The Paradox of Money Laundering

The Money Lender and His Wife (detail) by Quentin Massys

Money Laundering: the process of taking the proceeds of criminal activity and making them seem legal. 

By criminal activity authorities mean drugs & armaments trafficking; human, human organs and antiques trafficking; prostitution, illegal gaming, kidnapping, blackmail, robbery, fraud, embezzlement, extortion and (the hot topic of the first decade of the 21st century) terrorism.
Some add “tax evasion” to the list however many find it debatable.

The money laundering paranoia began when a group of illuminated regulators believed that the best way to fight crime is to hit criminals where it hurts them most: money. Then, perhaps, they’d eventually stop committing crimes. However, they haven’t stopped and money keeps being laundered.
Interesting how Men set themselves out to design regulations while overlooking several aspects of human nature (e.g.: human creativity for both good and bad).

Certainly crimes must be fought against and punished; but I am not sure if anti-money laundering laws are the best way to do it; specially when these laws sound more like a pretext to violate banking secrecy (meaning that one’s personal banking information could be subject to being shared at the request of authorities) even if/when one does not partake in criminal activity.

Authorities (in EU, for instance) have decided that one person cannot deposit more than €15,000 in a day (it’s considered money laundering); they have also decided how much a person should have at home (which is not only an absurd but also proof that lawmakers attempt to violate people’s liberties); they have decided that banks are the main source of money laundering and so they force these institutions to not only interrogate potential clients but mostly to rat on their customers – and what is more interesting is if customers decide to take all their money from the banking system (to either protect their privacy or protest against the whole financial system or even sabotage banking institutions) and keep it at home they would probably be committing a crime: money laundering (assuming that they have a comfortable account and/or savings account).
Financial institutions are not subsidiaries of security forces. They can’t nor should do police work, cause doing so will eventually backlash: money will stop flowing affecting, thus, economies around the world.

What happens when governments launder money? I mean, there are times when governments commit what is perceived as crimes (sale of weaponry to undesirable nations; sale of drugs; kidnapping, prostitution, extortion, blackmail etc) and then actually create front businesses, and invest in legit corporations, to make it all legal...so, what happens then? Nothing because it is considered a perpetrated evil for the greater good; meanwhile, the main shareholders of these governments (i.e. tax payers) become targets of a new entity of persecution: the Financial Inquisition.

Interestingly enough, the only activity that is not consensually accepted as money laundering is tax evasion; which, in my opinion, constitutes the biggest financial crime of them all.

Money laundering is a global business of between $590Bn and $1.5Tn: do you think that linear regulations will make it go away?

Comments

  1. Money laundering go away? You must be kidding Max. What will all our plutocrats and their puppets do?

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  2. Hi Rummy :D!

    When I asked that question, my intention was to show those who set themselves to fight against money laundering that it won't go away just like that, since a huge amount of money is involved. Things are not as linear as some regulators (and jealous people) want us to believe them to be.

    Plutocrats can be useful when they are of the right lot.

    Rummy, thank you so much for your input, my friend :D.

    Cheers

    ReplyDelete
  3. Hi Max,

    An amazing and topical topic. So are you saying that your country is controlling how much money people can have, spend, save, etc.? What if they have legitimate businesses and they earn over 15k a day? Does the government keep the extra?

    Sometimes I watch that show American Greed and it shows how criminals are sophisticated and are becoming harder to catch, but they all make simple mistakes - like throw away their trash. I just saw an episode where one man was literally laundering money - he was a counterfeiter. He bought expensive cars and nice homes and I found out that I used to pass one of his homes on my walk. Very interesting piece.

    You have proven once again how much on the ball you are.

    Free Cash Cheers!

    ReplyDelete
  4. Max, the concept of money laundering veils envy, jealousy for other's wealth. Look at the list of criminal activity - it is a mélange of crimes that do not make much sense and yet it leads to one purpose only (that of breaking banking secrecy).

    It is like the war against off shore accounts...senseless and rooted on envy.

    ReplyDelete
  5. Olá Max,

    I thought that, in Portugal, we couldn't have more than €10K at home and deposit more than €12,500...I'm confused now.
    Anyway, I think this issue hides something bigger than what is being thrown at us and of course all the anti-wealth and anti-capitalism folks are more than glad to support such laws because they thrive on seeing the rich squirm. Somehow it gives them a sordid satisfaction; but obviously they will say they're are fighting crime.

    I kinda agree with you on tax evasion though: it is a crime not to pay taxes and social security. Portugal (that until recently did not have the tradition of collecting taxes in an effective way; although it wasn't as bad as Greece) should learn from the US, those guys will put you in jail for stealing from the government.

    Spectacular post, Max!

    Tchau

    ReplyDelete
  6. And it also interesting you''ll find in most countries anti money-laundering acts not getting passed simply because the moment it gets passed the beneficiaries, i.e. first the politicians will be in trouble who are guilty of stashing huge sums in tax havens. And most interestingly the big fishes remain at bay and it is interesting even if they get caught, I haven't heard of some kind of an extra-ordinary punishment being meted to them, whereas you get to hear so many cases of small fishes who may have mis-managed as little a sum as 10 to 20 dollars getting jailed for 5-10 years. I also do agree with you that tax evasion cases are taken too lightly where in most cases the offender is let off with just a penalty.

    But the main problem in catching the big fishes are that more often than not they are the chief financier of political parties during Election time, so until and unless political funding reforms takes place, its very difficult to net the big fishes, who enjoy political patronage of all hues, with the governments around the world fully aware of its own culprits.

    I compliment you for the social issues that you raise with every post and the interesting thing I find is, somewhere I used to think that it happens only in India, but it seems its a global problem and I w'll just wish more and more people take notice of your blog so that at least some day citizens around the world can make realise the governments that people power is supreme, but the only problem is governments around the world very shrewdly have managed to fragment the polity so well over the last few decades and have an complete grip over our societies that today is getting increasingly difficult to gather masses over a social issue.

    ReplyDelete
  7. Hi Lady A :D!

    "An amazing and topical topic. So are you saying that your country is controlling how much money people can have, spend, save, etc.? What if they have legitimate businesses and they earn over 15k a day? Does the government keep the extra?"

    Thank you *bowing*. Not exactly; my country (as per the EU directives) controls how much an individual, not a company or a small business, should have at home (in cash) and how much money it can deposit per day in its bank account. But if one has a debit/credit card or a check-book then that person can spend as much as its bank account can afford him to.
    If a legitimate business earns more than 15K (in cash) it must deposit that amount in its bank account along with the proper justification. If it earns through other means (bank garanties, credit lines, checks, direct debit etc) it is easy to track, therefore it poses no problem. The issue is live cash, that is hard to track.

    "I just saw an episode where one man was literally laundering money - he was a counterfeiter. He bought expensive cars and nice homes and I found out that I used to pass one of his homes on my walk. Very interesting piece."

    LOL it can't get more literal than that, can it? *nodding* he wasn't smart. Really?

    "You have proven once again how much on the ball you are."

    lol I try, girl ^5.

    Lady A, thank you ever so much for your incredible comment :D.

    Free Cash Cheers

    ReplyDelete
  8. Hi Ana :D!

    "Max, the concept of money laundering veils envy, jealousy for other's wealth."

    I agree.

    "Look at the list of criminal activity - it is a mélange of crimes that do not make much sense and yet it leads to one purpose only (that of breaking banking secrecy)."

    You are right. I hadn't looked at things from that angle...thanks for pointing that out.

    "It is like the war against off shore accounts...senseless and rooted on envy."

    I believe people are a bit misinformed about offshore accounts, specially now that the law regarding this sort of account has changed (the holders of such accounts have to report their existence and they now pay taxes - only, a much smaller tax rate than in domestic accounts).

    Ana, superb comment for which I thank you a million times :D.

    Cheers

    ReplyDelete
  9. Olá Celeste :D!

    "I thought that, in Portugal, we couldn't have more than €10K at home and deposit more than €12,500...I'm confused now."

    I thought the same, but I read an article saying that it is €15K...

    "Anyway, I think this issue hides something bigger than what is being thrown at us and of course all the anti-wealth and anti-capitalism folks are more than glad to support such laws because they thrive on seeing the rich squirm. Somehow it gives them a sordid satisfaction; but obviously they will say they're are fighting crime."

    I hear you. I definitely hear you.

    "I kinda agree with you on tax evasion though: it is a crime not to pay taxes and social security. Portugal (that until recently did not have the tradition of collecting taxes in an effective way; although it wasn't as bad as Greece) should learn from the US, those guys will put you in jail for stealing from the government."

    Oh no, Portugal cannot (should never) be compared to Greece: Greeks are allergic to paying taxes and even in the midst of their crisis they protest against paying any tax - shocking!
    But yes, Portugal did have a problem (many years ago) with tax collection, but not anymore.

    "Spectacular post, Max!"

    Thank you, darling *bowing*.

    Celeste, obrigada for your super comment :D.

    Cheers

    ReplyDelete
  10. Hi Kalyan :D!

    "And it also interesting you''ll find in most countries anti money-laundering acts not getting passed simply because the moment it gets passed the beneficiaries, i.e. first the politicians will be in trouble who are guilty of stashing huge sums in tax havens."

    I have no issues with tax havens (because they represent business for those nations/havens). A tax haven doesn't mean not paying taxes at all; it only means paying less taxes. But anyway, if people have funds in such places then perhaps they should report their existence.

    "And most interestingly the big fishes remain at bay and it is interesting even if they get caught, I haven't heard of some kind of an extra-ordinary punishment being meted to them, whereas you get to hear so many cases of small fishes who may have mis-managed as little a sum as 10 to 20 dollars getting jailed for 5-10 years."

    That is true and it should be corrected.

    "I also do agree with you that tax evasion cases are taken too lightly where in most cases the offender is let off with just a penalty."

    Right?

    "But the main problem in catching the big fishes are that more often than not they are the chief financier of political parties during Election time, so until and unless political funding reforms takes place, its very difficult to net the big fishes, who enjoy political patronage of all hues, with the governments around the world fully aware of its own culprits."

    In several countries (Portugal included) there are laws controlling this sort of thing. Out of control Political funding can be viewed as corruption, indeed.

    "I compliment you for the social issues that you raise with every post and the interesting thing I find is, somewhere I used to think that it happens only in India, but it seems its a global problem and I w'll just wish more and more people take notice of your blog so that at least some day citizens around the world can make realise the governments that people power is supreme, but the only problem is governments around the world very shrewdly have managed to fragment the polity so well over the last few decades and have an complete grip over our societies that today is getting increasingly difficult to gather masses over a social issue."

    Why, thank you so much for your generosity, my friend *bowing*. Unfortunately this sort of issues are indeed global and we must debate them more so that things can move forward in a more positive way. I dream of Democracy for the whole world; real Democracy where the power of the people is indeed supreme (as it is the power of the verb)...until then we must keep on fighting and hoping, right?

    Kalyan, my friend; thank you ever so much for a fabulous comment :D.

    Cheers

    ReplyDelete
  11. The only way to get rid of it is to stop these money launders by doing this money laundering.Anti Money Laundering

    ReplyDelete
    Replies
    1. Hi Johny :D!

      Welcome to our universe!

      Would you care to elaborate?

      Thank you ever so much for your input and I hope you come back :D.

      Cheers

      Delete

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