This bit is downright scary: "the bank cannot explain why SARs [Suspicious activity reports] triggered a debanking, because disclosing the existence of a SAR is illegal. 12 CFR 21.11(k) Yes, it is the law in the United States that a private non-court, in possession of a memo written by a non-intelligence analyst, cannot describe the nature of the non-accusation the memo makes. Nor can it confirm or deny the existence of the memo."
I get why this is insane but I also get why the law is there which leaves me in a wired spot. Part of me wants to say something along the lines of "make SAR's disclosable / viewable to American citizens or legitimate users" but you can't really do that because the bad guys will quickly exploit any escape hatches like this.
What do others think about this? Because I'm kinda stuck in the middle about them.
If there is evidence against you, you surely have the right to know of it and to contest it! That's pretty fundamental to any reasonable justice system.
But the SAR itself, from how it sounds in the OP, is not the trigger that makes a person/business unbankable across the entire banking system - only at that single bank.
The OP article makes a reasonable point that administration officials can and do exert pressure on banks to withhold services to certain industries like debt collectors. And there indeed is a slippery slope there, and one that VCs with significant exposure to crypto are motivated to highlight.
But “withholding evidence,” and the SAR secrecy specifically, doesn’t seem to be a mechanism by which that happens. I’m far more concerned with what might cause an individual to lose access to all banks than what might cause them to lose access to one.
Maybe that was a true when a bank was a private business and you could reasonably live without it. Today they are effectively a branch of the government and your life would be seriously impaired.
For example, where does your employer setup direct deposit? How do you apply for a mortgage and demonstrate assets?
If society relies on technology then you need it to participate. Yes you can still breathe without access to transportation, but you can’t work in the economy. In 1940 car or bus access was a luxury because normal people got along fine without one. That’s why it’s misleading to say increasing car access is an better standard of living. It’s actually an increase in the cost to participate in life.
So yes banking must be a right. Or alternatively we could strengthen cash rights (reduce technology) with legal protections to qualify for loans, etc. But that won’t happen.
So it’s effectively a jail sentence, and that’s fine for people who break social rules, but we have built up a whole justice system for applying them. When government pretends taking away your bank is anything less serious, they just want to sidestep due process.
It's not government taking it away. It's a bank taking it away because they do not want to spend time and money to resolve the situation. The legal risk is high where as there is very little upside for retaining the customer relationship.
FINCEN (and others who have search access to it, which rounds to most Federal Government criminal investigators) can see all SARs filed. Banks (and other financial institutions obligated to file a SAR- like casinos!) don't get to see what any other institution has filed. The point of a SAR is to provide a data point for an investigator, not to create a black-list of unbankable people.
Banks can only share sars in very limited circumstances. If you went to another bank they, in almost every case, would not know that your previous bank filed a sar.
We don’t need to invent a mechanism for banks to share bad customer data between each other. There is a whole ecosystem like credit bureaus for bank accounts.
But sars being secret has nothing to do with that.
Which is already a big improvement over the situation in America.
Being cut from the savings/investment/loan system would certainly suck and be unfair if you did nothing wrong, but much less than losing your basic bank account. That's where you receive/cash your pay, tax refunds, any government benefits, write checks (for things that are still paid that way by default), make transfers, etc.
That's true, and it's certainly better than nothing, but engaging in some legal business activity is also one of the basic personal freedoms in the Western value system, one that is trampled on very badly by the recent rise of draconian banking regulations. For businesses, the banking situation in the EU is actually worse than the US right now. It depends on the country, but in some places small businesses basically have to go begging around, hoping that some bank will take on the "compliance risk" of opening an account for them.
I disagree. Bank accounts aren’t the solution; regulating the end use cases (ie businesses that don’t accept cash) is a much better option for society.
Not just seriously impaired, but outright impossible sometimes. For example, It is illegal to pay in cash above a certain amount, where I'm from. That means having a bank account is not an option, it is practically a requirement. If you don't have a bank account you simply can't buy a house, or a car.
That is not true. All the banks must satisfy the same regulator. None of them are going to take a risk that invites audits from the big cheese to get your 20k in savings. The legal term to avoid here is “unilateral action” - don’t do what the other banks aren’t doing.
The list of problematic people is even shared between them by the regulator.
Due to the savings and loan crisis there is no longer a plurality of banking businesses each with their own independent thinking. There are 10 marketing corporations for the same government service. Same with mortgages.
It can be incredibly stressful even right now. I had my bank freeze my accounts because they believe I deposited a fraudulent check (I hadn't). They were incredibly unhelpful during the entire process necessitating hours on hold, going to the branch multiple times and eventually they threatened to close all my accounts. Took about a week to get sorted while I had no access to my funds, including direct withdrawal bills like my mortgage payment.
And you are correct... I had no rights. They had all the power, and they knew it and acted accordingly.
It is already scary, many governments mandate that large purchases are only made through the banking system. Not to mention the private-sector pressure (how do you get paid for work?).
But then we have to pay taxes on any amount of cash money above ~650 EUR in the Netherlands. They WANT to steer us towards cash-less, and MANY shops in the Netherlands have already stopped accepting cash. It's where we're going - ultimate control. No right on banking, but also it's a necessicity soon. So.... Too bad?
Countries in EU have a hard limit on cash transactions. Buying a car for over a few grand and it has go through bank. Renting a flat, even if you pay monthly, the tax man considers the whole duration as one big business deal, so the rent has to go through a bank
Which is the root problem, and the solution is a constitutional amendment guaranteeing an inalienable right to an electronic money account one can send and receive money from.
“Banks” don’t really have a point in a cashless society (the government can operate a database just as well), but it seems the government wants to the ability to persecute selected people or populations with plausible deniability. So they use the ability to get banned by big business as a proxy.
Who would provide credit and do maturity transformation? Maybe you end up with duration matched funds everywhere but I think that's unlikely for regional banks.
You’ve stipulated that the debanking was ok but that not disclosing why was problematic?
How about this:
1. Corporations are highly regulated legal constructs. Being given an extraordinary right (immunity for shareholders) they should be expected to return significant value to society. I propose that value should be “lack of freedom of association” - eg I don’t think corporations should be allowed to stop doing business with, or refuse to do business with, anyone citizen, except after conviction in a court of law for behavior directly related to that business.
2. Government should not be able to use their secret monitoring to prevent anyone from doing anything. No lists, secret orders, etc. If government wants someone debanked, take it to court.
Finally, if corporations can’t debank people, how do they handle unusual cost/risk? With pricing, of course. If porn and crypto transactions pose extraordinary financial risk, then allow pricing based on actual financial risk.
>Finally, if corporations can’t debank people, how do they handle unusual cost/risk? With pricing, of course. If porn and crypto transactions pose extraordinary financial risk, then allow pricing based on actual financial risk.
And you're absolutely certain that powerful and vocal crypto people won't claim that this special pricing is discrimination as they're doing now with debunking ?
Most lenders don't discriminate via pricing - they accept or deny individual applications. The market discriminates via pricing, as higher-cost providers are willing to loan to customers who pose more significant credit risks.
> I don’t think corporations should be allowed to stop doing business with, or refuse to do business with, anyone citizen, except after conviction in a court of law for behavior directly related to that business.
I would quit contracting on the spot if that became the law.
An LLC May be treated by election as a disregarded entity (p&l flows directly to your own person just like a sole proprietor), sub c (if you’re anticipating going public), sub s (if you’re not), sub k (good for capital intensive stuff where you can get loans that are no recourse to the partners) or other sections of the code (think 501(c)).
LLCs are extraordinarily flexible from a taxation point of view, but without shareholders or a board of directors and lacking articles of incorporation, they are distinct from corporations.
The middle ground seems to be allowing SARs (which are analogous to tips to police officers), but not requiring banks keep them secret from the customer. The bank could decide to do so, but also could decide not to, like any other speech.
What is the incentive to divulge the information if they don't have to? Customer service? "We're the one bank that will tell you why we are dropping you as a customer"?
Probably some amount of customer service. Banks are at their distrection then on whether they want to tell you or not -- just like for any other reason for dropping you as a customer.
I guess more important than empirically whether banks tell you, it's that it should be their right to tell you if they want.
When a case is brought to court, they have to outline the methods used to determine the perpetrator. Why is it okay to do that for things like murder and other crimes but not for banks?
SAR's can be discussed when criminal charges are filed.
The most famous case I know of that stems from a publicly available SAR is former Speaker of the House Denny Hastert (R-Il) after his retirement from the House, when he was a lobbyist. He was being blackmailed by someone for his previous sexual assaults from his days as a high school teacher and wrestling coach three decades earlier, before he went into politics. He went to a bank to withdraw a bunch of cash to pay his blackmailer, and the bank started to fill out the form they do whenever you withdraw over $10,000 in cash (not a SAR, just a regular form). He saw the form being filled out, and decided he didn't want a paper trail with the government showing he was being blackmailed. So instead he stood in line hundreds of times at the bank, withdrawing $5,000 each time. This was why a SAR was filed, because he was clearly doing something called "structuring" which is setting up transactions deliberately to avoid those disclosure rules. After the FBI investigated, they decided that they couldn't get him for child sexual abuse, because it had been so long ago that the statue of limitations had expired. But they could get him for structuring, to which he plead guilty and served 15 months in jail.
Besides the fact that knowing about when they are filed would tip off criminals, there is also the fact that oftentimes they are filed for perfectly innocuous reasons, and are never investigated and don't go anywhere. Not ideal to have publicly available "this guy did something suspicious" flags that have not been investigated further looming over you and haunting the rest of your life. Since SAR's are not shared with other financial institutions, they won't follow you the same way.
The law seems to be punishing people based on secret judgements over sealed "non-accusations".
Sorry, but no, I can't see why a country would want a law like this.
Honestly, my country had a dictator impose a Constitution that made sure every person had access to banks over 200 years ago (we haven't had a democracy at that point, but nobody even discussed it since, because nobody disagrees). I also can't understand how come the US treats that system so frivolously.
This is all tied to the war on drugs and laundering of drug money (post-9/11 it become about terrorism as well, but again, more on drug money being funneled into terrorist groups)
There are enough people in the US that think that the mere existence of drug users is an indictment of society, so any action taken to limit the ability of people who sell drugs is justified. You also see this with asset forfeiture laws.
So the reason these laws exist is the people against drugs, unable to see that the war on drugs has been lost for over 20 years at this point, want to impose more and more draconian restrictions around them which just fuels the power of cartels and criminal gangs selling drugs.
If the war on drugs worked then why can you get them in every high school and prison in the US?
You fight money laundering by letting people use the banks, have the banks record everything, and using the records on court to get the money back.
You may have something about limiting international transfers, but forcing people out of the banks is contrary to the goals of a criminal investigation.
Stop with the Al Capone, totally dumb, angle: instead of arresting him for his actual crime, they arrested him because he didn't pay his taxes. Something dumb like that. And everybody applauds as if it was so brilliant. It's not.
What I think is: arrest people for the actual crime they commit... and leave honest people the fuck alone.
Of course it is scary. This is totalitarianism plain and simple. Secret laws. Secret rules. All these do exist (not necessarily only for SARs, where the law is not necessarily secret) when they definitely should not.
The excuse "(but) This is very much the law." isn't much of an excuse.
Last I checked the numbers estimated that, worldwide, KYC/AML costs on business where more than $180 bn while only $12 bn of funds were frozen. And frozen do not mean confiscated: a part of these are unfrozen and rightfully returned to their owners.
So that whole totalitarian, dystopian, system is a gigantic net loss.
And for what? To please bureaucrats who can do nothing else but push papers, create laws and rules and put ever more burden on everybody else.
But the worse of it all is that it gives a perfectly valid excuse for banks to debank anyone they don't like: seen that they don't need to justify anything they can just say "we're sorry we cannot say anything".
Wait, no, that's not the worst of it all. In several countries in the EU like France and Belgium the local IRSes do basically run ads explaining how you can denounce your neighbor.
I've heard a number floating in floating (devs in charge of these systems do talk): 25% of all the self-employed people have had at least one SAR.
On my LinkedIn I see people proudly posting 3rd-reich stuff like "The previous chief compliance officer said there were weeks where they had zero SAR". Basically implying that the previous dude was not filling enough reports and that he was so happy to get the job so that he could run those numbers up.
Burn that entire system. Just burn it to the ground.
There is no moral justification to freezing the bank accounts of truckers in Canada.
I don't care that "this is the law". Laws should be about justice.
This has absolutely nothing to do with being just.
It de facto describes you of property if you have to carry all your wealth as cash, which is then (at least stochastically) subject to civil forfeiture and/or everyday crime.
I have a friend that is constantly being debanked and his wires getting lost because he has the same name as politically exposed Russian person.
Banks do not negotiate. They just kick him off and sometimes even lose his money.
There is nothing he can do, even though everyone who would look the issue would figure out it's just a shitty automatic system flagging it because of an unrelated person 's name. It would cost too much time and money for banks to fix this mistake, so giving a boot is cheaper.
Sounds like a big inconvenience, did he try to change his legal name?
Edit: I have no idea why this legitimate question is being down voted. I'm not suggesting that he should change his name or even that such a solution is an acceptable state of affairs. And the replies received re:past names are furthering discussion.
Apparently AML/KYC programs do consider past names so that people can't simply change their name to avoid sanctions. But one would think if they were going into that much detail they would be able to tell that you aren't the same person as the sanctioned entity.
What's more: if you exhibit knowledge of the SAR requirement to a banker, they're supposed to file a SAR on you just for this, even if nothing else about your transaction trips the SAR threshold.
Absolutely, it's one of the most undemocratic, potentially violative of 1st amendment laws that is out there.
This is from the point of view that money laundering as a law is essentially thoughtcrime. The police state has done an orwellian job of normalizing not privacy, but instead telling the government the reason you are doing every transaction. Then, any attempt to not tell the government is "money laundering".
Of course, if you are the state, the powers of this tool are alluring. Imagine if the state could compel citizens to write down what they're thinking, and compel justifications for everything they do in life. Think of how many crimes we could solve! Think of how many bad folks we can catch ahead of time!
> ...is essentially thoughtcrime
> The police state has done an orwellian job...
> Then, any attempt to not tell the government is "money laundering".
Exactly.
But the really most shocking is the number of people that'll find excuses for such a dystopian system.
Now of course very few bite the hand that feeds them: when you literally work on software facilitating the handling of SARs, you need to do post-fact rationalization of your acts and life choices.
I hope the new administration burns that profoundly nightmarish system to the ground.
