Earlier this year, I began a column about anti-money laundering laws with four observations.
As a libertarian, I don’t like that the government forces banks to spy on customers.
- As an economist, I don’t like that these laws don’t come close to passing a cost-benefit test.
- As a citizen, I don’t like that AML policies divert law enforcement from fighting crime.
- As a humanitarian, I don’t like the way poor people are disproportionately hurt.
I now want to confess that I committed a sin of omission. I should have included a fifth point.
- As a believer in democracy, I don’t like how AML laws can be used as tools of oppression.
But I’m not going to cite a libertarian-leaning source to justify this additional observation.
Instead, let’s look at some excerpts from a recent article in the Economist.
…charities that support small-scale farmers and help people after natural disasters have…had their top brass charged and accounts frozen for allegedly breaching the Philippines’s Anti-Terrorism Act, a draconian law passed in 2020. Their ordeal is an example of how governments are weaponising rules intended to stop dirty-money flows, both at home and abroad. …international directives create opportunities for large-scale abuse.
And evidence suggests that strongmen are becoming increasingly creative in how they wield tools of financial suppression. At fault is a body called the Financial Action Task Force (FATF). …The worst offenders are autocratic regimes keen to maintain a pretence of democratic rule… But even democracies are sometimes tempted. In 2022 Canada broadened its anti-money-laundering laws to stop funding for a protest by lorry drivers… Some strongmen start by collecting information. The FATF requires governments to establish “Financial Intelligence Units” with the power to obtain data…
Abusers might then starve victims of funds so they cannot continue to work. …banks, wary of being punished, are often ultra-cautious in how they handle frozen assets… the FATF can be used to make politically motivated arrests…and…allows repressive regimes to lock up people for months or years on baseless charges. …
FATF standards require states to provide legal assistance, cross-border asset freezes and extraditions. Belarus and Kazakhstan have used this to make Western democracies provide financial intelligence on exiled dissidents.
The bottom line is that it is a very dangerous idea to give politicians carte blanche access to everyone’s financial data.
That’s true when dealing with dictatorships like Russia. And it’s even dangerous, as the Economist noted, in (supposedly) civilized societies such as Canada.
By the way, anti-money laundering laws are just part of the problem. In this video from 15 years ago, I explained why financial privacy laws in tax havens should have been defended rather than attacked.
Pay close attention about 4:40 and you’ll notice that even some left-wing sources admitted that governments would misuse financial data.
Subsequent events (including in the United States) confirm that my fears were fully warranted.
P.S. On a related note, you can read my seven-part series about the “War on Cash” by clicking here, here, here, here, here, here, and here.
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