AML, KYC and their abbreviations are now part of every day life. To help law enforcement track illegal funds, an increasingly constraining set of anti-money-laundering measures is being implemented across the globe. Since the 1990s, there have been extensive Know-Your-Customer requirements for financial The institutions are required to confirm the identities of clients, their backgrounds and their nature. The global economy has benefited from this system, which is based on the assumption of guilt and surveillance. financial System to effectively fight crime by cutting off criminals’ money flow.
Has it actually?
In reality, the numbers are different. A number of independent studies found that AML/KYC policies only allowed the authorities to recover 0.1% or less of criminal money. AML costs a hundred-fold more, and they also threaten the right to privacy.
There are many examples of unreasonable demands such as the one of a French man asked to justify the origin of €0.66 he wanted to deposit, are hardly raising any eyebrows anymore. The regulators don’t blink when they are ridiculed, while journalists and whistleblowers keep exposing the laundering of billions of dollar at the top of institutions who put regular customers through bureaucratic hell.
The results suggest that the sacrifice of our privacy rights may not justify its cost.
Many personal freedom activists have been encouraged by the blockchain’s emergence as an alternative to fiat currency that is KYC gated. The regulators responded by trying to integrate the act of buying crypto and the transfer into current AML procedures.
Has the AML Regulation tamed the Blockchain, sealing both its entrance and exit?
It’s not too late. At least not everywhere. Switzerland for example is famously practical and commonsense. It often lets companies define their goals. own risk exposure. It means people are able to buy a reasonable amount of cryptocurrency without KYC.
Swiss experience could help to prevent global AML practice from spiraling and creating a state of surveillance in the former world known as “free”. First, we need to understand why traditional AML approaches are failing.
KYC: The worst policy in history
There are few people who dare question the effectiveness and efficiency of AML-KYC: No one wants to show up on the “criminal” The other side of the argument. The debate should be held, however, as our society seems to spend an outrageous amount of money and time on something which just doesn’t work. work The intended.
You can also read about the advantages of using noted Rob Wainwright was appointed as the director of Europol for 2018: “The banks are spending $20 billion a year to run the compliance regime … and we are seizing 1 percent of criminal assets every year in Europe.”
The most complete overview of this thought is the book, “The Most Comprehensive Overview Of This Thought”. studies Ronald Pol of La Trobe University of Melbourne published a paper in 2020 about the effectiveness of AML. The study found that “the anti-money laundering policy intervention has less than 0.1 percent impact on criminal finances, compliance costs exceed recovered criminal funds more than a hundred times over, and banks, taxpayers and ordinary citizens are penalized more than criminal enterprises.” Furthermore, “blaming banks for not “You can also check out our other articles.” implementing anti-money laundering laws is a convenient fiction. Fundamental problems may lie instead with the design of the core policy prescription itself.”
This study is based on a variety of sources, including major governments and agencies. However, the author acknowledges that it’s nearly impossible to bring all these pieces together. It may seem strange, but despite the billions spent in AML and despite its widespread use, it is impossible to determine whether AML has been effective.
It is impossible to ignore the truth. Even though modern KYC has existed for over 20 years, organized crime The following are some examples of how to get started: drug use continue to rise. In addition, several high-profile investigations revealed massive money-laundering schemes at the top of well respected financial institutions. Crédit Suisse helping Bulgarian drug dealers, Wells Fargo (Wachovia) laundering money for the Mexican cartels, BNP Paribas facilitating operations of a Gabonese dictator… This is not to mention tax frauds initiated by the banks themselves: Danske Bank, Deutsche Bank, HSBC, and so many others have been proven guilty of scamming their countries. The regulators responded by tightening the rules for small transfers to retail customers and creating a lot of red tape.
Why choose ineffective and cumbersome measures? The main reason may be that those who set the rules do not have to take responsibility for their implementation or the final result. It is possible that this lack of accountability explains the absurdity of rules. financial Institutions must maintain an army of compliance experts, while regular people are required to go through the hoops in order to do basic tasks. financial operations.
It is not only frustrating, but it also shows worrying trends in the context of a larger historical and political history. In the increasingly restrictive regulations, a system has been created that allows people to be filtered. It is possible to cut different groups off under the pretense of combating terrorism. financial system. This includes politically exposed people, dissenting voices, homeless, non-conformists… or those involved in the crypto space.
Crypto AML
Due to its decentralized structure, the blockchain is a significant challenge to fiat currency. Blockchain nodes are not burdened like centralized banking institutions with AML verifications. Instead, they run code independent of the user.
The blockchain, or virtual asset service provider (VASP), cannot be made to fit the AML mould. The AML duties of intermediaries now cover two categories, namely buying and transferring cryptocurrency.
FATF has the authority to transfer crypto, and many countries implement its recommendations. The recommendations also include: “travel rule”The data must also be documented. “travel” Together with them. FATF suggests that, at the moment, any transfer of fiat money over $1000 be accompanied with information regarding the sender and beneficiary.
Different countries impose different thresholds for the travel rule, with $3,000 in the US, €1,000 in Germany, and €0 in France and Switzerland. The upcoming TFR regulation update will impose the mandatory KYC for every crypto transfer starting from €0 in all EU countries.
It is good to know that blockchain does not require any intermediaries in order to move value. It does need them to buy crypto using fiat, however.
It is important to understand the rules and regulations that govern buying cryptocurrency. financial Here, the traditions of each country are important. France is a country with centralized government, where a variety of regulations, inspections on site, and conferences are used to define the market in detail. Switzerland is a country that has a direct democracy, which relies on consensus. financial In the management of their businesses, intermediaries have a certain degree autonomy. own risk appetite.
Friedrich Hayek was a prominent economist who founded Mont Pelerin Society in Switzerland. The Mont Pelerin Society was founded in 1947 by Friedrich Hayek, a prominent liberal economist. “Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own.”
On the Geneva Lake’s banks, there is an interesting company named Mt Pelerin, which is a cryptocurrency broker.
Buy crypto in Switzerland
Switzerland is not the tax-free haven many people think it to be. In response to international pressure, it has de facto cancelled its centuries old banking secrecy traditions for foreign residents. The zealousness with which the FATF recommends are implemented shows that it wants to get rid of its previous bad reputation. Indeed, FINMA decided to implement the travel rule for crypto starting from 0€, including for unhosted wallets, as early as 2017. The FINMA decided to implement the travel rule for crypto starting at 0EUR, including unhosted wallets, as early as 2017. “conservative” This obligation will only be enforced by the European Union in 2024.
Switzerland prefers not to micromanage the money when it doesn’t leave the country. financial It does not require a lot of paper work for normal operations. Now, it is one of the few countries in the world where crypto can be purchased without having to provide any personal information. It means companies such as Mt Pelerin are able to process crypto retail transactions up to CHF 1000 per day, without the need for clients’ identities being verified.
It does not mean a free bar but rather an increased degree of autonomy. Mt Pelerin, for example, implements their own Fraud detection methods are used and the company reserves its right to reject transactions that may raise suspicion. This approach is more successful than the bureaucratic processes that are used in other countries. The firms on the front line often know more about fraud techniques than the government.
The Swiss AML approach must be replicated and preserved for the sake of society. We are now closer to the dystopia Friedrich Hayek warned about than ever before, in a world where mass surveillance is routine and CBDC threatens to control our finances.
Any government can manipulate us by controlling the day-today activities. “obliterate any views but their own”. We buy Bitcoin for this reason, and we don’t want KYC.
Then what about the criminals? We should cut off the money they have access to to discourage their involvement in illegal entrepreneurship.
This thesis is now proven to be wrong after twenty years of AML. Why not just accept that the criminals are able to enter our financial system and then follow this money in order to uncover their activities? Learn more by reading part 2.
A special thank you to Biba Homsy, the Regulatory & Crypto Lawyer at Homsy Legal, and the team of Mt Pelerin for sharing their insights.
The guest blogger is Marie Poteriaieva. Opinions are solely theirs. own The views expressed herein do not necessarily represent those of BTC Inc. or Bitcoin Magazine.
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Source: bitcoinmagazine.com