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Banks Greased with Dirty Money Are Terrified of Becoming Obsolete

Last Updated March 4, 2021 3:19 PM
Christina Comben
Last Updated March 4, 2021 3:19 PM

Most cryptocurrency companies struggle to get a bank account. This is mainly due to inadequate anti-money laundering procedures and the banks’ fear of being fined. At least, that’s what these centralized institutions with coffers stuffed full of dirty money want you to believe. In reality, they’re out of their depth and scrambling to stay relevant.

Banks Suppress Cryptocurrency Because They Fear It

In June 2016, the British public lost its mind. Driven by an ageing population of right-wing voters clinging to the memory of the “Great” Britain of the colonial years–and voter abstention on behalf of the youth.

Then, just a few months later, the U.S. followed suit and voted a misogynistic reality TV star into the White House.

What follows only goes to show the danger of having elderly, out of touch rulers at the helm of society.

Experience is valuable and I’m not trying to come across as ageist. But, it is a fact that most of us become resistant to new things as we get older. Now we’re overrun by a bunch of white-haired old men at odds with technology because they fear it.

Why Do We Fight Change As We Get Older?

It’s not just the Tory backbenchers and upper-middle-class Britons who are losing their grip on society. Warren Buffett’s been making the headlines a lot lately for his absurd commentary on Bitcoin. It makes me recall the words of one wise lady I knew long passed.

If you don’t know anything about it, it’s best to listen rather than speak.

Why do Buffett and so many others like him fear Bitcoin, cryptocurrencies, and financial innovation?

Because they don’t understand it. Worse than that, they don’t know how to control it–and they certainly don’t need transparency of transactions in their shady deals. They’re already profiting handsomely from market manipulation, money laundering, and cronyism.

As Barry Silbert stated, Buffett investment Wells Fargo has been fined almost 100 times since the turn of the century:

Big Banks–A Tale of Money Laundering and Corruption

Is it ironic that banks don’t want to work with cryptocurrency companies, brandishing them as “unregulated” and even criminal? Bitcoin was born as a response to the same global financial crisis a few centralized and decidedly criminal institutions caused.

That such global turmoil could be spurred by the actions of so few was unforgivable. Yet, we duly forgave, and used our tax paying money to bail out the banks.

Now banks are suppressing innovation because cryptocurrency companies have ‘lax AML procedures’ in place. Really?

Bank scandal after bank scandal last year only goes to prove that large global financial institutions are, in fact, enablers of illicit financial flows.

Whether they operate laundering crime under the thumb of Russian oligarchs in the Baltic states, or they’re simply considered too big to fail, the resounding majority of the world’s banks have opened their arms to dirty money. Some more than others.

2018 saw one money laundering scandal after another. UBS, Rabobank, ING, Malta’s Pilatus Bank, Goldman Sachs, and of course arguably the worst perpetrator of all, Deutsche Bank.

Beyond laundering close to $200 billion of suspected dirty money and having its offices raided in November, Bloomberg calculates  that the German bank shelled out over $18 billion in the last decade to settle AML disputes.

Isn’t that a shit-ton of money? Apparently not, if Alec Ziupsnys is to be believed. That’s simply a mere fraction of the profits they make from facilitating criminal transactions.


Banks Won’t Work with Cryptocurrency Companies Over AML

They say that people in glass houses shouldn’t throw stones. With most big-name banks winding up in an AML scandal at some point, not wishing to work with cryptocurrency companies for their lax AML procedures no longer holds up in court.


Big bully banks are getting their way because they are scared of becoming irrelevant, just like ageing backbench politicians.

Take John Frigo, for example. He’s currently working as a digital marketing lead for MySupplementStore.com. However, until recently, he was running a currency exchange and niche banknote business and even looking into opening up a Bitcoin or Cryptocurrency exchange in Chicago. He says:

I had the licensing… I was registered with FinCEN and had a Money Transmitter license from the state of Illinois. However, banking was the major issue and hurdle that ultimately made me decide not to pursue it.

This isn’t really surprising and in many ways isn’t unique to cryptocurrency. Banks and merchant processing companies routinely blacklist entire industries which are completely legal.

He goes on to say that he has no doubt that the banks are the biggest money launderers around. And that AML and KYC laws do very little to stop money laundering. They simply present a lot of hurdles and headaches for individuals trying to run businesses. And they halt innovation.

There’s an ongoing joke in the financial services industry, want to launder money open a bank.

money laundering
If you want to launder money, open a bank. Image from Shutterstock

A Tale of Threats and Bribery

Bruno Skvorc is CEO of Bitfalls.com and Coinvendor.io in Croatia. He’s received his fair share of threats as well as requests for bribes from banks to open an account. He strongly believes that they refuse to work with cryptocurrency companies not due to lax AML, but out of fear of becoming irrelevant. He states:

The banks are arguing for stronger AML because of two reasons:

1. To them it doesn’t matter. Any fine they have to pay if discovered will be less than their profits from the laundering. So to them, it’s very much worth it.

2. Stronger AML is able to kill any young crypto company, i.e. their direct competition. It’s literally a case of being immune to bullets–they can get hit, but take no damage. For us, though, the bullets are lethal.

The AML5 Directive in the EU

Bruno urges us to take the new AML5 directive  in the EU under further scrutiny. One of its stipulations is that in order to offer any kind of monetary service–including crypto facilitation–you need to be able to reverse transactions for a given time.

AML5, https://www.electronicid.eu/aml5-new-anti-money-laundering-directive/

This is technically impossible on the blockchain unless it’s a mockchain (a private blockchain like IBM’s Hyperledger Fabric). So it disqualifies all crypto traders automatically unless they’re willing to degrade their service to the point of having the customers wait for days before their transactions go through. Meanwhile, banks can still compete, pretending they’re faster and more “legal”.

Another interesting aspect of AML5 is that it requires all money-service businesses to carry out extensive KYC of all customers. Banks have a handful of customers a day and entire departments dedicated to this. However, Bruno says:

A crypto trading desk like Coinvendor.io which has hundreds of signups per day is thrown under the bus. There is no way to do the kind of checking and communication with customers that AML5 requires, while at the same time respecting GDPR and handling it all in a timely manner.

Final Thoughts

While we’re in this chicken and egg phase where we have to rely on existing infrastructure, it pays to keep the hope. The banks may have the upper hand for now, but they can’t halt innovation forever. And the smarter ones know this to be the case. But currently Bruno says:

The system is rigged against crypto companies. And that’s exactly why we’re using crypto–to exit this rigged system.

The views expressed in this op-ed belong solely to the author.