Ryze Recap 9/22: US Banks Launder 800x More Money than Bitcoin
Govt Docs Show $2 Trillion Have Been Laundered by US Banks
Good morning Ryze readers! It’s Tuesday, September 22nd.
If you’re new here, Ryze Recaps is a newsletter synthesizing the biggest news Bitcoiners need to know. We’ve got one massive story for you today.
US Banks Have Laundered $2 Trillion, 800x More Money Than Bitcoin Has Been Used to Launder
What if I told you that the biggest vehicles for laundering money within the US weren't cryptocurrencies or some obscure avenue you've never heard of, but rather, the biggest banks and financial institutions that we use and trust?
What if I told you that although AML (anti-money laundering) compliance is a multi-billion dollar industry, it's been largely ineffective at stopping dirty money from flowing through the hands of US institutions?
This is exactly what's happened, as BuzzFeed reports (yes...props to BuzzFeed for the investigative journalism). Upwards of TWO TRILLION DOLLARS have been laundered by drug cartels and terrorist financing groups through our banking system.
And Bitcoin is the bad guy that facilitates money laundering? Give me a break 🙄
What we know:
This information was brought to light through the "FinCEN Files," a treasure trove of criminal activity that includes over 2,100 SARS (suspicious activity reports) and other US government documents involving over 200,000 transactions with over $2,000,000,000,000 in total transacted value between 1999 and 2017.
Under the table agreements and secret handshakes with kingpins, embezzlers, and terrorist financiers on one side and the "giants of Western banking" on the other have enabled parties on both sides to make fortunes for themselves and ultimately their shareholders. Names include JP Morgan Chase, HSBC, Deutsche Bank, HSBC, BNY Mellon, Bank of America, Citibank, American Express, and Standard Chartered.
But wait...don't we have laws to stop this from happening? Let's dive into how these laws actually facilitated these crimes to occur.
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The Basics of Money Laundering and Banking
The Bank Secrecy Act from the '70s requires financial institutions to file SARS reports whenever they believe that financial crimes are being committed through a transaction or account. These reports go to FinCEN (Financial Crimes Enforcement Network), a branch of the Treasury Department. FinCEN "enforces" the rules around money laundering by occasionally slapping a fine on the bank in question, but does little else to stop the underlying nefarious activities.
Banks can file a SARS report, potentially pay a nominal fine, and then they're basically immune from any further prosecution and can quietly continue to facilitate the money laundering. They could've blocked further activity from those suspicious accounts, but then they wouldn't be able to make fees off of those customers. Instead, they continue processing transactions and letting the dirty money flow freely and raking in fees, instead of stopping the suspicious activity.
As BuzzFeed puts it: "Some banks treat SARs as a kind of get-out-of-jail-free card, filing alerts about a huge array of transactions without actually moving to halt them. In some cases, banks filed numerous reports on the same clients, detailing their suspected crimes over the course of years while continuing to welcome their business."
Why it matters:
The crimes involved with these transactions include: manipulation of international stock trades, funding the Taliban, running a Ponzi scheme that scammed immigrants out of $80 million, human trafficking for organs, drug trafficking, bribery, embezzlement, child sex trafficking, murder for hire, and more heinous crimes that our governments and banks should stop facilitating. The problem with money laundering is that it enables a small criminal operation to grow into a large one. As much as we like to point at foreign villains like Osama bin Laden or El Chapo, the banks in our own neighborhoods and communities are also to blame for letting these criminal enterprises thrive.
Bitcoin has been used to launder $2.5 Billion since it came into existence. Chainalysis reports that from 2017-2019, a total of 1.1% of all transactions across 25 different crypto-assets were used in criminal transactions. The majority of these crimes were scams within the crypto ecosystem, rather laundering money to facilitate external crimes such as terrorism financing or evading sanctions. So the next time somebody tells you that Bitcoin is just used for drugs and money laundering, tell them to get their head out of their ass and start paying attention. Banks have helped launder 800x more money than Bitcoin ever has.
As somebody involved with the crypto industry, what's more frustrating than misconceptions by the common man is the level of regulatory scrutiny applied to anything that touches crypto. If you've ever opened an account at an exchange, you've likely done the whole song-and-dance of taking pictures of your ID, taking a selfie, and sometimes even having to submit multiple proofs of ID and address. This is all done because crypto companies know that any mistake on their part in terms of AML/KYC will have regulators acting swiftly and decisively. There's no room for error. But banks can launder trillions for two decades and the government doesn't bat an eye. The double standard is painfully obvious.
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While Bitcoin, and crypto as a whole, look to bring a better financial system to everyone regardless of income, creed, and color, our current financial system is built to serve those with crisp white collars by keeping them rich and keeping their hands "clean."
AML/KYC regulations are among the biggest hindrances to the advancement of Bitcoin and cryptocurrency. These same regulations aren't even being properly applied to the banks and institutions that we're supposed to trust. It is imperative that we find better solutions to solve these problems.
While some crypto-assets have an emphasis on privacy, Bitcoin is a public pseudonymous ledger. Anybody can see which addresses have how much money, where it came from, and where it's going, all the way back to the very creation of that unit of money. This is impossible with our current financial system.
The ultimate goal of any money launderer is to have an untraceable chain of transactions, but Bitcoin was built to have an immutable public record of all transactions. Go ahead and add "stopping terrorists and drug cartels" to the list of 1001 reasons that Bitcoin is simply better.
That's all for today, stay tuned for another Ryze Recap later this week breaking down the OCC's big news about stablecoins, and more.