How Well Does the Money Laundering Control System Work?
95 comments
·August 21, 2025imglorp
nine_k
Lotteries, too: https://www.acamstoday.org/lottery-and-money-laundering-a-ma...
I remember reading about a case where criminals bought an entire issue of a local lottery, thus collecting all the prizes, and apparently saw that a reasonable cost to launder their cash.
throwpoaster
In Canada any transactions over a certain limit require the regulated counterparty to file a Suspicious Transaction Report with FINTRAC.
FINTRAC is unable to establish a pattern in those reports and prosecute. Instead, when someone is charged with an indictable offence, their name and related entities are searched for STRs. Any financial crimes are then used to create additional charges.
The net result of this, because of lack of digitization and various privacy guarantees, is that it is almost impossible to be charged with financial crimes as a primary offence in Canada.
Source: former RCMP financial crimes consultant.
goalieca
What did you think about the bc government report on money laundering?
bradley13
Moving money around is a crime...why? It results in massive intrusiveness by government: full insight into everyone's finances, without evidence of a crime.
And, yes, this does get abused. Government is people, some of whom are evil, or out for revenge, or whatever. I had an acquaintance whose accounts were periodically frozen by the IRS, because he had pissed off the local office. He would get them unblocked, but only after weeks of missing mortgage payments and other bills.
onetimeusename
Ending anonymous banking like in Switzerland was a major objective for the US. They said it was because it allowed money laundering for terrorists. People will get upset when the government talks about ending encryption in order to stop terrorism but the same concept applied to money apparently doesn't matter.
In practice we have a system where money laundering has not ended and we have much more financial surveillance for average citizens. That was probably the purpose all along and it never had anything to do with finding tax evaders or stopping terrorism.
nine_k
What's the point of surveilling the movements of average citizens' money? They usually don't hide anyway. I suppose tax evaders were the target all along, with a smattering of criminal operators, e.g. drug dealers. Terrorists were but a pretext to produce moral panic.
LocalH
Control
pjc50
> much more financial surveillance for average citizens
As with the TSA, any system designed to filter "bad guys" ends up being a huge imposition on average citizens, because there's a lot more of them.
pjc50
> Moving money around is a crime...why?
The short answer is that said money is either the proceeds of a crime, or (in the other direction) being sent to or from a sanctioned person, organization, or country.
This is why it's so hard to push back against, like the TSA. "Do you want terrorists using the banking system?" is a killer argument for midwits.
fuoqi
Just replace "money" with a gold bricks. If I have them in the trunk of my car and move it around, you can't arrest my car on the assumption that the bricks are "the proceeds of a crime". You have to reasonably prove it with all the red tape involved, or GTFO of my way.
efitz
Civil asset forfeiture- a law enforcement officer in many jurisdictions in the US can seize the gold bar without charging you with anything, under the assumption that it is proceeds for a crime, and in an insane twist, they get to keep part or most of the value of the seized property when it is sold at auction. It’s insane.
pjc50
Everyone else telling you about civil forfeiture; I'm going to mention the original James Bond novel Goldfinger, in which part of the early plot is exactly Auric Goldfinger hiding gold in the panels of his Rolls-Royce in order to smuggle it out of the UK, which was illegal at the time. Even for gold legitimately owned.
(historical background: https://www.chards.co.uk/guides/exchange-control-act/785 )
benmmurphy
My understanding was the police were able to do this in the US using civil forfeiture.
kiratp
lol look up Civil Asset Forfeiture.
BMc2020
Money launderning is making it look like the taxes have been paid.
After you pay your W2 income taxes for the year, your income for the year is no longer taxable.
edit: I guess I can't argue with the holy writ of wikipedia, but it's how they got Al Capone.
mothballed
Just using an unlicensed hawaladar to transmit legally earned and taxed money is money laundering (whether that is the actual statute that would be charged, idk, but it falls under the stuff AML compliance is supposed to catch). The whole system is absolutely insane.
LatteLazy
That’s tax evasion.
Money laundering is disguising the source or use of funds (making illegally sourced cash look legally sourced).
Plenty of people would (do) happily pay some tax on cash as part of avoiding difficult questions about the source.
bluGill
They are often related though as if you have illegal money you also didn't pap taxes on it and in turn they can get you because they may not know where the money is from they know you spent more than your taxes indicate is possible.
olalonde
The crazy thing about money laundering laws is that in many jurisdictions, just failing to prove the legitimate origin of your funds can be enough to lose assets, and face criminal prosecution, without the state ever proving an underlying crime. It effectively shifts the burden of proof.
bjornsing
Also, even if you can prove the legitimate origin of the funds you can’t be sure that your bank will accept them. If you can’t find a bank that will accept them then formally you may still have the ”asset” but you can’t really use the money.
XorNot
It is extremely simple to prove legitimate origin of funds though.
You're acting like the government will charge you for a $100 in your wallet.
olalonde
It's extremely simple until it's not. Let's say you bought 100$ worth of BTC back in 2012 and paid cash to some dude at a Bitcoin meetup. Now it’s worth $1M, but you can't prove its origin. You now have a perfectly law-abiding person that risks being accused of "money laundering" just to keep what's rightfully theirs or being forced to give it up.
XorNot
Bitcoin literally has an immutable transaction record baked into it's model.
You would be able to point to the timestamp when you took possession of the wallet which would prove providence unambiguously.
adiabatichottub
I worked in the legal cannabis industry in California before the pandemic. The business I worked for had to jump through a lot of hoops, including dividing itself into multiple LLCs, in order to deal with the disparity between state and federal laws, and the business policies of banks and even some of our equipment vendors (I remember specifically that McMaster-Carr would not do business with you if you were a cannabis company). Most cannabis businesses were forced to work in cash, which made a lot of financial transactions difficult, but also made it easier to do business with those still in the "traditional market". In the end, the stricter regulations had the effect of greater concentration of ownership, but questionable efficacy in stopping illegal exports.
mothballed
It's my understanding that cannabis is still federally illegal virtually without exception, therefore changing AML law might not do much for your industry since it was always an illegal conspiracy to knowingly aid and abet the commission of a felony.
tim333
The money laundering control systems, as well as being ineffective at controlling crime can be a pain in the neck for the law abiding. I have money from my grandad, received 40 years ago. No one really has records going back that far but you try buying a house and they want proof of the origin of the funds. Trying going to your bank to get records from five years ago often gives a date out of range error.
gruez
>The money laundering control systems, as well as being ineffective at controlling crime
The point of AML/KYC regulations isn't to stop all crime, just like the point of US sanctions on Russia isn't to stop all Russian exports. In both cases it's to raise the cost of doing business for the entity being targeted. In the case of Russia, they can still sell their oil to India or whatever, but at a steep discount. In the case of drug cartels, they can still get their funds into the regular banking system, but also at a steep discount. Smuggling pallets of dollar bills across the border and setting up a network of front companies is expensive. Doing all that also which implicate them in even more crimes, so even if there's no evidence of them smuggling fentanyl, they can be prosecuted purely on the basis of having a car full of cash.
>I have money from my grandad, received 40 years ago. No one really has records going back that far but you try buying a house and they want proof of the origin of the funds.
The better question is why are you were sitting on cash for 40 years. In that time inflation already ate 66% of the value, and if you factor in the opportunity cost of not investing the money in stocks/bonds, the loss is even greater.
mothballed
The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones. Ensuring the greatest threats become even bigger ones, but also that any corrupt politicians/officials/bankers get even bigger payouts and the payouts they get are more predictable from fewer channels.
gruez
>The point is to raise the barriers/cost of business high enough so that the larger criminal enterprises do not have competition from the smaller ones.
You can make the same argument about literally any crime deterrence measure though? For instance having drug search dogs at airports probably makes it harder for the indie drug trafficker to get drugs through, but probably isn't going to do much against organized crime networks with insiders working at the airports and/or bribed officials.
tim333
It wasn't in cash. It was in equities to a large extent. But they still ask for the source. Even if it's from selling shares they want to know where the shares came from. At least sort of. The whole thing is a box ticking exercise for compliance to cover their own arses.
In fact it's worse than that in some ways as I had an investment advisor who bought and sold stuff and I don't know if I have records of what exactly.
jacquesm
If I get the OP correctly it wasn't 'cash' that they were sitting on but it was a balance in a bank account. You can turn that into cash (unless lots of other people try to do the same thing at the same time, see also 'bank run') but strictly speaking it isn't cash.
bluGill
I know a number of people who don't trust banks and so have their cash in a mattris or similer things. Most are dead - they remembered banks failing in the 1930s and said never again.
bee_rider
I don’t think that really is the better question. It’s their money, if they want to do silly things with it that’s up to them.
jacquesm
Yes, but they are now aiming to use these funds to buy real estate and of course that is going to raise a bunch of flags. If the government would accept this without challenge criminals would suddenly be left all kinds of crazy inheritances. At a minimum you'd expect some documentation of how that money landed in their possession in the first place, for instance a will, a final balance of an estate and so on.
I've handled a couple of these for family members and the amount of paperwork around even a minor inheritance can be pretty impressive.
jerf
You shouldn't really need to prove where you got them from; what the system cares about is that you're not laundering it, and it's obvious that nobody launders money on a multi-decade timescale. All you should need to satisfy them is just to show that you've been in possession of it for so long the bank can't even show where it came from anymore. That is itself proof that it's not laundering. You may have good success just pushing back a bit with this point.
cortesoft
That requirement isn’t about money laundering at all. They are wanting to make sure that you aren’t borrowing the down payment from someone else, because that would mean you don’t actually have as much (or any) of your own money invested in the property.
The point of a down payment is to make it so the borrower has an incentive to not default on the loan, because the borrower would lose the down payment.
If the down payment is actually borrowed money as well (like suppose you get a credit card advance for the money), then the borrower won’t lose anything if they stop paying the loan, and there is increased risk that the loan defaults.
bob1029
One fun way to get around this is to have enough money to sidestep the bank altogether. The title company does not give a shit about where the money came from. All they will want to see is a screenshot of your current balance so they know you aren't wasting everyone's time.
mothballed
I bought a cheap property (vacant land with no utilities) then built the house literally $20 or $1000 at a time buying blocks/wood/pipes etc as I was building. All the money was legally earned and taxed, but the point is even the title company was sidestepped in this case beyond an amount pretty trivial in comparison to the value of the property and very little of it would have had to of went through the traditional financial system in order to make it possible.
pkaodev
"just be rich bro"
gnopgnip
The lender only needs you to show proof of the origin of funds if they were transferred in the last 60 days
jacquesm
Depends on the jurisdiction and it may not be the lender that requires proof of origin but the party handling the transaction. They may even have a reporting requirement for 'suspicious transactions'.
spydum
They have them, but not from a web interface. Probably will require talking to a human, and a service fee to retrieve the records from physical storage.
FireBeyond
> but you try buying a house and they want proof of the origin of the funds
Fannie Mae's assessment criteria for origin of funds has a time limitation. If that money has been in an account you control, for forty years, "origin of funds" is not a question. I want to say the cut off is something like 36 months, but it may be even less.
Helpfully, all this information is public: https://selling-guide.fanniemae.com/sel/b3-4.3/verification-...
tim333
I'm in the UK. You can kind of get around the regulations but they are still a pain.
phkahler
We all complain about big brother, new surveillance tech, and the easy sharing of personal data with government. And yet, some of the biggest problems seem to be untouched. Is this incompetence, beuacracy, complicity?
throw101010
The moment you try to look into the fines governments impose on banks caught money laundering and the rare cases in which bankers actually see a prison cell, your last option is the most likely one, with a sprinkle of the two others.
My main issue is that all the AML/KYC/KYB barriers we have to deal with never seem to be subject to efficiency tests, all the studies I read and the few audits of these system seem content with it's likely better than doing nothing... but never measure the lost opportunities in trade/business they cause.
In a way it's the same hopless fight against so-called piracy for movies/games. The motivated actors who want to break the law find ways to do it at a large scale, mostly without consequences... and the honest people are just hindered when they want to use their content (even lose access to it when DRMs rely on the existence of the developer/publisher and their goodwill to maintain it way past the time when that media was able to generate revenues).
chaz6
In the UK one of the best ways to launder money is to open a barber shop. Most people pay cash and unless they are going to watch every shop to see how many customers go through there's simply no way to police it effectively. I have heard that the shop owner will get a commission on any laundered money.
aeve890
Same in Chile. A while ago our version of FBI closed 12000 barber shops along the country under an investigation on money laundering. It's so obvious it's ridiculous. 20 barber shops in the same street (we don't have a barber district btw), many of them working 24/7.
fires10
I generally like having these systems in place, because I find when dealing with certain vendors and businesses that following these helps me weed out many scammers when dealing with large amounts of money. Every transfer required a discussion with the teller asking questions about transfers and if the transaction is suspicious. Yes, criminals will find a way, but I find it provides me an easier screening to ensure some businesses are more likely legit.
giantg2
You'd be better off not implementing the majority of the AML stuff and then just freezing/seizing the assets of known criminals once it's in the system.
gruez
>just freezing/seizing the assets of known criminals once it's in the system.
How does that even work? You think that without an AML system, el chapo is going to be opening a wells fargo account with his real name?
throw101010
You think El Chapo had a lot of banking issues in practice? He went around most of these hurdles with and without the complicity of banks and governments.
HSBC's cash deposit tellers in Mexico were even reported to be wider to accommodate the larger cash deposits from the cartels [1]
The same people we put in charge of watching their own activites are the ones breaking the law, repeatedly... and the governments enable it by arguing that fines are "preferable" to real prosecutions and firm/long prison time for complicit bankers.
They are just taking their share on the illegal traffic revenues, like mob bosses do. No intent to stop them. And in the mean time all these AML hurdles hinder legal activites.
[1] https://www.theguardian.com/business/2012/dec/11/hsbc-fine-p...
butlike
not well, evidently.
Notch123
Only read the abstract, but this doesn't seem surprising seeing that crypto, despite maybe noble intentions, has evolved in the worlds' easiest way to launder money and the president himself happily makes a couple of 100 mil with his own shitcoin.
Stagnant
In the grand scheme of things crypto-related money laundering is just a drop in the bucket compared to the amounts being laundered using more traditional methods.
PaulHoule
Most crypto coins (not Monero) are pseudonymous. If a particular bitcoin wallet comes to somebody's attention they can investigate hassle anybody that this person tries to trade with, tell exchanges not to redeem cash, etc.
Thing is these tactics aren't just available to the authorities but also to anyone like intelligence agencies, the mafia, etc. so the confidentiality problems are much much worse with crypto.
paulgerhardt
> Most crypto coins (not Monero) are pseudonymous.
It's worth reading the OSPEAD report from the Monero Community: https://www.getmonero.org/2025/04/05/ospead-optimal-ring-sig...
> Monero users with extreme threat models should be aware that anti-privacy adversaries can leverage timing information to increase the probability of guessing the real spend in a ring signature to approximately 1-in-4.2 instead of 1-in-16.
So slightly worse odds than Russian Roulette. Cool. Cool.
whatsupdog
> tell exchanges not to redeem cash
Try telling it to Chinese, Russian, Indian exchanges.
pavlov
But it’s intentionally set up to be much more accessible than the traditional laundering methods.
Crypto advocates love this “drop in the bucket” excuse. By the same logic, it’s not a problem if I manufacture extra strong alpha-PVP and hand it to school children, because my drug distribution is just a drop in the bucket compared to the global cocaine trade.
kalaksi
> Crypto advocates love this “drop in the bucket” excuse.
Or so you think.
Notch123
No clue, but likely
bob1029
> For example, the United States has not required the disclosure of beneficial ownership information for establishing corporations (violating rec. 24) until recently.
I worked on a front line product for US banks and built a process to verify beneficial ownership for business account openings. I found the current expectations to be laughable:
https://www.federalregister.gov/documents/2022/09/30/2022-21...
> An individual may be a beneficial owner of a reporting company by indirectly holding 25 percent or more of the ownership interests of the reporting company through multiple exempt entities.
Getting around this is not very difficult if you are clever and wealthy.
The overall takeaway I had was that these kinds of rules don't really work in the cases where they need to the most. I don't know how much of a deterrent this could ever hope to be. We even developed an override process for this based on a request from one of our clients.
eep_social
unsurprisingly they killed off the BOI reporting requirement in March [1]:
> ALERT [Updated March 26, 2025]: All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information (BOI) to FinCEN.
privatelypublic
Yea, AFTER you had to file the report to go to jail- and BEFORE it could be retroactively shot down nationally in court. (They already lost in some states)
I've come to realize that viewing the world through the simple lens of laundering causes dumb systems to suddenly make sense. Silly rabbit, you thought these industries were there for the normal public?
Gambling: https://www.cbc.ca/news/politics/online-gambling-sites-money...
Casinos themselves: https://www.ibtimes.com/political-capital/trumps-businesses-...
Commerce: https://www.wired.com/story/wired-awake-180518
Crypto: https://financialcrimeacademy.org/cryptocurrency-money-laund...
Shell companies: https://newrepublic.com/post/192244/trump-celebrates-destroy...
Real estate: https://www.firstaml.com/resources/5-ways-criminals-launder-...