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Culture War Roundup for the week of May 6, 2024

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Excellent post!

In general I think we should be suspicious of any public program that tries to hide its costs, or launder those costs onto private actors.

Another example of this is AML/KYC regulations, which basically require banks to serve as a branch of law enforcement at their own expense. From the excellent Bits About Money post on the topic:

Money laundering is, effectively, a process crime. We criminalized it not because of the direct harms, but because it tends to make other interdiction of criminal activity more difficult.

Money laundering covers anything which obscures the link between another crime and the proceeds of that crime. This is intentionally extremely vague and expansive. The victim is, take your pick, either the state or the financial institutions the state has deputized to detect it. [...]

Much like KYC, AML policies are recursive stochastic management of crime. The state deputizes financial institutions to, in effect, change the physics of money. In particular, it wants them to situationally repudiate the fungibility of money. [...] They are required to have policies and procedures which will tend to, statistically, interdict some money laundering and (similar to how we discussed for KYC) trigger additional crimes when accessing the financial system. Particularly in U.S. practice, one sub-goal of this is maximizing the amount of assets which will be tainted by money laundering and then subject to forfeiture proceedings. [...]

And so every financial institution of any size has a Compliance department. One of their functions is having a technological system which will sift through the constant stream of transactions they produce and periodically fire “alerts.” Those alerts go to an analyst for review.

This implies floors upon floors of people who read tweet-length descriptions of financial transactions and, for some very small percentage, click a Big Red Button and begin documenting the heck out of everything. This might sound like a dystopian parody, and it is important to say specifically that this is not merely standard practice but is functionally mandatory. [...]

I think the thing that cryptocurrency enthusiasts are rightest about, which is broadly underappreciated, is that the financial system has been deputized to act as law enforcement. [...] Is this tradeoff worth it? I wish that society and policymakers more closely scrutinized the actual results obtained by AML policies. Plausibly we get sufficient value out of AML to have people attend mandatory diversity training at 1 PM, Banking the Underbanked seminar at 2 PM, and then AML training at 3 PM, while experiencing very little cognitive dissonance. But if that case can be made, then let it be made. I find the opposing case, that AML consumes vast resources and inconveniences legitimate users far out of proportion to positive impact on the legitimate interest of society in interdicting crime, to be very persuasive.

Sorry for the giant quote-post. I don't have much to say about this topic beyond "the above article is fully consistent with what little experience I have of AML/KYC from my work". I just think that article is very very good and also quite relevant to the topic at hand.