Could it be that the law here is just unreasonable and only the biggest players can afford to get away with breaking it? (likely for an additional premium)

What you don't see in this article is that HSBC has tons of false positives and the scrutinization of transactions slows everyone down. The more strict they need to be with money flow, the more regular people suffer from crippling KYC and financial reporting.

Do we want every transaction we send out to require an accompanying invoice and paper trail? Payment reviews, account freezing, in-depth explanations for every transaction?

Moving money has become tedious and a bureaucratic nightmare. I doubt HSBC is doing this on purpose, they just have so many obligations already from their transaction volume that it's nearly impossible to comply with regulations.

This year they quadrupled their harassment of the common customers with the updates in the KYC and antifraud policy. It's close to be completely unbearable.

As we can see all these regulations do not help at all. It's better to scrap them whatsoever and just let law enforcement to do their job on following the trails themselves.

They are applying scrutiny to the wrong parties. Ever-more-strict KYC for individuals will never catch commercial clients, by design. That is not a reason to just give up.

> the scrutinization of transactions slows everyone down

I really don't know if this is a problem. "It is hard to follow the law" doesn't tend to be an excuse for individuals. I have to scrutinize my tax return pretty closely and "it would take a lot of time" isn't going to convince the IRS that I should be let off the hook.

Law enforcement could help. Compared to things like the drug war, we have very few people investigating financial crimes. This appears to be by design, where our society is so invested in enabling the rich to make money that anything that stands in their way is unacceptable.

The law allows for jail time, it's just rarely pursued these days by the DoJ because Eric Holder changed their system to pursue 'wins' (fines) rather than criminal prosecution, because the bar for successful prosecution is so much higher to convict someone of a crime.

Can't lose a case if you never try and convict anyone.

From government perspective the prosecution with jailtime will mean lengthy court processes with an army of lawyers. Lots of costs for government and headache for the government officials.

Instead if you just impose a fine, the government will actually get lots of money with little work and headache, and everyone involved will be moderately happy.

> From government perspective the prosecution with jailtime will mean lengthy court processes with an army of lawyers.

You're missing the point.

The US government has no desire to try SEC and/or white-collar cases without almost certainty that they will win. They don't really care about deterrence - losses tarnish runs for political office later. (You can watch "Law and Order" to see how that works at the city and state level.)

This is a subtle form of regulatory capture that greatly favors the largest companies. Fines look like a govt. win without the risk of a loss.

It's so bad that federal prosecutors mailed companies to not fund legal defenses for executives charged with a crime, in order to win more cases against defendants who couldn't mount a vigorous defense. (There are even some court forms that ask where you got the money to pay your defense lawyer.)

The Countryside shutdown was a multi-billion dollar debacle for the US government. Countrywide CEO Angelo Mozilo basically walked away without legal repercussions after it cratered. He even gave discounted mortgages to politicians to ingratiate the company in Washington. Who's going to indict their mortgage holder?

https://www.propublica.org/article/cheat-sheet-whats-happene...

Source: worked for an SEC watchdog.

Oh the banks are 100% in the wrong as they are fully aware what’s happening.

KYC compliance is already getting painful for ordinary bank customers. Please don't bring in more surveillance.

Strawman argument. More surveillance is _not_ what I have proposed.

There is an argument that we could have signficantly /less/ regulation if regulation were taken seriously from the top down. This would encourage it to be taken seriously.

What kinds of systems did you have in mind, then? It's hard to see how a CEO could keep personal tabs on all the bank's activities without automated surveillance - it's not like she can individually review every deal the bank makes.

What forces do you think are capable of causing leaders at financial institutions to internalize the cost of criminal banking activity such that they adequately prevent it?

I don't agree with the premise. The way to fight criminal banking activity is to write clear, straightforward, and consistently enforced laws. No system of incentives is going to meaningfully reduce financial crime in a world where grey areas are gigantic and almost all cases end with a settlement.

You can try to write all the laws you want, eventually it boils down to manually reviewing a ton of transactions and everyone loses. The bank needs to pay for growing compliance departments, customers are scrutinized on a growing number of transactions.

Small businesses who are in higher risk industries, however that is chosen to be defined, become inundated with KYC tasks. Every transaction needs an accompanying stack of documents showing the entire trail.

Finance is becoming a bureaucratic hellhole which disproportionately affects lower income people and small businesses. If you don't have a hired compliance agent you will spend your time as a business owner complying to endless demands for onboarding/KYC/transaction reporting.

No but she puts the organisation and processes in place so that the deals are reviewed with a chain of responsibility

That's how it works today. The problem is that any sequence of links in the chain can decide to lie. That's how most major banking scandals happen; some guy, his boss, and maybe his boss's boss conspire against the rest of the chain to be dishonest together. I feel like I end up circling to 1MDB very often here, but it's just such a good example; the 1MDB bankers had to lie extensively to the chain of responsibility at Goldman Sachs, since the compliance department had repeatedly instructed people not to do business with their major point of contact.

An investigation will reveal a subset of the people in the chain involved in the misdeed and/or coverup. Could the following process work?

1. Identify the subset of people involved and color them red.

2. For each of the red-colored nodes, color their immediate superiors yellow if not colored.

3. Until there are only uncolored or blue nodes left in the company, do:

3a. Put all red and yellow nodes in front of a court (presumably in parallel)

3b. When a verdict is reached for a given node, color it blue.

3c. If a yellow node is revealed to be involved, color it red, and goto step 2.

3d. If an investigation reveals further people possibly involved, color them yellow, goto step 2.

This is based on a principle of "your subordinate, your responsibility", and is meant to give everyone involved and their superiors a fair chance of landing jail time. I would hope the courts are already doing something like this.

Random auditing by machine learning algorithms looking for suspect transactions.

That is already done.

Let’s be real here, the only thing these banks would do is impose more draconian KYC/AML on customers to cover their ass. Whatever it takes to tick that box.

Exactly: this is the warrantless mass-surveillance approach to combatting crime. But add a few buzz words about big banks, CEOs with hefty salaries not being held accountable, and drug cartels, and suddenly everyone's for it.

And it's overt surveillance, where privacy is blatantly criminalized, rather than the type of covert mass-surveillance we're accustomed to hearing about, where a 3 letter agency secretly deprives you of your privacy, showing you enough respect to not demand that you knowingly give it up.

So-called anti-money laundering laws are a complete and utter violation of democratic principles, namely privacy and due process, and create the kind of surveillance apparatus that puts the populace under the complete control of the state.

You're guilty until proven innocent on nearly every regulated financial service platform. Prepare to explain with evidence how you got the money, why it's being sent, and who it's being sent to, at a moment's notice. Otherwise expect to be separated from your balance on said platform indefinitely.

Exactly. Money is treated differently than every other medium. As soon as you use it, traditional democratic principles are ignored, and the population is largely okay with that.

The public support for this kind of double standard translates to: "we support you being secure in your rights, unless you want to do something meaningful, like send, receive or possess economic value".

As long as these broad invasions of AML laws into privacy are in place, the West's support for the principles of liberal democracy looks superficial.

For ordinary customers yes, for fraudulent customers, I think they have other ways.

In the end the KPIs are probably something like “number of accounts blocked”, which is easier with ordinary customers