Posts Tagged ‘banks’

“Know Your Customer” in the news

In a memo sent to the Washington Post and published on his website, presidential candidate Donald Trump has outlined his ideas for compelling Mexico to “pay for the wall” as promised by his campaign. The first item on his list is unilateral executive tightening of banking regulations:

The provision of the Patriot Act, Section 326 – the “know your customer” provision, compelling financial institutions to demand identity documents before opening accounts or conducting financial transactions is a fundamental element of the outline below. That section authorized the executive branch to issue detailed regulations on the subject, found at 31 CFR 130.120-121. It’s an easy decision for Mexico: make a one-time payment of $5-10 billion to ensure that $24 billion continues to flow into their country year after year.

The paper goes on to describe in more detail the regulations that would be proposed, then dropped in a deal with the Mexican government in exchange for a payment.

I’ve been writing for quite a while now about how “Know Your Customer” and anti-money-laundering rules, typically adopted on a rationale of combating terrorism and major organized crime, are susceptible to being turned by government to many other objectives not discussed when regulatory authority was originally being sought.

Banking and finance roundup

  • Federal judge refuses to dismiss suit against prosecutor Preet Bharara, FBI agents by hedge funder David Ganek over treatment in now-dismissed Chiasson inside trading case [Peter Henning, New York Times “DealBook”; Business Insider] SEC agrees to return $21.5 million extracted from Ganek’s Level Global Investors [BNA via Ira Stoll]
  • CFPB follies: “Government-Directed Lending Comes to America” [Ike Brannon, Cato] Agency casts its eye on marketplace, otherwise known as peer-to-peer, lending [Thaya Brook Knight, Cato]
  • SEC inspector general sides with agency against allegations of undue sway over ALJs [Reuters, earlier here, here, etc.]
  • Third party liability for crime: “HSBC Sued Over Drug Cartel Murders After Laundering Probe” [Bloomberg]
  • Former Ally Bank CEO: administration extorted race-lending settlement by threatening to derail regulatory approvals [Paul Sperry/New York Post, more]
  • Bellevue, Wash.: $213,000 award to complainant Leticia Lucero “could mean other cases where homeowners argue lenders [cause] emotional distress during negotiations.” [AP/Yakima Herald]

Lyndon McLellan, target of structuring/forfeiture case, beats IRS

We covered this case last year:

…despite the U.S. Department of Justice’s promise to stop seizing bank accounts in future in cases where violations of laws against bank deposit “structuring” (keeping them under the $10,000 reporting threshold) are not connected with any underlying crime, it continues to hold on to money already in the seizure pipeline. That includes the $107,000 grabbed from Lyndon McLellan, who runs L&M Convenience Mart in rural North Carolina, according to the New York Times. “You work for something for 13, 14 years, and they take it in 13, 14 minutes.”

To make matters worse, a “prosecutor wrote menacingly to McLellan’s lawyer about the publicity the case had been getting,” warning that press attention “ratchets up feelings within the agency.”

In June of last year the IRS agreed to drop the charges and return McLellan’s money, and now a federal judge has told the agency to pay the store owner $20,000 for his legal costs, according to my Cato colleague Adam Bates, who has other links and thoughts on the case: “If the government cannot prove beyond a reasonable doubt that a person engaged in criminal activity, it should not be able to punish them as if they’re guilty.”

Banking and finance roundup

Law enforcement for profit roundup

Banking and finance roundup

  • Bernie Sanders still rants and raves about Glass-Steagall Act. Who will break the news to him? [Catherine Rampell/WaPo, P.M. Carpenter (Krugman, Pearlstein in accord with Rampell), earlier] “Hillary Clinton vows to go ‘well beyond’ Dodd-Frank” [Housing Wire via Kevin Funnell]
  • “In the past, ‘financial institutions were unwilling, for relationship reasons, to litigate against each other…That has changed dramatically.'” [Daniel Fisher quoting New York attorney Brian Fraser]
  • “Government Thinks You’re Too Dumb To Try Crowdfunding” [Ben Weingarten, The Federalist]
  • “If every bank behaved like Abacus, the financial crisis wouldn’t have occurred.” So guess which bank got prosecuted [Jiayang Fan, The New Yorker back in October]
  • Billions in free money for consumers, just by regulating credit card fees! Sorry, it’s not that simple [Todd Zywicki]
  • “The war against cash”: government vs. the cash economy [Daniel Mitchell, Cato, first and second post]
  • New IRS authority to secure revocation of passports should give pause to everyone concerned about American liberty [Investors Business Daily]

Banking and finance roundup

  • Trying to buy gift cards in bulk as an employee bonus, Coyote discovers anew that the government hates cash;
  • Initial public offerings are drooping again, regulation one reason [Thaya Knight, Cato]
  • A dissent from the lamentations, here and elsewhere, on the decline of small community banks [Ira Stoll] “Fed’s Tarullo says looking into smaller banks’ concerns” [Business Insider]
  • Berned out? Financial transactions tax “one of the more overrated ideas in American Progressive political discourse” [Tyler Cowen, Wikipedia on Sweden’s experience via @aClassicLiberal on Twitter] And Sen. Sanders continues to express incredulity on Twitter about college loans’ carrying higher interest than home mortgages do, despite attempts to enlighten him on the whole topic of secured lending and collateral [@tedfrank]
  • Video of Federalist Society convention panel on constitutionality of administrative law judges at SEC and elsewhere with John S. Baker, Jr., Stephen Crimmins, Todd Pettys, Tuan Samahon, moderated by F. Scott Kieff;
  • Consumer Financial Protection Bureau ban on contractual arbitration will help class action lawyers, few others [Todd Zywicki, Mercatus]
  • “How US policies to stop terrorist financing end up hurting innocent families abroad” [Dylan Matthews, Vox] Money laundering regs, “de-risking” result in many bank closures in U.S.-Mexico border areas, hassles result for local residents and businesses [Kevin Funnell]

Community banker: it’s better in the U.K. at this point

“When I went to Britain I thought the regulatory environment would be much worse,” he says. “It’s infinitely better there,” says Vernon Hill, who headed for the U.K. after a career in the community bank sector in the United States. The founding of new banks has fallen virtually to zero in the U.S. since the enactment of Dodd-Frank [Stephen Moore, W$J via Kevin Funnell]

Banking and finance roundup