The Financial Crimes Enforcement Network (FinCEN) is the part of the US Treasury tasked with administering the FBAR Form. Even though their job is to administer the FBAR, they tend to assign most of their administrative tasks to the IRS. And now they’re messing around with the Bank Secrecy Act (BSA) again. This time, they’re trying to change it in order to require investment advisers to establish anti-money laundering (AML) programs. Their solution for getting what they want? Simple, just tweak the definition of “investment adviser” to also mean a “financial institution.”
Straight from the press release:
‘Investment advisers are on the front lines of a multi-trillion dollar sector of our financial system,’ said FinCEN Director Jennifer Shasky Calvery. ‘If a client is trying to move or stash dirty money, we need investment advisers to be vigilant in protecting the integrity of their sector.’
Stop. Right. There.
Last time I checked, if an investment adviser is assisting a client with moving or stashing dirty money, that is a criminal conspiracy and also belongs to a variety of other federal crimes. So, why do we need more laws? Overloading law enforcement with irrelevant data does not make the world safer. In fact, it does the opposite. The BSA allows the IRS to seize the funds of people who did not break the law. The following is an excerpt from a new Institute for Justice article:
“Thanks to federal civil forfeiture laws, the Internal Revenue Service has seized millions of dollars from thousands of Americans’ bank accounts without proof of criminal wrongdoing, according to a new report from the Institute for Justice (IJ). The IRS practice of “seize first, ask questions later” highlights the need for broad reform of federal civil forfeiture laws that impose substantial burdens on property owners and make seizing property — and profiting from it — too easy for law enforcement.”
The IRS took the “seize first, question later” approach when it cleaned out the bank account of Carole Hinders’ Mexican restaurant in Spirit Lake, Iowa. Carole’s restaurant only accepted cash, so she made frequent cash deposits. To the IRS, this was evidence of illegal “structuring” — deliberately depositing or withdrawing cash in amounts under $10,000 to evade federal reporting requirements imposed on banks. Under federal civil forfeiture law, that was all the IRS needed to seize her money and force Carole into court to try to prove her innocence and win her money back, which she eventually did more than a year-and-a-half after it was seized.
Well, that’s pretty horrifying. But are you ready for the truly terrifying bit? Stories like Carole’s are getting more and more common…
So, what has the Treasury Department done to convince us that they should be trusted with more power? Anyone? Bueller?
The press release continues:
“This proposed rulemaking would address money laundering vulnerabilities in the U.S. financial system. Presently, illicit actors seeking to access the financial system may attempt to gain such access through an investment adviser as a means to avoid detection of their activity which might otherwise occur in dealings with financial institutions that have AML programs and suspicious activity reporting requirements. Requiring investment advisers to establish AML programs and file reports of suspicious activity would bring them under similar regulations as other financial institutions subject to the BSA, such as mutual funds, broker-dealers in securities, banks, and insurance companies.”
Way to let that cat out of the bag. Anyone looking to access the financial system to launder money can now look for unscrupulous investment advisers to help them launder their dirty money — regardless of the rule change (however, those breaking the law a) usually don’t have any qualms about breaking said law and b) don’t intend to be convicted of any crime). What we have here is a possible ironic result where the Treasury, in an attempt to hide, remove, or make money laundering techniques more difficult, released information that could have the unintended consequence of publicizing the very things that should be kept quiet.
Personally, I didn’t know that there were any investment advisers involved in money laundering. I wonder how many people looking to launder money just found a way to do so?
