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Washed Up

The Guardian has reported on the latest developments in Money Laundering. This is the process whereby you have to prove your identity in order to open a bank account and shows that your money has not been received from an illicit source. Under the Money Laundering rules, enthusiastically expanded by the Financial Services Authority, this process is named as “know your customer”.

This is an example of where the rules provide authority for a particular group, cashiers, who proceed, in certain cases, to abuse it without any form of accountability. It would appear that bank staff have been demanding loudly for proof of identity and where the customer received their cash or cheque. Understandably, the customer finds this distasteful and intrusive.
However, the FSA states that it is only implementing the rules set by Her Majesty’s Government and the European Union.

The other intrusion into the financial privacy of the citizen involves the notification of any transaction above £10,700 in a suspicious activity report to the National Criminal Intelligence Service. There are an expected 100,000 SARs anticipated this year “from banks, financial advisers, estate agents, lawyers, accountants, jewellers and high value car dealers“. New rules on house purchase have resulted in deposits above £10,700, paid in cash, being sent for investigation as a SAR. Most of these SARs will not be examined because the reporting system is overwhelmed and understaffed. There are perverse consequences:

Fraud experts such as Liesel Annible of accountants Bentley Jennison, who is UK president of the Association of Certified Fraud Examiners, believes the system can actually help criminals.

“What does NCIS do with all these reports? Firms are now disclosing so much because of the fear of prosecution that there is a danger of serious infringements being hidden by and lost under the noise of all the minor problems and unfounded suspicions. All these SARs just gum up the works – the vast majority are just stored”, she says.

One enters a strange world where the Royal Bank of Scotland can be fined £750,000 for breaching these strict rules even though no evidence of money laundering was ever found; and where rules for identity are enforced whilst money laundering often takes place elsewhere. The final consequence of these rules is that those who are unable to provide proof, especially the poor, find that they have an additional hurdle to overcome if they wish to use the financial infrastructure within the United Kingdom.

There are a number of indications from this article that the process of subcontracting the enforcement of regulation to private sector bodies results in unaccountable staff intruding upon the financial privacy of the ordinary citizen. A more positive note is that, where the citizen finds that his expectations of certain freedoms are abrogated, the response is anger rather than apathy.

The money laundering rules have perverse consequences and demonstrate that the financial privacy enjoyed by the British has been sacrificed to observe a set of regulations that have not worked.

1 comment to Washed Up

  • A particularly perverse example of the toughened ID requirements has struck my brother and his girlfriend. They’ve been entirely unable to open a joint bank account, even with the bank that either of them have been customers of for over 10 years, because they’ve just moved and the only proofs of address they can bring from the last 3 months are from addresses they no longer inhabit. Meanwhile, if they were willing to break the rules, I can’t imagine they’d find it too hard to cook up a few gas bills….