It seems strange to me that there is a consensus on this site that communications privacy is a human right but that financial privacy is a terrible evil. In fact all of the arguments pro/con (terrorists, drug dealers, etc can benefit from it) are basically identical yet there exists this double standard. The truth is that these now-sacred laws that ended financial privacy really only started being enforced in America in the 80s and their European equivalents in the late 90s. Are we really any safer now than we were then? The proponents of these laws always claim that if only they could close the loopholes they would be successful. First it was bearer shares, then it was "shell banks", then it was money orders, now it's gift cards, luxury real estate, and cryptocurrency. I am skeptical that closing all these supposed loopholes will actually move the needle on crime. As long as you can 10x your money bringing cocaine from Colombia to America or robocalling grandmas, people are going to do it and new reporting requirements or whatever may make them pay 25% for laundering instead of 10% but it won't put them out of business.
1. I would not call it consensus, for example the top comment on this article disagrees with that ‘consensus’
2. Here are two nuanced arguments about each that I’ve seen:
Communications privacy is good in the small and mirrors the world with earlier technology with some differences. In the large it can allow maintaining much larger conspiracies than were previously possible with private meetings. One may consider it acceptable from a privacy and free speech perspective to allow secret communication in small groups but less secret communication in large groups. Indeed for political speech in a modern democracy you generally want it in public anyway, and WhatsApp and signal have small group sizes so you get this anyway. For very large groups, leaks seem hard to avoid. A counter argument might be that militaries / companies are in some sense like conspiracies in the way they want to keep state/trade secrets. However in typical democracies there may be document release schedules/transparency laws and internal company information may be revealed through patents, subpoenas, or just plain old leaks.
The money argument is that whereas people typically have similar amounts of private speech, some people have many orders of magnitude more money than others. Privacy for communication is then reasonably fairly distributed across the population (though those with more to hide may gain more) whereas privacy for money is mostly an advantage for the people with lots of it. Giving the people who are already rich and powerful this kind of advantage in avoiding scrutiny/taxes may not be considered fair or desirable. A counter argument could be that it is unfair for the rich to be exposed to such increased scrutiny merely because of their money.
> A counter argument could be that it is unfair for the rich to be exposed to such increased scrutiny merely because of their money
I think it is very fine to discriminate against people based in things that give them enormous power, quality if life and they can easily get rid of. Unlike being discriminated and scrutinized for having no money , you can easily escape scrutiny due to wealth by giving away wealth with no meaningful reduction of quality of life (after a given point)
It's really not because of their money, it's because of how they got their money and what they are doing with it and the great harms that accrue to everyone else due to those processes.
True, after a certain amount one has enough money, and the next goal becomes power. One person's power is directly opposed to the power of the rest. And more often than not, untraceable money is a tool to achieve more (unwarranted) power.
Really? You think there is an ending to a sentence that starts with:
"I think it is very fine to discriminate against people based in.."
That's actually good?
Yes. "It is very fine to discriminate against people based on them behaving like assholes" is another one. If you can't point to the injustice in the discrimination and are reduced to claiming all discrimination is bad you have run out of arguments
I’d add that its a very rose colored illusion that is totally the opposite of what happens. KYC/AML guidelines are often used to banish poor people from the financial system.
I’m by no means rich and I’m sometimes getting into KYC hell because my passport have the wrong color. Banks will often flag poor people for the slight things and demand impossible documents. You send the required documents and they keep saying that’s not enough and requesting more and more documents.
I had this debit card company asking me for criminal records (never committed a crime, financial or not) in english and translated by a trusted entity. I’m from a portuguese speaking country and live in a slavic country. I don’t think they were actually expecting me to send those impossible documents and more like the platform wanted me out.
Banks will ban you because you are not worth the risk. They call this “de-risking”. Meanwhile rich people can just hire someone to handle the requests and as we often see in billion dollars money laundering scandals the bank might even turn a blind eye for a while if there is profit in it.
To add fuel to the fire many KYC/AML proponents will justify this abuse by trying to say in a polite manner that its your fault for having born in the wrong place. I’ve actually seen fervent self proclaimed anti-racist pro-immigration people agree with this kind of abuse.
Racism and xenophobia are alive, well and officially sponsored by the general population through the guise of financial crime laws.
I don’t think it’s really intended for KYC/AML/ATF to keep poor people out of the system, though it is true that in practice they mean it’s hard to have access to the financial system if eg you’re homeless or your name is Mohammed and you send remittances to your family abroad. And banks have a shared ‘blacklist’ of people who cause them compliance pains so those people who have a hard time at one bank can end up having a hard time at many other banks.
In reality it is exactly the opposite. The very rich can pay advisors to create all the privacy schemes they want, “optimize” their taxes, etc.
Financial privacy would benefit the middle class way more than the very rich.
> It seems strange to me that there is a consensus on this site that communications privacy is a human right but that financial privacy is a terrible evil
Why is that strange?
Financial 'privacy' allows corporate interests to buy government officials or just buy governments, it allows despots and oligarchs to move money with impunity, allows dictators to steal mercilessly from their people and 'clean' the money in other nations. And yes, it allows terrorists, drug dealers and criminals to go about their business too.
These are not identical concerns to privacy of speech. To paint them as such seems overly reductive.
> Are we really any safer now than we were then?
We are certainly better able to fight corruption and laundering of dirty money in the west than we have been in the past, yes. Are we 'safer'? Who knows, but it's about a lot more than a bit of cocaine, it's about the integrity of democracy itself.
Oh please, this has nothing to do with Democracy. Democracy literally means citizen-power, while this enforcement is removing the power of citizens to come to consensus on which money they want to use. The day there's a fair election at the federal level on any core economy-related topic, then your argument could begin to have something to stand on, but right now it doesn't. This is strictly shifting power away from citizen into the hands of a few.
No, this isn't removing some imaginary consensus process on money, it's sanctioning a criminal money-laundering operation using well established law.
> The day there's a fair election at the federal level on any core economy-related topic, then your argument could begin to have something to stand on, but right now it doesn't.
Just because your system is already broken doesn't mean it's a good plan to enable it to be outright bought.
> This is strictly shifting power away from citizen into the hands of a few.
Bullshit. That is exactly what so-called financial privacy does. "The many" are not incentivised to hide their financial movements because they are uninteresting. "The many" are not using ethereum-based money laundering tools, nor will they. Cryptocurrency in general is already a niche activity of techbros and crimininals. The very, very few.
> No, this isn't removing some imaginary consensus process on money
> "The many" are not using ethereum-based money laundering tools, nor will they. Cryptocurrency in general is already a niche activity of techbros and crimininals. The very, very few.
This consensus process is very real. Money, like language, is something that is only useful when shared, gains importance with increased usage, and eventually becomes unavoidable once it reaches a certain level of adoption. That's why people use dollars, and that's why they may end up using crypto, unless some authoritarian interventions disturb the democratic process of adoption.
> it's sanctioning a criminal money-laundering operation
The Tornado developers are clearly not criminals, or sponsored by criminals. You can talk to them at technical crypto conferences. This is a very different clique from the shady operators of centralized crypto platforms you likely hear about a lot in the news (Binance, Nexos, ...), who certainly did have many links to criminal organizations, and did intentionally help launder money.
And if we disregard intention when calling something a "criminal operation", is the federal reserve criminal for having issued untraceable paper dollars? It's certainly possible to imagine a money system with strict tracing, yet they didn't implement that. It's almost like privacy is not criminal.
There is no "democratic process of adoption", because switching currency without a managed, centralised process is likely to be catastrophic.
> unless some authoritarian interventions disturb the democratic process of adoption.
Preventing money-laundering is not an authoritarian intervention, it's the application of well established law. If your imagined process of adoption relies on it there's something very wrong.
> The Tornado developers are clearly not criminals
I mean, they might well be, as they've provided this service which is not looking very legal right now.
> is the federal reserve criminal for having issued untraceable paper dollars
I mean... clearly not. 'criminal' is not some sort of moral status that can be waved away by saying "but they mean well", or applied to people doing things you can draw vague parallels with.
> There is no "democratic process of adoption", because switching currency without a managed, centralised process is likely to be catastrophic.
Actually this already happens and has happened in many, many countries and time periods. Cities, even private companies, used to mint their own currencies. Nowadays many countries' people use the USD informally. Touristic spots often accept many different currencies. Bitcoin has been accessible to anyone on Earth for almost 13 years. There's nothing catastrophic about it, this is just how the world works.
> I mean... clearly not. 'criminal' is not some sort of moral status that can be waved away by saying "but they mean well", or applied to people doing things you can draw vague parallels with.
The comparison between a service that allows anyone to anonymize traceable-by-default currency (Tornado), and issuers of an anonymous untraceable-by-default currency (the FED) isn't a "vague parallel", it's fundamental. Both were legal at the time of their creation, one got declared illegal, allegedly because it got popular with North Korean hackers.
Few of the examples there are of people "democratically" choosing one currency over another, some of those (company currencies) are pushed from the top down in an unaccountable organisation and are generally acknowledged to be a bad thing. Tourist spots accepting one currency over another means little.
> There's nothing catastrophic about it
A country allowing their own currency to die in favour of a cryptocurrency would pretty much be a catastrophe by definition, involving a failed currency.
> isn't a "vague parallel", it's fundamental
It's a very vague parallel, because one is a state actor, operating with democratic oversight, and the other is a money-laundering operation. You asked if the fed was criminal because of its actions - writing it off as a vague parallel was my way of not just directly calling you an idiot. "Criminal" is a matter of criminal law, and the central banks are established by law. So no, the fed is not a criminal enterprise by definition.
> Both were legal at the time of their creation
I would dispute that Tornado Cash was ever legal, because it explicitly enabled KYC and AML-less money laundering. It just flew under the radar for a while.
FYI most dollar transfers are very traceable, with the right authority, and this is what's missing from a system like Ethereum in general. All this talk about financial privacy misses the fact that financial privacy has been a limited right for a long time - you have financial privacy from your neighbours, sure, but with the right judicial approval that can be stripped away. Making something mathematically impossible to trace is a whole different level and it's not at all surprising that a) it attracted criminal use and b) that the state seeks to shut it down.
So I'll say again - if a money-laundering facility is essential to your adoption process, your process is all sorts of wrong, and the world is a better place without it.
AML is the least effective policy of all times. Infinite cost for practically zero results. 0.2% success rate while it increase costs for everyone and, worse, severely limits economic opportunity for many people in unprivileged industries/countries.
This is the "proportion of criminal funds recovered" [1]. So of the $1.6 trillion laundered out of $2.1 trillion of estimated criminal proceeds, only a few billion were confiscated or seized.
The author then argues for reducing fines on banks and financial institutions, increasing criminal asset forfeiture regimes and moving away from suspicious transaction reporting. (I agree with Nos. 2 and 3; for No. 1, I'm skeptical given the author is a consultant [2].)
Tornado's sanctions were imposed by OFAC. From what we can tell, it wasn't AML reporting but criminal investigations that yielded the tip. Your source thus refutes your argument. Following the author's prescription, we'd now work to investigate everyone around Tornado and seize their assets if they're doing anything illegal.
Criminal asset forfeiture is not civil asset forfeiture. You need to actually prove someone committed a crime that generated the assets, in order to seize them, and the burden of proof is that of criminal law: beyond reasonable doubt, which is much higher than the preponderance of evidence standard of civil law.
>>Following the author's prescription, we'd now work to investigate everyone around Tornado and seize their assets if they're doing anything illegal.
The author didn't suggest investigating any one who privately transacts, but in any case, what you describe would be far more just than the current situation, where all Americans are having their right to use TC denied, under the pain of sanctions law, as a roundabout way of punishing North Korea.
> criminal asset forfeiture is NOT civil asset forfeiture
The author is speaking to a global audience and using those terms colloquially; I parroted their language.
Table 1 [1] mentions "proportion of confiscations attributed to anti-money laundering policies" as its operating measure (and only has columns for Europe and global). Figure 3 [a] measures total US asset forfeitures, which covers both criminal and civil forfeiture [2].
So yes, the paper's prescription would involve investigating, freezing where suspicious, charging and seizing assets. The success metric uses confiscated assets as its numerator.
To be clear, I'm advocating for none of this. Just refuting that source and the figure quoted for AML programmes' success rates. The paper doesn't speak to anything about OFAC, but instead to what should and shouldn't be done after an entity is sanctioned or deemed a suspect.
Not sure why you're trying to whitewash the Treasury's actions. The release they put out highlights the allegation of TC being used for money laundering, and sanctions enforcement is one of the objectives of AML programs.
> why you're trying to whitewash the Treasury's actions
I’m showing why a source is irrelevant to an argument, in part because of some unintuitive jargon. (Though the part quoted by the original comment is straightforward for anyone who reads the paper and the definitions around the 0.2% figure.)
If one takes directly the paper’s suggested endpoint, seized funds as a measure of programme success, it counters the gist of OP’s argument.
> release they put out highlights the allegation of TC being used for money laundering, and sanctions enforcement is one of the objectives of AML programs
AML, in the paper’s context, begins and ends with banks telling on suspicious accounts. For detecting money laundering. TC was fingered by feds analysing the blockchain. That’s police work. Different monitoring mechanism.
The goal is stopping money laundering. But the midpoint, identifying accounts laundering money, and endpoint, seizing those funds, are downstream of the paper’s concerns. To the extent the paper discusses OFAC and similar agencies, it implies an endpoint far more drastic than anything done so far to Tornado or its users.
> the paper is relevant
Tangentially. But not in furtherance of the argument that OFAC sanctions are ineffective.
While the paper is relevant to AML overall, it doesn't really speak towards the efficiency of enforcing sanctions as such. That particular area could be a lot more (or less) effective.
Money has been massively stigmatized, because that is a prerequisite for centralizing control over economic interaction.
The beneficiaries of this centralized control are any one who depends on government spending or regulatory restrictions for their job, it's your parents and neighbours, your partner and cousin. This is a massive cohort - who are over-represented in the top 10% of income earners [1] - who participate in the manufacturing of consent for restrictions on our right to engage in mutually voluntary economic interactions with other consenting adults.
I have to believe the motivation is much more likely placed with the treasury having the most complete view of everyone’s finances, seeing as basically every dollar earned in the US was done so on the shoulders of tax revenue-directed infrastructure, projects, research, and defense apparatus.
Something like this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt, so (in their eyes) why not just stomp out the promising ones with whatever justification is easiest?
> the treasury having the most complete view of everyone’s finances, seeing as basically every dollar earned in the US
Have you followed a financial-crimes investigation? Nobody knows where jack is.
The American payment system is essentially decentralized [1]. Each bank maintains its own books and records and periodically compares parts of them with others and a summary with the central bank to promote consistency. The IRS and Treasury don't systematically share records. (Bureaucratic imperatives, after all.) That's why when the FBI or the CIA or whomever want financial records they have to quietly subpoena banks. To assemble records they do not have.
> this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt
Wall Street has enthusiastically embraced crypto. It's cheaper to run, permits higher fee loading and is regulatory greenspace, which tends to favor sharks. Nothing about crypto makes taxes or debt impossible. Taxes were collected and debt raised for the millennia when cash and commodity money reigned. Crypto is easier to track than either of those.
[1] Aside: the difference between crypto and traditional rails isn't decentralization. It's eager evaluation. The blockchain is always current everywhere. Bank records are not. The latter is computationally cheaper, but at the cost of more error. Centralized banking would involve everyone having an account at the Fed. It has been suggested [a].
I am skeptical of this because if they just wanted to raise revenue at the expense of privacy there are a lot easier ways to do it. They could make FBAR apply domestically. Or just require banks report checks and wires over 50k. Banning Tornado Cash is a kind of decision made by self styled counterproliferation/illicit finance/terror finance/anti corruption "experts."
Yes but this is really only useful for them after they already discovered a target of investigation. Having this information for everyone would make the initial detection of tax evaders substantially easier.
Why are you looking for principles when most reactions are driven by emotion? Many of crypto’s loudest representatives are smug assholes. People love seeing arrogant folks taken down a peg (deservedly or no).
> The truth is that these now-sacred laws that ended financial privacy really only started being enforced in America in the 80s and their European equivalents in the late 90s. Are we really any safer now than we were then?
AML/KYC is not just about terrorism (where it's doubtful if these measures actually have much effect, given how much terrorism is state-sponsored or -backed), it's more about organized crime - and I'd say that yes, organizations like the OG Italian mafia have a way harder time these days. Particularly Italy has made a lot of progress combatting them.
The major organized crime cases of the 70s and 80s were built almost entirely off wiretaps, informants, and a then novel law called RICO which federalized a bunch of former state crimes notably loansharking and gambling and dramatically increased the sentences for those convicted of those crimes. This resulted in dwindling membership and combined with changing demographics is why most mobsters in America are 70-80 years old today.
If anything Italy proves how ineffective these laws are. Every couple of months they announce a 100 million euro Ndrangheta/Camorra related seizure and yet these groups still have thousands of members, still traffic drugs by the ton, and still extort half the businesses in the South.
If you think of consumer purchases when you think of financial privacy, you live in a bubble of privilege.
There are literally countries where people get sent to jail for giving money to pro-democracy groups or journalists.
If you're an American, imagine a scenario where rights are stripped away from people at the federal level and donating to those causes becomes illegal.
Surveillance has impacts far beyond your consumerist lifestyle.
Yes, black markets have never existed and can only be done through the existence of cryptocurrency.
That or you find a plug for your weed (like half of Europe does), abortion pills (like half of the US is about to do) or porn, and you pay with old fashioned cash. I know, not having one click order of your weed is horribly harsh.
Of course not speech is not money but the relationship is that both can be used to facilitate crime, yet only with respect to money is this fact to rationalize the criminalization of privacy.
> there is a consensus on this site that communications privacy is a human right but that financial privacy is a terrible evil
Money can be transferred; speech can't be transferred. That's a significant enough difference to them that "why is privacy for one good but privacy for the other bad?" seems like a facile comparison.
The consensus is that there is a profound difference between slipping someone a dollar bill and slipping them coffers full of cash. We don't need to know where that dollar bill goes, most likely. We do need to know where those coffers went. Scale matters. Quantitative changes are qualitative changes.
Anti-money laundering laws may not prevent organized crime. But organized crime massively benefit from their absence. Solutions don't need to be 100% effective to be useful.
The difference between communications and finance is that finance is integral to the state. Currency and taxes are a core instrument of the state (even its capability for direct physical violence requires finance to maintain and exert). Even so, privacy only applies to SOME forms of communication just as it still applies to SOME forms of finance (though for the latter this is more often de facto than de jure). If you want true communications privacy, you need to build parallel systems that don't interact with public or compromised ones and even then there's the risk of someone taking information from one system to another and leaking it (this is why OPSEC/INFOSEC/COMSEC is such a big deal).
> Anti-money laundering laws may not prevent organized crime. But organized crime massively benefit from their absence. Solutions don't need to be 100% effective to be useful.
Yes but there should be a cost-benefit analysis. The current system of low reporting thresholds across the board and filing SARs on anything that moves does not produce actionable intelligence 95% of the time. No one is against BSA recordkeeping requirements for instance. I am against a system that treats everyone as guilty until proven innocent (thousands of people have had Paypal or Coinbase decide to freeze their funds indefinitely for "compliance reasons") and incentivizes "derisking" left and right. See https://www.wsj.com/amp/articles/account-closed-how-bank-de-... (or https://archive.ph/D3amw).
UBO laws are a great example of poor cost-benefit analysis. Actual criminals will just get stolen identities or homeless people to put down as owners while the 99.9% of law abiding people have millions of unnecessary added compliance hours every year.
