Dirty Little Fingers, In Everybody's Pie

Radley Balko | August 13, 2007

The DEA triumphantly announced last week that American Express Bank International American Express Bank International's customers (fixed for accuracy) will pay a $55 million fine because the bank hasn't taken sufficient steps to monitor its customers' behavior for signs of drug-related money laundering.

Among the measures the government expects your bank to take (and, ultimately, to charge you for):

Under the Bank Secrecy Act, banks are required to establish and maintain an anti-money laundering compliance program that, at a minimum, provides for: (a) internal policies, procedures and controls designed to guard against money laundering; (b) the coordination and monitoring of day-to-day compliance with the Bank Secrecy Act; (c) an ongoing employee training program; and (d) independent testing for compliance conducted by bank personnel or an outside party. Banks are also required to have comprehensive anti-money laundering programs that enable them to identify and report suspicious financial transactions to the U.S. Treasury Department’s Financial Crimes Enforcement Network.

This is nothing new, of course. But it's always good to remember that in order to make it marginally more difficult for Americans to get high, not only are you footing the $1.9 billion bill it costs the DEA to raid homes, pay snitches, arrest doctors, spray poison across Latin America, and storm medical marijuana clinics each year, you also pay your bank to spy on your financial transactions on behalf of the U.S. government.

Thanks to Daniel Bear for the tip.

Comments

|8.13.07 @ 11:16PM|#

Should I be angry at all this extra cost if I get high?

|8.13.07 @ 11:34PM|#

AOBP

The Wine Commonsewer-Reg US Pa|8.14.07 @ 12:14AM|#

Thanks, Radley. This stuff needs as much airplay as possible. And you are right, it's not new, its just getting worse. It's all rooted in Rico, and mafia busting, and a whole chain of financial laws dating back decades.

Just a real world anecdote. Had a client do a big financial deal that involved several wire transfers of several million dollars. 1.7 million just didn't show up in his account. No muss, no fuss, no notification, no money. It took him several hours to track the problem down and it turned out that Mellon Bank in Pittsburgh claimed he was on the terrorist list so they simply refused to release the money. Mind you, this was the only bank of five that noticed he was a terrorist.

His name is quite common, on the order of Jones and is definitely not Middle Eastern in origin. I mean that there are probably several million people with the same first and last name.

Oh sure, he got his money in a couple of days. Fortunately, it was the end of the transaction and not the beginning or it could have had serious repercussions.

The Wine Commonsewer-Reg US Pa|8.14.07 @ 12:16AM|#

BTW, love the headline

|8.14.07 @ 12:20AM|#

So much for going to bed with a smile on my face. Thanks, Mr. Balko. What you're doing is important; I just wish it didn't always put me in such a bad mood.

Timothy|8.14.07 @ 12:29AM|#

For the record, your bank does not like doing this. It is expensive, it is time-consuming, and we have to have whole departments devoted to doing this shit all because some ninny in Washington thinks it's our business what our customers do with their money. If we could stop all that crap, even with a drop in service income, the cost off-set would definitely improve profitability.

Ashish George|8.14.07 @ 1:02AM|#

Some people will tell you they are for small government. They may later tell you that for one reason or other they also support the war on drugs.

These people should not be taken seriously.

|8.14.07 @ 1:34AM|#

For the record, your bank does not like doing this.

Quoted for truth and an atheist AMEN.

|8.14.07 @ 3:10AM|#

Sometime, everyone with money in a financial institution should read the Bank Secrecy Act (with it's delightfully Orwellian name, since it has nothing to do with secrecy and everything to do with sharing lots of information with the government). Any large cash transaction (just a couple thousand dollars or so) or transfer into monetary instruments (such as traveler's checks) or transfer to another account is automatically reported to the government. The Patriot act strengthened these provisions and added more, in fact.

Even if the drug war is stopped, the government will still collect this information in the name of stopping terrorism and organized crime (made more fascinating with the fact that a lot of organized crime centers around illegal drugs).

Maybe we can hope that our privacy is preserved by the information overload and that no one in the government feels the need to snoop on us personally. But, as far as financial privacy from the government goes, the genie is out of the bottle and good luck getting it back in.

|8.14.07 @ 4:23AM|#

I'm confused. If the right-wing government (and it's organs) that your country voted for isn't paid for by the taxpayer, then who should pay for it?

I'm as liberal as the next university-educated European pinko, but what are you whining about? That it's harder for you to buy dope, or that you have to pay for the privilege of upholding a law?

Christ, you're a bunch of whiners. So vote for someone else next time.

Mike Laursen|8.14.07 @ 4:41AM|#

Would you be any less confused if you realized that nobody on this blog voted for our right-wing government?

|8.14.07 @ 6:49AM|#

@Lamar:

I don't know whether you should be angry; I shiver at the irony of not being angry about it if I were high. How is it that these "wars" being waged on our behalf--with money from our treasury and now private industry--seem to only encourage the "enemy"?

|8.14.07 @ 6:52AM|#

what are you whining about?

Uhh, that the government is keeping tabs on my money.

|8.14.07 @ 7:21AM|#

Sure, Rob @ 4:23am, we should just roll over and accept all the restrictions and surveillance that are already de jour in Euroland.

As long as we don't complain we'll eventually catch up with y'all.

|8.14.07 @ 8:05AM|#

Not only does the DOJ force banks to act as the money laundering police, they have to be the internet gambling police. We'll soon be paying our banks to protect us from all those evil poker games.

S.A. Miller|8.14.07 @ 8:25AM|#

Does this have to do solely with drugs? I mean, say hypothetically we legalized all drugs tomorrow wouldn't they still want financial institutions to watch for money laundering of other illicit activities?

|8.14.07 @ 8:30AM|#

Well, ok. Except that the article isn't making that point. The tabs, restrictions and surveillance aren't up for debate. They exist, and have done for years, according to the writer. I'm not American, so I can't say i'd be expected to know that. You are, and clearly don't, and didn't realise that, even after you'd the article.

God bless you, every one.

thoreau|8.14.07 @ 8:36AM|#

Some people will tell you they are for small government. They may later tell you that for one reason or other they also support the war on drugs.

These people should not be taken seriously.

QTMFT

Episiarch|8.14.07 @ 8:43AM|#

Rob, maybe you should do a little research (or realize that you are posting on a fucking libertarian website) before coming in with your douchebaggy Euro-condescension.

It's not like the limeys have anything to brag about with their surveillance state, or the euros with their statism and welfare states.

|8.14.07 @ 8:51AM|#

The fine is likely nothing to the cost of compliance. This is your classic unfunded mandate, with law enforcement duties imposed on financial institutions as well. Not to mention that this system doesn't work very well, especially given the tremendous cost.

As me how well the Gramm-Leach-Bliley Financial Modernization Act's privacy provisions are working. How many billions were wasted on that law?

|8.14.07 @ 8:56AM|#

More than once, I've bounced a check because a deposit has been held up.

Get married? Better deposit each gift check separately, or else they'll all be red-flagged and held up.

Have a baby? Deposit Junior's cash gifts one at a time.

Make a withdrawal from your IRA? Don't pay off those bills for another week because the money won't be there.

The only good thing is that the bank allows our money to earn interest while it's hanging there in PATRIOT limbo.

And yes, the banks hate this. Nobody enjoys dealing with unhappy customers calling every day with the same cry, "where's my fucking money?!?"

|8.14.07 @ 8:58AM|#

oops.

"Where's my fucking money?!?"

and

"What do you mean I have to pay you to keep my money from me?"

|8.14.07 @ 9:02AM|#

I don't paying a little extra because I ONLY use American Express when I buy 8-balls and dimebags.
Those frequent-"flyer" miles really add up.

|8.14.07 @ 9:08AM|#

I'm no fan of the drug war but without some regulations you basically will have banks becoming "look the other way" partners in criminal enterprises.

Also, I disagree with Mr. Balko that charging a business is the same as charging its customers. It's not. American Express Bank can try to pass on those charges but their customers can always switch banks if they don't want to pay the extra fees. Or, AmEx can simply do with slightly less profit.

|8.14.07 @ 9:13AM|#

Anyone else confused by Radley's entry?

Sorry Rob. It's just you and your binary world-view.

herodotus|8.14.07 @ 9:15AM|#

"Rob, maybe you should do a little research (or realize that you are posting on a fucking libertarian website) before coming in with your douchebaggy Euro-condescension.

It's not like the limeys have anything to brag about with their surveillance state, or the euros with their statism and welfare states."

Europeans don't hate us for our government. That's just what they like to say.

They really hate us because our armed forces could, if it suited them, turn the whole of their civilization into a parking lot, and there isn't a damn thing they could do about it.

Hell, it would bug me, too, if I were one of them.

|8.14.07 @ 9:25AM|#

Even a libertarian site seems to bring out the right-winger in you, you crazy kids. Deep down, even the most angst-ridden Nu Yoik liberal is burning to be ruled by a Guliani or a Cheney.

I just wish you'd grow up and admit it. Denial ain't a river in Egypt, girls.

|8.14.07 @ 9:27AM|#

Wait a sec. It's not that I'm right, it's the Euro-condescension?

Libertarianism. Can't beat it. Or spell it, from the look of some of you.

|8.14.07 @ 9:28AM|#

So vote for someone else next time.

I, for, one voted for someone else the last time. And all the times before that.

Fat lot of good it did, huh?

Actually, in fact, no one votes for this stuff. Ordinary people fall for vague promises of public safety and the lawmakers haven't even read the bills they voted on.

Russ 2000|8.14.07 @ 9:36AM|#

For the record, your bank does not like doing this.

So we can probably assume most banks have their most conscientious and valuable employees doing that work.

|8.14.07 @ 9:47AM|#

Actually, the BSA and related restrictions were beefed up mightily after 9/11 (in part by the USA Patriot Act). There was an attempt by the Clinton administration ("We're tough on crime, too!!") to ram through similar legislation in the late 90s--mostly for War on Drugs reasons--that failed because it was opposed by 99% of the country. Civil rights groups, banks, some law enforcement groups, sign-language speaking gorillas. . .just about everyone.

My impression is that the original BSA was intended to allow banks to report criminal behavior, not to compel them to do so. I'm not sure the law was written that way, but that's how it worked in practice.

During my time in banking, it was clear that much of the paperwork filed in connection with suspicious activity reporting, cash transaction reporting, OFAC's SDN list, etc., etc. just went into a big black hole. Too much data, not enough resources. And a lot of people named Juan Valdez got to wait a little longer for some of their financial transactions to occur.

Maybe the next law will require financial institutions to apprehend and hold suspects--'cause, you know, it's the private sector's responsibility to conduct law enforcement activities.

Timothy|8.14.07 @ 9:58AM|#

Well, Rob, the fact is you're not right. The BSA was passed before I was fucking born, so there's not a way I could have voted against the idiots who passed it in Congress (Democrats, by the way) nor Nixon, who signed it. In this matter, Bush/Cheney/Rove/Boogeyman aren't featured very prominently. Changes to BSA enforcement since then have largely been a function of unelected regulatory agencies, with some enhancements to the Know Your Customer rules pushed through as part of USA Patriot. Interestingly, John Kerry wrote those provisions and had been pushing them for some time before 9/11.

Therefore Rob, you ignorant slut, the point is that neither major party is particularly keen to end the drug war and they've both a long damn history of using banks to spy on people. Further, how a person voted in the last few election cycles has little or nothing to do with how the DEA behaves.

LibertyPlease|8.14.07 @ 10:05AM|#

"I'm no fan of the drug war but without some regulations you basically will have banks becoming "look the other way" partners in criminal enterprises.

I'm with Dan T. If you're not with our rulers, then you're "looking the other way". Please leave your freedom at the door. It's for the children.

jimmydageek|8.14.07 @ 10:28AM|#

ProLib,

Is there any job that you haven't done? Today I learned that you sold computers and that you were in banking...

|8.14.07 @ 10:31AM|#

Guys, Rob is a troll. He's probably not even European, but knows it will make him seem extra annoying. Rob, if you prove me wrong by saying anything logical, interesting or substantive than my apologies in advance.

|8.14.07 @ 10:37AM|#

I think it's outrageous that grocery stores will sell food to just anybody. They are just making it easier for them to terrorize our god-fearing nation! And it's entirely out of greed for their own profits!

|8.14.07 @ 10:40AM|#

In the very least, anyone purchasing tahini or hummus should be red-flagged, because it's clear they aren't even American.

Minion of URKOBOLD|8.14.07 @ 10:40AM|#

PROGLIB NEVER FINISHED HIS POLE DANCING TRAINING.

|8.14.07 @ 10:45AM|#

Also, I disagree with Mr. Balko that charging a business is the same as charging its customers. It's not. American Express Bank can try to pass on those charges but their customers can always switch banks if they don't want to pay the extra fees.

Because the other banks aren't regulated?

|8.14.07 @ 11:01AM|#

Not all other banks have been hit with fines for non-compliance.

Robbo|8.14.07 @ 11:09AM|#

I'd write something witty and inflammatory but I'm just waaaay to high to care.

People get their knickers in a knot over privacy concerns with internet transactions when they should really be keeping an eye on their own government. What a sad and sorry state this world and especially America has become.

Now where'd I put that roach?

|8.14.07 @ 11:11AM|#

In today's times information = power.
Government wants power.
Therefore government wants information.

Goverment wants to suck up every piece of information on it's citizens as it can. There was a article on Drudge Report yesterday about China's own soon to be Total Information Awareness program.

It's starting to look like the only difference in domestic spying between non-democratic governments and democratic governments is that a country like China will openly talk about it while a country like the US will try to do it in secret.

|8.14.07 @ 11:25AM|#

jimmydageek,

I've gotten around. I was just a kid selling computers in high school, so that doesn't entirely count. Though it beat flipping burgers. I was an in-house counsel for a bank a few years ago, and I did the same thing in private practice hell before getting this job.

I've never waited tables.

|8.14.07 @ 11:25AM|#

To second Nate, the last time we let a faux-EuroTroll dominate the conversation, we were stuck with Jean Bart for...well, we're still stuck with him.

So just don't.

|8.14.07 @ 11:31AM|#

"""Not all other banks have been hit with fines for non-compliance."""

Not all drug dealers have been arrested either, what's your point?

"""Also, I disagree with Mr. Balko that charging a business is the same as charging its customers. It's not. American Express Bank can try to pass on those charges but their customers can always switch banks if they don't want to pay the extra fees. Or, AmEx can simply do with slightly less profit."""

If a customer leaves, he/she is no longer a customer. The claim is that their customers, not ex-customers will pay the fine.

|8.14.07 @ 11:34AM|#

"""People get their knickers in a knot over privacy concerns with internet transactions when they should really be keeping an eye on their own government. """

You can't keep your eye on government when it starts doing things in secret. Democracies die behind closed doors.

|8.14.07 @ 11:51AM|#

If a customer leaves, he/she is no longer a customer. The claim is that their customers, not ex-customers will pay the fine.

Okay. So who cares if customers are willing to pay the fine?

|8.14.07 @ 12:14PM|#

No matter how many times you try to educate the Dan T's of the world, they never quite seem to put it together.

You're missing the entire point; there's no sense of justice or anything remotely approaching fairness in having customers of a bank pay more when their bank doesn't spend enough of their money helping the federal government spy on them. Period. Most of the customers probably won't even know they're paying the fine, they'll just assume they're being nickel and dimed to death as banks sometimes do.

And also, to pretend that not funding spying measures in some way makes banks complicit partners in crime is so silly that it's hardly worth addressing. But you seem confused about it, so I might as well. Think really, really hard, Dan. There's no way to justify that line of thought.

Goldthwait|8.14.07 @ 12:14PM|#

"This is nothing new, of course. But it's always good to remember that in order to make it marginally more difficult for Americans to get high"

Because as we all know, this money laundering is only a tool to let Cletus buy a cheaper bag of pot. It is never used by more dangerous criminals in the pursuit of more organized and lucrative endeavors. The merits of the statutes aside, the above quote is asinine.

|8.14.07 @ 12:29PM|#

So would these regulations be more palatable if the state was footing the bill for them instead of making the banks pay?

|8.14.07 @ 12:32PM|#

ChicagoTom,

Even the government wouldn't blow its resources on something like this. Too broad a blanket and not at all cost effective. If law enforcement has reason to suspect someone, it can subpoena the records from banks. That's how the actual baddies get caught, anyhow,

|8.14.07 @ 1:06PM|#

If law enforcement has reason to suspect someone, it can subpoena the records from banks.

But wouldn't that be just too much work?

|8.14.07 @ 1:09PM|#

Isaac,

It's important that law enforcement personnel never actually have to leave their desks. Everything should be done electronically from the comfy chair.

☺

The Wine Commonsewer-Reg US Pa|8.14.07 @ 1:14PM|#

Goldthwait

The merits of the statutes aside, the above quote is asinine.

Huh? I don't think so. I see your overall point that these laws are intended to cover a lot of different bases but Radley's point is exceptionally well taken. It's the money quote, in fact.

Just the fact that Rico statutes are used to shut up anti-abortion protesters is reason enough to dismantle the entire apparatus.

The larger point is YOU are paying for all of this monitoring and your favorite hop head is still sticking needles in his arm, Tony Soprano is still breaking people's fingernails, and the rest of us are putting up with moderate inconveniences daily.

The Wine Commonsewer-Reg US Pa|8.14.07 @ 1:17PM|#

Okay. So who cares if customers are willing to pay the fine?

It is quite a bit more subtle and diffused than that. As Matthew says, nickled and dimed to death. Or, nominally higher interest rates on car and home loans, which can translate into the bank being less competitive. GM never paid a dime in income taxes, car buyers paid it all. That saw holds true across the board. If a business fails to recover costs in some manner it fails, eventually.

|8.14.07 @ 1:29PM|#

Because as we all know, this money laundering is only a tool to let Cletus buy a cheaper bag of pot. It is never used by more dangerous criminals in the pursuit of more organized and lucrative endeavors.

In movies, all the time. In real life?

|8.14.07 @ 1:31PM|#

Just to be clear, this isn't all Rico. Anti money laundering requirements went up across the board with the PATRIOT Act.

lunchstealer|8.14.07 @ 1:57PM|#

I think Rob's basic points are that

A - America has a right-wing government so Americans shouldn't complain about anything that its government does.

and B - He's European.

Oh, and C - We're right wingers for complaining about a right wing government's actions.

OK, I'm all for dry British humor, but it helps if it actually makes sense.

Meh, this from the country that brought us "Only Fools and Horses."

|8.14.07 @ 2:43PM|#

the rest of us are putting up with moderate inconveniences daily.

And finally the American libertarian complaint in a nutshell.

Urkobold™|8.14.07 @ 3:16PM|#

YOU ARE CORRECT, DAN T. AMERICAN LIBERTARIANS SHOULD WAIT UNTIL THE GOVERNMENT HAS COMPLETELY ENSLAVED THEM BEFORE COMPLAINING.

|8.15.07 @ 9:31AM|#

You're already in trouble once you start putting people in extremely violent prisons for no other reason than to protect them from their own questionable personal choices.

You're in even bigger trouble when you accept a growing police state in order to combat the people's own questionable personal choices.

Are there more than a very few people awake out there? This is absolute insanity!

|8.15.07 @ 9:50AM|#

"I'm no fan of the drug war but without some regulations you basically will have banks becoming 'look the other way' partners in criminal enterprises."

Just like the grocery stores and 7-11s are when gang-bangers and other criminals shop there. Or just like the transit systems are when said criminals use public transit.

The only reason that bankers are enlisted in the "War" and grocers or drycleaners are not is that banking provides a more convenient choke-point. In truth, as long as criminals deal non-criminally with vendors and service providers, it only gums up society to enlist said vendors and service providers as arms of law enforcement to recognize and help to apprehend said criminals. Most people, most of the time, ought simply to mind their own business. Society works best when that is an important, widely-observed principle. Deviations from it move us down the road to tyranny, mass paranoia, and dysfunction.

Josh|8.16.07 @ 9:31PM|#

"So would these regulations be more palatable if the state was footing the bill for them instead of making the banks pay?"

No, because then instead of just the bank customers paying the government to spy on them every American taxpayer would be paying the government to spy on them. Since, you know, that's were all the governments money comes from.

Regardless of that though, the DEA is charged with telling people they aren't smart enough to decide what goes into they're own bodies. Why is it regulating banking?