For the majority of banks, they do not want people to conduct illegal activity via their bank. For the minority of banks which don’t mind it, nothing stops them from adding the clause anyways. A cartel bank probably cannot use the existence of the clause as a defense if they’re still allowing illegal activity.

If the purpose is to allow the bank to terminate accounts suspected of illegal activity, my assumption is they can already terminate for much less than that.

Bank 1 has the CYA clause and a cartel uses them for a decade for illegal purposes.

Bank 2 does not have the clause and a cartel uses them for a decade for illegal purposes.

In neither case does the clause prevent the illegal activity or make the bank any more or less aware of what customers are doing. They have to do KYC regardless of what the TOS says.

If you have actual measures (such as asking for source of funds and then asking for proof if the evidence looks incongruent with what was stated), you have no need for the silly question; if you don't, the silly question won't save you either.

This should go for both the asker and the subject of the question: Illegal things are already illegal. If a given legal system requires the silly question to be able to "tack on wire fraud charges" to something that would otherwise go unpunished(?!), I think what should be fixed is the legal system, not every single banking form.

> You might look at the standard KYC questionnaire for a new retail account and think “Really? You ask questions which have obviously correct answers. You give people less than a tweet worth of space to answer them. How could this possibly catch any criminals not stupid enough to write Occupation: Drug Dealer?” […] this is not the only mechanism by which KYC questionnaires have a stochastic effect; they’re also useful in an entirely different part of the crime lifecycle. Many, many crimes involve lies, but most lies told are not crimes and most lies told are not recorded for forever. We did, however, make a special rule for lies told to banks: they’re potentially very serious crimes and they will be recorded with exacting precision, for years, by one of the institutions in society most capable of keeping accurate records and most findable by agents of the state.

> This means that if your crime touches money, and much crime is financially motivated, and you get beyond the threshold of crime which can be done purely offline and in cash, you will at some point attempt to interface with the banking system. And you will lie to the banks, because you need bank accounts, and you could not get accounts if you told the whole truth.

> The government wants you to do this. Their first choice would be you not committing crimes, but contingent on you choosing to break the law, they prefer you also lie to a bank. […]

> Particularly in white collar crime, establishing complicated chains of evidence about e.g. a corporate fraud, and mens rea of the responsible parties, is not straightforward. But then at some point in the caper comes a very simple question: “Were you completely honest with your bank?” And the answer will frequently be “Well, no, I necessarily had to lie in writing.”

> And congratulations, you have just eaten a wire charge fraud for every transaction you’ve ever done.