[mike_hearn]

I learned a lot about the AML system many years ago and still have some books about how it works on my bookshelf. It's fascinating stuff.

A few minor comments.

My wife and I have owned and used 1000 CHF notes quite a few times in the past. The last two times we moved apartments I paid part of the moving fee with a 1000 CHF note. We've also bought furniture this way. Nobody was surprised to see this and the notes were accepted without question or comment. To a person who spent their life in Britain this sounds absurd because the British government has - true to form - been trying to wipe cash out for many years to improve surveillance. You can't get any high value notes there, they just don't exist, because the state assumes that anything it can't see must automatically be suspicious. And there's so much street crime, and the police care so little about burglary, it would be very dangerous to hold such notes. But in Switzerland it's safe and the government doesn't try to wipe cash out, so paying with high value notes is common. (Although bank notes are in no way as private as people assume and can be tracked quite well, because they don't tend to circulate far.) This situation makes a mockery of the recommendation to fight crime by removing high value bank notes. The UK did this already and ML is out of control there: criminals just don't care.

I looked into the case of George Cottrell once. The case against Cottrell collapsed because it was founded on entrapment (the eight months was a plea deal in the usual American fashion, and doesn't mean much). It boiled down to undercover FBI agents asking Cottrell, "how could we launder money" and he explained how to do it, in the way anyone familiar with the topic could. He didn't make any offers to actually do it, didn't do it, and that's why "could be jailed for up to 20 years" turned into an eight month plea bargain to let prosecutors save face. Then after he was released he trolled US LE by writing a book called "How to launder money". Usually not given is the subtitle: "A guide for law enforcement and politicians". It's not written for criminals but people love to omit that detail.

Carousel fraud in the EU is a huge problem that governments hate to talk about because they don't know how to fix it and fear that by talking about it, they'll just teach more people how to do it. It's an infinite money glitch but in the real world. It's interesting that the UK thinks they solved it. I suspect they didn't, rather, enforcement collapsed elsewhere and it became easier to just go back to other ways of scamming the government.

[pjc50]

> You can't get any high value notes there, they just don't exist

Yes, although this is mostly by capping the highest regularly circulating note at £50 after the war and then waiting for inflation.

> And there's so much street crime,

[mostly false]

> and the police care so little about burglary,

Sadly true (including "find my iPhone" reports; there was a joke during the Mandelson scandal that this was the one time the Met had managed to locate a phone)

> The UK did this already and ML is out of control there: criminals just don't care.

Yes, which makes a sort of orthogonal point about whether or not cash is actually important for this. There's the conspicuously suspicious businesses ("American sweet shops"), but also more complicated stuff going on (Scottish Limited Partnerships were in the news). Then there's all the Crown dependencies, which are a total financial wild west still.

> Carousel fraud in the EU is a huge problem that governments hate to talk about because they don't know how to fix it

God yes. This is a significant problem in VAT as a concept; I don't understand why the EU loves VAT so much.

[gambiting]

>>Sadly true (including "find my iPhone" reports

I'll give you one better. I know someone who had their nearly new Range Rover stolen in Manchester - reported to the police etc. Few days later, they found it parked at a car park near a big supermarket. Rang the police, they said well, if you still have the keys...just take it? And he was like hang on, you don't want to look at it, check for drugs, take fingerprints, you know, do any actual police stuff stuff around stolen property? And they were like nope, don't have the time or the people to come out, if you have the keys just take the car back and make sure you tell your insurer you got it, that's all we can do.

[masfuerte]

I've heard that this is quite common. The criminals drive the car a short distance and leave it for a few days to check if it has a hidden tracker. If the vehicle isn't recovered they assume it is clean.

[deltoidmaximus]

The story I heard is the car is stolen and used briefly to commit other crimes like robberies or general mischief. Then the car is discarded leaving the surveillance trail largely dead or at least difficult to follow.

[gambiting]

Depends on the vehicle. Range Rovers are commonly stolen to be exported for countries where registering them is not a problem and where buyers are likely to pay cash. Some cars are stolen to be broken up for parts, some are used for other crimes, and some are exported and re-sold as-is. LR products are very frequently in that last group.

[userulluipeste]

"I don't understand why the EU loves VAT so much."

Because it's easy money as taxation goes. Facing growing fiscal deficit and worsening credit score, the first thing the government in Romania did last summer was to rise the (general) VAT quota and cut on some VAT exceptions. It works quicker and more reliably than other means for securing the budget needs.

The VAT related fraudulent schemes are a problem in EU as many other things are, but they are investigated, often prosecuted, and written about. For anyone interested, more can be found at the European Public Prosecutor's Office's site: https://www.eppo.europa.eu/en/media/news

[chadgpt3]

VAT/GST is a direct tax on productive economic activity (as opposed to some proxy like income or capital gains) and I'm sure there are good economic arguments why that's the best kind of tax.

[jcattle]

I'm not suprised that in the swiss economy no one bats an eye at 1000 CHF bank notes. After all the swiss are historically known for being the classy alternative to launder and store your ill gotten gains from, for example, your stint as the dictator of an African country.

But there has been some changes in recent years so I don't know how it is today.

[pjc50]

The absolute peak of that was, of course, during WW2 when vast amounts of stolen or looted money, gold, and other valuables ended up being laundered through Switzerland and kept in anonymous accounts. Mostly by Nazis, although not exclusively. There was a long campaign of litigation by the descendants of Holocaust victims to get some of it back.

In the 21st century the US eventually pressured them into not being a tax haven for anonymous money hidden by US nationals.

The twin questions of tax and terrorism remain as pressure against money laundering.

[roromainmain]

The usual (gu)estimate is that 1 to 3% of UK GDP is exposed to suspicious foreign wealth. It is estimated to be 15 to 20% of Switzerland GDP today. So indeed, it doesn't make sense for Switzerland to limit circulation of cash or increase tracability.

[mike_hearn]

Those estimates aren't based on anything real. The entire financial system including things like insurance and pensions is only 10% of Swiss GDP. Private finance is like 1% or less. And the AML rules are the same as everywhere else because they're standardized by the FATF.

You get a lot of nonsensical talk in other countries about the Swiss economy because the alternative would be to admit that it's a genuinely strong economy and thus that the Swiss are doing things right. There's a culture in the British civil service of assuming there's nothing that can be learned from other countries policy-wise.

[mike_hearn]

That's a sort of standard cope found abroad but bears no relation to reality. It's not easier to launder money in Switzerland vs anywhere else. Actually it's much harder because of the generally high level of policing here. Dictators and oligarchs often end up in London instead.

Look at the article and note the common themes: money is frequently laundered through dodgy chains of high street stores that don't seem to have any actual customers. Everyone is aware of this problem but nobody solves it. What the article doesn't explain is why: it's because these chains are largely owned by ethnic minorities and the left wing governments that have ruled Britain for decades are terrified of anything that looks like an ethnically targeted crackdown, or anything that could be called "Islamophobia".

Good luck running a fake vape shop in a Swiss village, lol. I've never seen or heard of such a thing here. In Britain you can just drive for a while and see lots of them. Look at the sibling comments where British police won't even investigate car theft (the idea there's not lots of street crime there is crazy). Come visit Zürich and it won't take long until you see bobbies on the beat, just cruising around looking for trouble. Levels of attention to low level street crime are completely different.

The origins of the Switzerland/ML link are the numbered (anonymous) bank accounts available and used in WW2, often by Jews trying to preserve their wealth from confiscation by the Nazis. Along with a general culture of financial privacy in which the local governments are constrained by law from obtaining all your transaction data from banks.

The AML system was invented by Americans who cared a lot about the war on drugs, tax evasion, and later, the war on terrorism. They didn't care about financial privacy at all, probably because they never lived right next to Nazis or communists, or experience floods of refugees fleeing totalitarian governments during WW2 (not on the scale Switzerland did). So the global AML system has been built largely by America threatening huge trade sanctions on any country that didn't agree to comply and financial privacy be damned. After all, Uncle Sam is the very avatar of democracy and freedom so who could object to it knowing everything?

Culture of financial privacy <-> American sanctions. Who wins? The answer is the US wins and Switzerland implemented all the rules long ago. Swiss citizens get some level of privacy from their own government, but Swiss banks will hand over all your data and then some to the US government if you're a "US person" - a category much broader than merely being a US citizen. So banks and sometimes other companies here often have you declare that you're not a US person because dealing with such persons results in the full force of the AML/FATCA compliance cannon being pointed at the org and it's too expensive and dangerous to deal with.

[iamacyborg]

> The UK did this already and ML is out of control there: criminals just don't care.

From 18th May:

“A new £30m High Street organised crime unit has been announced by the government after the BBC's year-long investigative reporting into illegal mini-marts, vape shops and barbers.”

https://www.bbc.co.uk/news/articles/ce3pzwx449no

Of course, remains to be seen what, if any, impact this ends up having.

[evanjrowley]

Which AML books would you recommend?

[mike_hearn]

I don't know of one that covers everything. Treasury's War is a sort of auto-biographical insider oriented history written from the perspective of someone in the Treasury Department, using the system to chase "terrorists" (often just random Muslim NGOs or orgs with zero evidence of terrorist involvement). Other books cover parts of the system incidentally, like the Banker's Plumbers Handbook (warning: self published, roughly edited).

A lot of what I learned about it, I learned by reading random documents published by governments designed for people working in regulated industries. Or by talking to people who worked in banks or regulators themselves. AML doesn't just cover banks but also in some countries casinos, car dealerships, lawyers, auction houses... it's like trying to push down on mercury so the scope of the rules constantly expands.

[marysol5]

>To a person who spent their life in Britain this sounds absurd because the British government has - true to form - been trying to wipe cash out for many years to improve surveillance.

Oh come of Facebook for christ sake. Absolute hogwash.