It's a direct result of the regulatory and reputational risks that banks now face. Threatened with multi-billion dollar fines for facilitating money laundering they're not taking any chances.
It's always 'boohoo the Banks are so troubled' but how hard is it to refrain from actively laundering money for drug cartels or third world despots or any number of other illicit sources? How hard is it to refrain from rigging the LIBOR or selling sub-prime CDOs to your clients to clear your own books after marking years of profit building up another debt bubble?
I have very little patience or sympathy for the modern banking industry and their travails screwing the rest of us over, and getting off with rather unimpressive fines, if we're honest.
This guy had his entire account seized. What if the banks were fined commensurate to their profits and they really started to feel the pinch? That, combined with personal liability for the officers involved with these scandals would certainly clean the problem up expeditiously.
What the banks were fined for was insufficient controls to detect laundering, not laundering itself. Banks process 100s of millions of transactions a day, including taking large numbers of cash deposits in developing countries like Mexico. It is _incredibly_ hard to build a framework which reliably detects suspicious activity without a lot of false positives. But given the potential repercussions, banks are being very cautious. They cannot afford more scandals.
http://www.rollingstone.com/politics/news/outrageous-hsbc-se...
"As a result of the government's investigation, HSBC has . . . "clawed back" deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement."
Faced with a lot of this knowledge, HSBC officials stated that to implement more AML would reduce profitability, and as such, they should "change their position".
No way. Even a cursory examination will find many cases where banks were suspected of actively facilitating criminal activity.
And no banker was jailed for 2008.
> And by that I mean there was no institutional conspiracy to do so.
That simply means that the conspiracy was too big to reasonably punish. Too many friends of the prosecution would have been hurt, so miraculously nobody was charged.
> But given the potential repercussions, banks are being very cautious. They cannot afford more scandals.
Which is what the OP was saying. We've dumped risk on the banks and now they're hurting legitimate customers to avoid that risk. And because it's essentially mandatory to have a bank, customers are being forced to use services that - like Paypal - will hold their money for months or years without feedback simply because they can.
They don't care that they freeze your accounts and you can't pay your mortgage, they're indemnified against claims from customers. "Oh, sorry, it was vaguely related to anti-money laundering. Check back in 90 days."
It's almost like our governments are trying to make us use non-bank solutions.
AML account closures only require 'suspicion', for example, a name match against a blacklist compiled by a government agency is 'suspicious' even if it wouldn't hold up in a traditional court of law.
They should be allowed to take steps to prevent themselves from unwittingly supporting laundering, terrorism, etc.
However, those steps should not include STEALING THEIR CUSTOMERS' MONEY, which is no less than this bank did until contacted by the media.
If they decide the person or transaction is insufficiently verifiable to accept, hold, or move the money, fine. Refuse to keep the funds and RETURN THEM TO THE OWNER. Keeping the funds is simply theft.
This is no better than the "asset forfeiture" going on in US police departments who are behaving as robbery gangs.