Bitcoiners Must Fight the FATF and it’s AML Regime

This article from October 11th, 2022 by Stephan Livera was originally published on Bitcoin Magazine

Financial surveillance is all around us. Every time you want to sign up with a bank, you have to show identifying documentation, be screened by their automated systems, and get peppered with questions about your job, lifestyle, and source of wealth. Often, when you go to withdraw, spend, or transfer what you thought was your own money, you are subject to even more questions.

It only seems to be getting worse and worse as time goes by. Why are we here? It has to do with various organizations that push this nonsense forward. And one of the key organizations here is FATF, the Financial Action Task Force. FATF is a natural enemy of those who favor financial freedom.

There is a regulatory burden brought by FATF and “financial crime” regulations such as anti-money laundering (AML) requirements and sanctions. These regulations are introduced and driven because they help stop money laundering or terrorist financing worldwide. However, a serious analysis of their effectiveness shows that less than 1% of illicit financing is detected (see my chat with Ron Pol and his research here). And yet, the world is paying a huge cost in compliance and lost civil freedoms. From a property rights standpoint, businesses and banks should be able to run their businesses how they see fit rather than constantly being in a position where they must “ask permission” from regulators or licensing agencies to continue operating.

If there’s a crime being committed, let law enforcement go and get a warrant! Regulators shouldn’t just get to automatically violate the privacy of everyday citizens’ financial details.

SO, WHO IS FATF ANYWAY?

Well, it’s not clear exactly what kind of entity FATF is. It claims to be an independent inter-governmental body, but what is its registered entity? That appears to be a project operated out of the Organisation For Economic Cooperation And Development (OECD). It’s ironic in some ways that FATF pushes massive regulation and scrutiny onto everyday normal people. Still, it seems not to be very accountable itself.

But the short version is that it bills itself as a global money-laundering and terrorist-financing watchdog. The FATF Secretariat is funded by OECD nations to the tune of about 619 BTC (or, in fiat terms, about $11 million) per year. It has about 65 staff members, per its 2021 Annual Report. But the impact it has is great because it is the one pushing out FATF recommendations and threatening countries with being placed on FATF gray or black lists.

BUT IT’S NOT JUST FATF…

Now, it’s not just FATF. There are all kinds of AML and “financial crimes” working groups, regulators, and other entities in individual nations worldwide. So, they seem to all collaborate on how our financial lives must all be regulated and micromanaged. The gist seems to be that they come back with “FATF recommendations” about stopping money laundering, and local countries and regulators must implement these rules. Few people in any individual country or state care enough to kick up a stink and stop the financial regulation overreach and human rights crime.

Usually, there are at least a few politicians in each country or political body who want to pretend to be anti-financial-crimes, which might also explain some of the recent “unhosted wallets” garbage coming out of the EU (see my chat with Gigi on why this corruption of language is harmful to Bitcoin and to all of us.)

WHAT’S THE NET-NET OF ALL OF THIS?

So, the result is that more and more financial control flows into individual banks, businesses, and entities that are forced to comply. The regulatory and bureaucratic state deputizes businesses and individuals to perform unpaid labor. And anyone who disagrees gets accused of being a shill for criminals and money launderers. Do they not appreciate that there might be people who want to defend private property and freedom on principle?

This is why we are all subject to so much financial surveillance and intrusive questioning about ourselves. In some ways, that poor bank teller or low-level bank staff member is not wholly to blame! The real culprit is at a much higher level. These intergovernmental-funded entities continually spin narratives about how effective their regulations are.

Now, of course, Bitcoin is a big part of the answer to making these wanton human rights violators obsolete. But even here, there are various Bitcoin companies and exchanges experiencing issues getting access to fiat accounts to enable the on-ramps they provide for users.

WHAT ABOUT BONA FIDE CRIMINALS?

Catch them for the actual crimes they do, whether that’s theft or murder, etc. We also have to accept that freedom has a cost. Criminals also use roads. Are we gonna have know-your-customer (KYC) requirements every time anyone uses a road? And criminals could also install curtains in their homes. Can you imagine the insanity if we came up with a Curtain Regulatory Authority that mandated that before any curtain installer could come to install curtains, they have to conduct identity checks to confirm that you’re not criminal hiding behind curtains?

And remember, it’s not like the current justice regime is doing some fantastic job, given all of the financial surveillance in the world today. The vast majority of crimes are still committed with fiat currency. The answer is not “more control and bureaucracy.” It’s to accept that the current approach is simply not effective.

THE NORMALIZATION OF DATA COLLECTION

However, this normalization of private data collection goes beyond merely AML and “financial crime” laws. We’re seeing real impacts, with quite recent examples:

• Celsius: The names and transaction histories of every user made public in bankruptcy proceedings

• Optus: 10 million customers’ data revealed in a breach, with 2.8 million having their passport or driving license number leaked.

So, in the end, creating this culture of private data collection has resulted in more innocent people being put at risk. Where does this factor into the calculation of overeager bureaucrats and politicians who play-act like their surveillance laws are helping?

WHERE DOES PAYPAL FIT IN WITH THIS?

PayPal recently came under fire for its change in policy relating to “misinformation” and docking customers $2,500. Given the social media outrage this time, it had to walk it back. But clearly, this is just a temporary reprieve from further financial surveillance on us all.

As Samson Mow of JAN3 tweeted, we can either use Bitcoin or be forced to research all political ideologies of executives at major fintech companies. Your self-sovereign Bitcoin wallet will not check your political views before broadcasting your Bitcoin transaction. Your self-sovereign Bitcoin wallet will not ask you about your source of wealth before permitting you to deposit funds and make use of it.

ATF and the AML regime have created and grown a culture where statists believe it is acceptable to peer into other people’s finances and control them, so long as their ideology differs from the people in power at the time.

THIS IS ABOUT HUMAN RIGHTS

It’s a question of human rights. To the extent that its FATF recommendations encourage local regulators, bureaucrats, and politicians to continue controlling private citizens’ and businesses’ money, it is impinging on their private property rights. FATF and the associated AML regime are violating human rights around the world, and we’re all poorer for it.

Bitcoiners must be clear about the problem and start speaking up and taking action on it. That action can include coding and building self-sovereign FOSS alternatives to the financial panopticon. It can also take the form of suing government entities for over-regulating and encroaching on innocent people’s lives. It could even involve lobbying local politicians to push back on FATF and financial surveillance. Defunding FATF would also be a great idea. Why must taxpayers worldwide pay for this ineffective and economically destructive regulation?

As a final takeaway, though, consider that while there are more obvious cases of financial exclusion (which FATF brushes away as “unintended consequences“), the case must be made on the principle of the matter. We want to live in a free market society with private property rights and not constantly wonder what we can do with our own money. The world does not need more FATF recommendations and reports. It needs defense of private property rights in principle.