- “FATCA: An American Tax Nightmare” [Stu Haugen, New York Times via TaxProf]
- Following Iceland’s model? “Neither [Krugman nor Yglesias] mentions that a major part of the Icelandic recipe was letting *foreign* deposit holders twist in the wind.” [Tyler Cowen]
- Wasting a Crisis: Why Securities Regulation Fails, new book by Virginia law dean Paul Mahoney [Thaya Knight, Cato, with video of Cato event]
- Seventh Circuit reverses $2.46 billion judgment against HSBC Holdings in Household International case [Reuters/Business Insider]
- “I’ve been with them 40 years and then they have this? It’s a pain.” Banks close longtime local accounts as anti-money-laundering rules squeeze economy in border town Nogales, Ariz. [W$J]
- Six regulatory agencies issue diversity guidelines for financial institutions, implementing Dodd-Frank mandate [FDIC]
- Judge to Labaton Sucharow, Bernstein Litowitz: you might at least want to talk to those “confidential informants” your case relies on [Daniel Fisher, Forbes]
What if it were a crime to walk down city streets taking roundabout paths so as not to be filmed by official surveillance cameras? Compare the state of “structuring” laws that make it an offense in itself to arrange transactions so they’re not subject to the filing of reports [Conor Friedersdorf, The Atlantic; earlier]
I’ve written often on the surreal world of “structuring” law, in which keeping bank deposits or withdrawals below a reporting threshold is a federal crime whether or not you are aware of the structuring law and whether or not the underlying money flow is for or from any illegal activity or intended to evade any law. Of particular interest, I’ve written about who can get away with structuring (Eliot Spitzer) and who can’t (you). The law, along with a separate charge of lying to federal investigators, appears to have tripped up former U.S. House of Representatives Speaker Dennis (“Denny”) Hastert in what a federal indictment suggests were hush money payments over misconduct before he arrived in Congress. I’m quoted in Francine Kiefer’s coverage for the Christian Science Monitor. More commentary: Ken White, Popehat.
The federal government is bringing charges against the leadership of FIFA, the international soccer association, and Switzerland has arrested them in accord with American wishes. But are the jurisdiction of U.S. courts and U.S. criminal law really proper for this alleged international wrongdoing? David Post:
…ask yourself: if you think that the “use of an American bank” is a sufficient basis for the exercise of US jurisdiction over foreign nationals residing and conducting business abroad, then presumably you’re OK with being hauled into court in Singapore because you have used, say, a Singaporean bank, or into a Mexican court because your money found its way to a Mexican mortgage broker, or into a Danish court because you have at times used a Danish Internet Service Provider. Yes? When you look at it that way it becomes a little more difficult to applaud wholeheartedly – shouldn’t we have been able to count on the Swiss, within whose jurisdiction FIFA undoubtedly lies, to do something?
- Home-court advantage: SEC wins against defendants 90 percent of the time when it litigates before its own judges [Jean Eaglesham/W$J, Thaya Knight/Cato, earlier]
- Oops! “Corporate Inversions Increase U.S. Tax Revenues” [Rita Nevada Gunn and Thomas Lys/SSRN via Paul Caron/TaxProf, related, earlier]
- “How U.S. rules on conflict minerals are making life worse for desperately poor people in war-torn Congo” [Politico, earlier]
- “Lock up the banksters.” “Lock up the drug dealers.” Dara Lind spots some populist parallels [Vox]
- Should bank boards owe fiduciary duty to regulatory as well as investor interests? [Marc Hodak]
- “Nobody’s Worried About ‘Too Big to Jail’ Any More” [Matt Levine/Bloomberg View] “Hunting Whales: The Problem With Prosecuting SIFIS” [Thaya Knight/Cato]
- Luigi Zingales: market economists need to address question of when and how finance sector goes wrong, or others will do it for them [“Does Finance Benefit Society?“, presidential address to American Finance Association, Buttonwood/Economist, Arnold Kling]
- Critics say by naming payment processors in massive enforcement action over debt collection practices, CFPB is implementing its own version of Operation Choke Point [Kent Hoover/Business Journals; Barbara Mishkin, Ballard Spahr; Iain Murray, CEI]
- Green sprout in Amish country: “Bank of Bird-in-Hand is the only new bank to open in the U.S. since 2010, when the Dodd-Frank law was passed” [WSJ via Tyler Cowen; Kevin Funnell on smothering of new (de novo) bank formation; Ira Stoll (auto-plays ad) on growth of non-bank lenders]
- “Quicken Loans Sues DOJ; Claims ‘Political Agenda’ Driving Pressure to Settle” [W$J; J.C. Reindl, Detroit Free Press]
- Shocker: after years of Sen. Warren’s tongue-lashings, some banks consider not giving to Democrats. Is that even legal? [Reuters] “Elizabeth Warren’s Extraordinarily Bad Idea For A Financial Transactions Tax” [Tim Worstall]
- Still raging on: Delaware debate about fee-shifting corporate bylaws as deterrent to low-value shareholder litigation [Prof. Bainbridge first, second, third posts]
- “How a Business Owner Becomes Criminally Liable for How Customers Spend ATM Withdrawals” [Elizabeth Nolan Brown, Reason]
- New York financial regulator pushes to install government monitors at firms where no misconduct has been legally established [Robert Anello, Forbes]
This is welcome news from the U.S. Department of Justice, and rather than try to rewrite I’ll just quote at length what my Cato colleague Adam Bates wrote:
[On March 31] Attorney General Eric Holder issued new guidelines to federal prosecutors tightening the rules for seizing assets for so-called “structuring” offenses.
Under the Bank Secrecy Act, structuring occurs when someone is suspected of arranging their financial transactions as to avoid triggering a report to the federal government by the financial institution. Some of civil asset forfeiture’s most egregious abuses are the result of federal prosecutors utilizing this nebulous statute to empty the bank accounts of unwitting citizens and small businesses who are never charged with any crime or even aware that their transactions are considered illegal.
The new rules require:
1. That structuring seizures against people for whom there is no criminal charge be based upon probable cause that the funds were either generated by unlawful activity or intended for use in anticipated unlawful activity. Alternatively, prosecutors must procure a warrant from a court and with the approval of either the U.S. Attorney (for Assistant U.S. Attorneys) or the Chief of the Asset Forfeiture and Money Laundering Section (AFMLS) (for Criminal Division trial attorneys).
2. That when the prosecutor determines subsequent to a structuring seizure that the government lacks the necessary evidence to succeed at either a civil or criminal trial, the seizing agency must return the full amount.
3. That when a prosecutor seizes property pursuant to suspicion of structuring, the prosecutor must file either a criminal indictment or a civil complaint, or receive an exception from either a U.S. Attorney or Chief of AFMLS within 150 days or else return the seized assets.
4. That all settlements must be complete and in writing. Informal settlements are expressly prohibited.
I’ve been writing about the outrages of these structuring cases for years, especially the feds’ ambush of Randy and Karen Sowers’s successful Middletown, Md. dairy farm and ice cream maker, South Mountain Creamery. In yesterday’s Washington Post, Rachel Weiner tells how the Sowers’ story “gave civil forfeiture reformers a powerful symbol”, especially after the Institute for Justice got involved. I’m quoted:
“The South Mountain case happened to be one of these that captured the imagination,” said Walter Olson, a blogger for the libertarian Cato Institute who has written about the Sowers case. “Once you’ve bought ice cream for your kids from one of their little trucks, the name sticks in your memory.”
- Florida court blocks drug-related seizure of house as violation of Constitution’s Excessive Fines Clause [Orlando Weekly, opinion in Agresta v. Maitland]
- Deferred- and non-prosecution agreements (DPAs/NPAs) have ushered in a little-scrutinized “shadow regulatory state” [Jim Copland and Isaac Gorodetski, “Without Law or Limits: The Continued Growth of the Shadow Regulatory State,” Manhattan Institute report]
- Politicized prosecution: New York Attorney General Eric Schneiderman throws book at bankers for not lending in Buffalo [Conrad Black via Tim Lynch, Cato]
- Would it improve prosecutors’ incentives if localities rather than state governments paid for incarceration? [Leon Neyfakh, Slate, via David Henderson]
- Andrew Pincus on the growing danger of enforcement slush funds [U.S. Chamber, more]
- “The Department of Justice, if it succeeds on its new theory, may have criminalized many instances of dull employee misconduct.” [Matt Kaiser, Above the Law; Peter Henning, N.Y. Times “DealBook”]
- A Brooklyn mess: new D.A. looking into 70 convictions obtained with evidence from retired detective Louis Scarcella [Radley Balko]
- Administration has abused the law in mortgage lender settlements [House Judiciary hearing: Paul Larkin, Ted Frank testimony]
- Department of Justice official says banks may need to go much farther in informing authorities of customers who may be up to no good than just sending Suspicious Activity Reports (SARs) [Kevin Funnell] Interpol Red Notices, which among other effects cut off banking access, are open to geopolitical manipulation [Ted Bromund, Weekly Standard]
- No, Operation Choke Point hasn’t gone away, not in the slightest [Funnell, Jared Meyer/Economics21]
- What Elizabeth Warren has done to Michael Greve’s mortgage refinance application isn’t pretty [Liberty and Law]
- Battle over loser-pays clauses in corporate governance rages on in Delaware [Reuters]
- “The U.S. government’s stupid tax war on expatriates” [Brett Arends, earlier on FATCA]
- Dodd-Frank: “Wall St. attacked, Main St. wounded” [Iain Murray]
New Cato Research Briefs in Economic Policy No. 20 takes up a question often raised in this space before [Hester Peirce, Ian Robinson, and Thomas Stratmann, Cato]