one really has records going back that far but you try buying a house and they want proof of the origin of the funds.
The better question is why are you were sitting on cash for 40 years. In that time inflation already ate 66% of the value, and if you factor in the opportunity cost of not investing the money in stocks/bonds, the loss is even greater.
The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones. Ensuring the greatest threats become even bigger ones, but also that any corrupt politicians/officials/bankers get even bigger payouts and the payouts they get are more predictable from fewer channels.
>The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones.
You can make the same argument about literally any crime deterrence measure though? For instance having drug search dogs at airports probably makes it harder for the indie drug trafficker to get drugs through, but probably isn't going to do much against organized crime networks with insiders working at the airports and/or bribed officials.
Ignoring the obvious problems with drug dogs, which I have a very personal extremely degrading and humiliating tale about involving a fraudulent search warrant that turned up nothing, a key difference here is the thing being monitored here is primae facie legal and involving forcing private parties to be the drug dog handler on behalf of the government on private property in a private transaction. In such case there is a presumption of innocence and government should need a warrant before requiring client to satisfy AML or KYC documentation.
I can't just walk up to your doorstep, make your sister take my drug dog, and force her to walk it around your bedroom and then punish her if she doesn't do it.
> In such case there is a presumption of innocence and government should need a warrant before requiring client to satisfy AML or KYC documentation.
But since you don't know when the government is going to ask for it, you need to collect it from everyone all the time, otherwise you won't have it to satisfy the request. "What do you mean you don't know who your customers are?" is not a question you want to have to answer in the face of a warrant.
If I get the OP correctly it wasn't 'cash' that they were sitting on but it was a balance in a bank account. You can turn that into cash (unless lots of other people try to do the same thing at the same time, see also 'bank run') but strictly speaking it isn't cash.
Nobody is questioning the source of funds for the balance in a bank account that’s been there for forty years.
OP could literally just put it in the bank, sit on it for a year, and there’d be zero questions. They are mostly only interested in knowing that you didn’t get this money from a different loan that they aren’t aware of (like a personal loan, or one you got two days ago that hasn’t yet been reported).
It wasn't in cash. It was in equities to a large extent. But they still ask for the source. Even if it's from selling shares they want to know where the shares came from. At least sort of. The whole thing is a box ticking exercise for compliance to cover their own arses.
In fact it's worse than that in some ways as I had an investment advisor who bought and sold stuff and I don't know if I have records of what exactly.
>It wasn't in cash. It was in equities to a large extent. But they still ask for the source.
And saying "gift from dead parents" wasn't enough to placate them? They wanted receipts? I get asked about source of funds all the time, but I don't think I've ever been asked to provide proof.
I don’t think that really is the better question. It’s their money, if they want to do silly things with it that’s up to them.
Yes, but they are now aiming to use these funds to buy real estate and of course that is going to raise a bunch of flags. If the government would accept this without challenge criminals would suddenly be left all kinds of crazy inheritances. At a minimum you'd expect some documentation of how that money landed in their possession in the first place, for instance a will, a final balance of an estate and so on.
I've handled a couple of these for family members and the amount of paperwork around even a minor inheritance can be pretty impressive.
I'd expect a presumption of innocence, and at the very least I'd expect some documentation from the government showing probable cause of a specific crime the money was involved in before blocking the transaction. The presumptive innocent party shouldn't have to provide anything by default.
You have a presumption of innocence up to a certain amount. After that there is a - minor - burden of proof. Not a single time that this happened to me did any of this appear to me to be unduly burdensome or invasive, and whoever did the investigation went out of their way to state that they did these checks as a formality, not because I was suspected to be in any way out of line. I don't recall it ever taking more than a few minutes (if that) either.
If I showed up with 50K in cash at the tellers window or a local notary to pay in part for a house tomorrow morning though I would expect the conversation would be an entirely different one.
50K cash is under the real value of the $10k CTR cutoff when congress passed the bank secrecy act (around 85k in current USD), so you can see how this slippery slope of the erosion of the 'up to a certain amount' has only gotten worse.
The amount was just an example. Any kind of transaction using large amounts of cash is going to trigger flags all over the system and you can be expected to be quizzed on the origin of the funds. The only time I've seen someone that legitimately came by a suitcase full of cash it was when a waitress left her daughter said suitcase, which contained decades of tip money that she never spent. It was insanely heavy and it caused quite a few problems when she tried to do a deposit with her local bank.
The fact that society has normalized a silly burden upon the law abiding doesn't make it right or good or justifiable.
Well, if you are law abiding then you really should abide by the law and this particular thing has the force of law in many countries. Not doing it is by definition not being law abiding!
I've been in business for 42 years now. In all that time I have never seen more than 1000 Euros cash in any kind of business transaction, and I have never been offered to be paid in cash. It's always bank transfers on invoice. I've never bought a vehicle cash, I can't even begin to understand why or how someone would want to buy real estate cash. Besides the obvious risks of being robbed the whole idea of keeping that much money or more around in physical form feels strange to me.
Even in the 1980s when I would buy a vehicle it would be through a bank transfer. The only people that sometimes insist they want to do some transaction in cash are usually marketplace sellers that I suspect are professional sellers that are keeping their income out of sight of the taxman and restaurants where the POS machine 'just broke' that are doing the same. And when I say I do not have any cash and it's ok they can send me an invoice or give me their bank account number suddenly their machine starts working again. Ditto with cab drivers.
The fact that you think some small timers dodging paltry amounts of taxes is somehow justification is laughable. You can trot out any kind of criminal you want and it will not change my answer. People deserve the right to be able to transact, for any size transaction, without being forced under threat of violence to leave a paper trail. Now, many times they will leave a paper trail out of connivence, but that does not change the fact that they ought to have the option not to without threat of violence.
I know a number of people who don't trust banks and so have their cash in a mattris or similer things. Most are dead - they remembered banks failing in the 1930s and said never again.
You shouldn't really need to prove where you got them from; what the system cares about is that you're not laundering it, and it's obvious that nobody launders money on a multi-decade timescale. All you should need to satisfy them is just to show that you've been in possession of it for so long the bank can't even show where it came from anymore. That is itself proof that it's not laundering. You may have good success just pushing back a bit with this point.
That requirement isn’t about money laundering at all. They are wanting to make sure that you aren’t borrowing the down payment from someone else, because that would mean you don’t actually have as much (or any) of your own money invested in the property.
The point of a down payment is to make it so the borrower has an incentive to not default on the loan, because the borrower would lose the down payment.
If the down payment is actually borrowed money as well (like suppose you get a credit card advance for the money), then the borrower won’t lose anything if they stop paying the loan, and there is increased risk that the loan defaults.
One fun way to get around this is to have enough money to sidestep the bank altogether. The title company does not give a shit about where the money came from. All they will want to see is a screenshot of your current balance so they know you aren't wasting everyone's time.
I bought a cheap property (vacant land with no utilities) then built the house literally $20 or $1000 at a time buying blocks/wood/pipes etc as I was building. All the money was legally earned and taxed, but the point is even the title company was sidestepped in this case beyond an amount pretty trivial in comparison to the value of the property and very little of it would have had to of went through the traditional financial system in order to make it possible.
"just be rich bro"
The lender only needs you to show proof of the origin of funds if they were transferred in the last 60 days
Depends on the jurisdiction and it may not be the lender that requires proof of origin but the party handling the transaction. They may even have a reporting requirement for 'suspicious transactions'.
They have them, but not from a web interface. Probably will require talking to a human, and a service fee to retrieve the records from physical storage.
> but you try buying a house and they want proof of the origin of the funds
Fannie Mae's assessment criteria for origin of funds has a time limitation. If that money has been in an account you control, for forty years, "origin of funds" is not a question. I want to say the cut off is something like 36 months, but it may be even less.
Helpfully, all this information is public: https://selling-guide.fanniemae.com/sel/b3-4.3/verification-...
I'm in the UK. You can kind of get around the regulations but they are still a pain.
We all complain about big brother, new surveillance tech, and the easy sharing of personal data with government. And yet, some of the biggest problems seem to be untouched. Is this incompetence, beuacracy, complicity?
The moment you try to look into the fines governments impose on banks caught money laundering and the rare cases in which bankers actually see a prison cell, your last option is the most likely one, with a sprinkle of the two others.
My main issue is that all the AML/KYC/KYB barriers we have to deal with never seem to be subject to efficiency tests, all the studies I read and the few audits of these system seem content with it's likely better than doing nothing... but never measure the lost opportunities in trade/business they cause.
In a way it's the same hopless fight against so-called piracy for movies/games. The motivated actors who want to break the law find ways to do it at a large scale, mostly without consequences... and the honest people are just hindered when they want to use their content (even lose access to it when DRMs rely on the existence of the developer/publisher and their goodwill to maintain it way past the time when that media was able to generate revenues).
Well, sometimes they really gum up the works. I have developers in Ukraine and several times in the last year a wire transfer to them to pay them their monthly salary was held up for more than a month in transit. It was stuck at a bank in NYC and no amount of me pushing on my rep at Wells Fargo could get it unstuck OR returned. Last one ended up taking almost 2 months to get there! And, they told us it was going to be returned, so we paid the person via other means (BTC). Very frustrating.
I worked in the legal cannabis industry in California before the pandemic. The business I worked for had to jump through a lot of hoops, including dividing itself into multiple LLCs, in order to deal with the disparity between state and federal laws, and the business policies of banks and even some of our equipment vendors (I remember specifically that McMaster-Carr would not do business with you if you were a cannabis company). Most cannabis businesses were forced to work in cash, which made a lot of financial transactions difficult, but also made it easier to do business with those still in the "traditional market". In the end, the stricter regulations had the effect of greater concentration of ownership, but questionable efficacy in stopping illegal exports.
It's my understanding that cannabis is still federally illegal virtually without exception, therefore changing AML law might not do much for your industry since it was always an illegal conspiracy to knowingly aid and abet the commission of a felony.
It hasn't been my industry for years, and the legality of intrastate cannabis is still being fought in the courts, see the Canna Provisions case which has been ongoing since 2023 and is currently on the Supreme Court docket.
I'd like to see intrastate commerce of plants not be interstate commerce, but until the supreme court decides otherwise most of the legal finding in Wickard v Filburn are still intact that it is interstate commerce to even grow a crop (in this case weed) on your own property and consume it even if you don't sell or transfer it.
Finding intrastate regulation of cannabis as outside of interstate commerce would basically implode most the government at this point, which I'm doubtful they would allow. The Civil Rights Act, ADA, FDA, EPA, OSHA and a myriad of other stuff all squarely rely on the same precedent that makes federal intrastate marijuana regulation legal.
Thanks for the reference to Wickard v Filburn, definitely an interesting read. On it's face it looks like a questionable decision and politically motivated, but I see your point about how it helped to create the current regulatory environment, for better or worse.
Only read the abstract, but this doesn't seem surprising seeing that crypto, despite maybe noble intentions, has evolved in the worlds' easiest way to launder money and the president himself happily makes a couple of 100 mil with his own shitcoin.
In the grand scheme of things crypto-related money laundering is just a drop in the bucket compared to the amounts being laundered using more traditional methods.
Most crypto coins (not Monero) are pseudonymous. If a particular bitcoin wallet comes to somebody's attention they can investigate hassle anybody that this person tries to trade with, tell exchanges not to redeem cash, etc.
Thing is these tactics aren't just available to the authorities but also to anyone like intelligence agencies, the mafia, etc. so the confidentiality problems are much much worse with crypto.
> Most crypto coins (not Monero) are pseudonymous.
It's worth reading the OSPEAD report from the Monero Community: https://www.getmonero.org/2025/04/05/ospead-optimal-ring-sig...
> Monero users with extreme threat models should be aware that anti-privacy adversaries can leverage timing information to increase the probability of guessing the real spend in a ring signature to approximately 1-in-4.2 instead of 1-in-16.
So slightly worse odds than Russian Roulette. Cool. Cool.
> tell exchanges not to redeem cash
Try telling it to Chinese, Russian, Indian exchanges.
What if it is the Chinese or Russian or Indian governments you're worried about? None of those have a libertarian attitude, even if they think it's cool to thumb their nose at Uncle Sam from time to time.
But it’s intentionally set up to be much more accessible than the traditional laundering methods.
Crypto advocates love this “drop in the bucket” excuse. By the same logic, it’s not a problem if I manufacture extra strong alpha-PVP and hand it to school children, because my drug distribution is just a drop in the bucket compared to the global cocaine trade.
"This isn't a problem yet" is the argument, but... if you do enough money laundering for long enough and grow the share of crypto as a share of the economy....
> Crypto advocates love this “drop in the bucket” excuse.
Or so you think.
It is absolutely not a drop in the bucket.
USDT is the money launderer’s dream. If they can get it into crypto (and there are a number of firms who are barely disguised criminal finance portals), the world is very much their oyster.
No clue, but likely
You'd be better off not implementing the majority of the AML stuff and then just freezing/seizing the assets of known criminals once it's in the system.
>just freezing/seizing the assets of known criminals once it's in the system.
How does that even work? You think that without an AML system, el chapo is going to be opening a wells fargo account with his real name?
You think El Chapo had a lot of banking issues in practice? He went around most of these hurdles with and without the complicity of banks and governments.
HSBC's cash deposit tellers in Mexico were even reported to be wider to accommodate the larger cash deposits from the cartels [1]
The same people we put in charge of watching their own activites are the ones breaking the law, repeatedly... and the governments enable it by arguing that fines are "preferable" to real prosecutions and firm/long prison time for complicit bankers.
They are just taking their share on the illegal traffic revenues, like mob bosses do. No intent to stop them. And in the mean time all these AML hurdles hinder legal activites.
[1] https://www.theguardian.com/business/2012/dec/11/hsbc-fine-p...
not well, evidently.
It's mainly about tax evation, under the pretense of fighting crime.
Also, people who can't easily move large amounts of money are weaker in organizing against a corrupt government.
It partners well with disarming the populace.
I generally like having these systems in place, because I find when dealing with certain vendors and businesses that following these helps me weed out many scammers when dealing with large amounts of money. Every transfer required a discussion with the teller asking questions about transfers and if the transaction is suspicious. Yes, criminals will find a way, but I find it provides me an easier screening to ensure some businesses are more likely legit.
In the UK one of the best ways to launder money is to open a barber shop. Most people pay cash and unless they are going to watch every shop to see how many customers go through there's simply no way to police it effectively. I have heard that the shop owner will get a commission on any laundered money.
Same in Chile. A while ago our version of FBI closed 12000 barber shops along the country under an investigation on money laundering. It's so obvious it's ridiculous. 20 barber shops in the same street (we don't have a barber district btw), many of them working 24/7.
> For example, the United States has not required the disclosure of beneficial ownership information for establishing corporations (violating rec. 24) until recently.
I worked on a front line product for US banks and built a process to verify beneficial ownership for business account openings. I found the current expectations to be laughable:
https://www.federalregister.gov/documents/2022/09/30/2022-21...
> An individual may be a beneficial owner of a reporting company by indirectly holding 25 percent or more of the ownership interests of the reporting company through multiple exempt entities.
Getting around this is not very difficult if you are clever and wealthy.
The overall takeaway I had was that these kinds of rules don't really work in the cases where they need to the most. I don't know how much of a deterrent this could ever hope to be. We even developed an override process for this based on a request from one of our clients.
unsurprisingly they killed off the BOI reporting requirement in March [1]:
> ALERT [Updated March 26, 2025]: All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information (BOI) to FinCEN.
[1] https://www.fincen.gov/boi
Yea, AFTER you had to file the report to go to jail- and BEFORE it could be retroactively shot down nationally in court. (They already lost in some states)
Indirectly holding through multiple entities still counts? How would someone legally get around that? It seems like whatever you do, it's still summing up.
Not all entities count. There are 23 types that are conveniently exempt from this regulation.
https://www.fincen.gov/boi-faqs#C_2
Money laundering is an absurd concept made up by a lazy government that fails to go after the actual underlying crime or criminals. They don't really have evidence of actual crime, so instead they target anyone they don't like. The ultimate effect it will have is of people exiting the government controlled financial system altogether.
One thing that consumers can do right now is to petition their favorite online vendors to start accepting cryptocurrency, at least a stablecoin that you can swap to.
I agree. We already see instances of debanking (logical evolution of money laundering "control") being used to pressure political opponents and dissenters even in the "free" West. Even worse, governments silently share this power with private entities to pressure stuff they do not like as was recently demonstrated by the MasterCard/Visa debacle.
Ideally, access to the financial system and secrecy of financial transactions should be protected by constitutions in the same way as secrecy of correspondence and right to privacy. Unfortunately, most constitutions were written in the age when it was a given, since most people relied on physical cash and were was no need to explicitly protect this right.
This 100%.
It's strange to see otherwise smart people correctly identify the "think of the children" fallacy in E2E encryption or net neutrality issues, but fail to identify the same exact fallacy when network traffic is measured in dollars and not bits.
They falsely assume the major burden of KYC/AML lies on the rich/criminals when in fact, as implemented in the USA, the burden falls largely on the innocent (and most of all on homeless / people with no address to pass KYC) with pretty vague data on whether there is much payback.
I wholeheartedly hope it fails and continues to fail forever.
This is such an eye-opening overview of the AML system. It really highlights how much effort, money, and regulation goes into preventing money laundering, yet the results seem limited.
It works as intended, it allows the US to pay bribes around the world while also allowing law enforcement to prevent criminal enterprises from competing with the regulated financial services industry.
Considering the amounts being laundered, it seems likely that a lot of the money is ultimately being invested.
If we stopped money laundering totally and completely, and managed to track down and confiscate all that money, the stock market would crash, hard. So would real estate.
The proceeds of crime propping up some aspect of our economy seems like a bad reason to let it continue unabated.
You’re absolutely right, but the people holding millions or billions in illiquid assets are going to disagree.
Lucrum ante valores.
Residential real estate costs roughly tice what it did 10 years ago. A "crash" back closer to fair market prices would be the desired effect.
That would be the desired effect for those seeking to enter the real estate market for the first time, but it would be disastrous for those who took out mortgages in the last few years, and it would be unwelcome to those who owned their homes longer and consider it a large (or only) asset in their personal wealth. I doubt that real estate prices will be allowed to drop much, simply because homeowners vote more reliably than renters, and they won't vote against their own financial interests.
only if they immediately sold all the confiscated assets. The government that did the confiscation could slowly divest on a schedule to minimize the effect on any markets involved.
It depends on the degree to which the continued flow of ill-gotten gains into the system is priced into current valuations.
And that would be excellent news, because it would be a "great equalizer". And a more egalitarian world would be much happier.
I see that the more egalitarian world is a must for us NOT going extinct.
And we're in the last minute to do that, if it's not too late already.
World seems to be headed to a short dystopian fascist phase before the collapse. A metacrisis caused by these tax-free metahumans with the tax fee multinational abstraction of individual power called corporations.
Left vs. right doesn't work to solve it, but the true dichotomy of people vs. billionaires with their sycophants.