Hacker News Reader

Comment by vlovich123 | Hacker News Reader

Just goes to show you what moral hazards look like. The DOJ (and perhaps similarly in GB?) has repeatedly preferred to prosecute white collar crimes seeking fines instead of jail time. From their perspective it makes sense. The accused admit their crime, you get a quicker resolution, and the government gets more tax revenue. The problem of course is that everyone bakes it into the “cost of business”. What would the banking industry look like if HSBC executives had been personally indicted for the many money laundering issues they allow to happen? What would it look like if the HSBC’s corporate veil were pierced as a result of their malfeasance?

You don’t need conviction numbers to set examples around unacceptable bad behavior. Add enforcement and regular independent audits by regulators with strong regulatory capture protections, and you’ll have a better run system.

View on HN

The real problem is that the whole concept of laws against money laundering is operating at the wrong layer of abstraction.

You have these criminals. Drug cartels. They sell their drugs and send the profits back to Colombia where they own the government and are immune from prosecution. The theory is supposed to be that you prevent them from getting the money or using it to pay their operatives in the US, since you can't actually put them in jail.

The problem is that it can't make their business unprofitable. It can't because the demand is relatively inelastic. Heroin addicts gonna buy heroin. You make it less convenient, the price goes up, the drug cartels make more money and use the money to bribe whoever they need to or buy submarines etc. And all the AML rules can ever do is make it more inconvenient to launder their money. Can't ever actually win that way.

It even makes it worse, because higher barriers to entry induce market consolidation. You get bigger, more violent cartels. Because AML drives some producers out of the market, but the others figure out how to evade AML and keep the higher margins from the reduction in competition, and increase their production to satisfy the demand left by the exit of the weaker producers. It puts more money into the hands of the cartels. It's a dumpster fire and should be utterly dismantled.

The answer is to solve the underlying problem. Do the opposite on the supply side; increase competition so much that nobody is making any money at all. Decriminalization. And then address the problem on the demand side through regulation and treatment programs etc. rather than prohibition.

>You get bigger, more violent cartels.

Are bigger cartels actually more violent?

I thought a lot of the history of the Mexican cartels was the Government almost collaborating with some of them because having one dominant cartel resulted in a lot less violence than multiple smaller ones.

If the price is higher there is more financial incentive to fight over territory (violence). In theory that doesn't happen if there is an actual monopoly, but that only works for Mexico, not the US. Because even if there is only one cartel in Mexico and one in Colombia, that's still at least two cartels operating in the US and fighting over territory.

On top of that, the merge to monopoly plan has the further disadvantage that then the monopolist drug cartel will be long-term stable. So their operation remains profitable and they never get shut down, which means their power grows over time as they use money to buy more power ad infinitum. You end up as a narco state. Very bad.

Yeah, I don't think it's a good idea, just that was my limited understanding of what had happened.

Honestly, I think we'll only solve it via legalisation as anything else just leaves the money in the hands of the drug cartels.

One would have hoped we'd have learned the lesson from Prohibition and organized crime in the early 20th century.

> I thought a lot of the history of the Mexican cartels was the Government almost collaborating with some of them because having one dominant cartel resulted in a lot less violence than multiple smaller ones.

A lot of the history of Mexican cartels was the government renting territory to all the cartels and actively supporting them as long as they played ball, because because that maximizes the ability to extract revenue from them and play them against them against each other when they get out of line.

> it can't make their business unprofitable

Agree for drugs. Disagree for tax fraud.

The type of tax fraud that requires money laundering is drugs. Or some other highly profitable criminal enterprise the proceeds of which have to be laundered to use in the regular economy without suspicion. As long as there is profit to be laundered it will be profitable to launder it.

Money laundering is a consequence, not a cause. You have to address the cause.

In Turkey, in the last 10 years, the major money laundering ops revealed were done on gold, oil, water and food.

> You have to address the cause

The causes are embezzlement and fraud (tax and otherwise). The drug trade is a flashy source of money laundering demand. But it is one of many.

Joe's Pizza not reporting their entire income or some plumber not reporting their side gig income isn't really a big deal except to the people who get bent out of shape over the sanctity of taxes. Only their thin profit margin (businesses with fat margins can afford to not run the risk of being on the wrong side of the law) doesn't make it right back into the local economy, arguably in a more efficient manner than if the money was taxed and given back by the government.

I've heard that one of the down-sides of underreporting is that, if in the future you want to get a business loan, you won't be able to claim as much past/future cash flow, so the bank won't extend you as much credit. For a plumber who plans to avoid debt, maybe that's fine. For another business that depends on leverage, like real estate, it could be disadvantageous, overall.

> The type of tax fraud that requires money laundering is drugs.

even white collar crime would face the problem of explaining where the money for purchases came from if that income hasn't been declared. money laundering is part of the strategy for anyone who does crimes and wishes to not get caught (otherwise why give up part of the profit for the laundromat).

> It can't because the demand is relatively inelastic. Heroin addicts gonna buy heroin. You make it less convenient, the price goes up, the drug cartels make more money and use the money to bribe whoever they need to or buy submarines etc.

That kind of addict is already spending 100% of their available money on heroin. Worst case the price going up means they take less, which seems like a somewhat positive outcome.

> And all the AML rules can ever do is make it more inconvenient to launder their money. Can't ever actually win that way.

You could say the same about every law. All you can do is make it more expensive; murder still happens despite all our efforts to prevent it. But you can make it rarer, make it a less profitable business. Eventually it becomes non-worthwhile for most of the people currently involved in it.

>You could say the same about every law. All you can do is make it more expensive; murder still happens despite all our efforts to prevent it. But you can make it rarer, make it a less profitable business. Eventually it becomes non-worthwhile for most of the people currently involved in it.

You can say whatever you want, but what matters is the evidence, and there's no evidence AML laws have reduced illicit drug use.

> Worst case the price going up means they take less, which seems like a somewhat positive outcome.

No, it means my car gets broken into.

> "[...]murder still happens despite all our efforts to prevent it"

I beg to differ. I definitely think we could do a whole lot more to stop serious crimes like murder, assault and rape. Hell, we're not even solving domestic violence properly when we could be doing so much more. Instead, the cheap and I guess politically-easy steps are taken, whilst the more drastic options are ignored.

> That kind of addict is already spending 100% of their available money on heroin. Worst case the price going up means they take less, which seems like a somewhat positive outcome.

No, worst case they get violently sick, resort to crime, lose their house, try risky new suppliers...

As an ex-heroin addict, nah that’s too simplistic. We will find more money, some way some how instead. This is where more crime ends up happening, too (I never stole to support my addiction, but plenty around me did).

That, and there’s a lot more addicts and users who aren’t spending 100% of their income on it than you’d think. It’s extremely addictive, but it’s still not 100% addictive after all.

>Worst case the price going up means they take less, which seems like a somewhat positive outcome.

That's already addressed by demand inelasticity. When price rises, the quantity demanded falls at a much lower rate. It's the same demand curve we see for healthcare. In a scenario where there is ample competition, the price equilibrium is not as skewed, but when supply is severely limited or suppliers collude, the price equilibrium inflates needlessly, which is exactly what we see in both controlled substances and healthcare.

>That kind of addict is already spending 100% of their available money on heroin. Worst case the price going up means they take less, which seems like a somewhat positive outcome.

Yes, they end up taking less heroin and more fentanyl.

"...murder still happens despite all our efforts to prevent it."

Sure, but it happens more in some places than others. We can nudge people to situations where they are more likely to murder or we can take care of society and have fewer.

Drugs aren't quite like murder, and laws regulating food additives aren't like drug or murder laws, and each of these have different impacts.

> The answer is to solve the underlying problem. Do the opposite on the supply side; increase competition so much that nobody is making any money at all. Decriminalization. And then address the problem on the demand side through regulation and treatment programs etc. rather than prohibition.

Problem with this statement is it's not only about drugs. Yesterday it was heroine/cocaine, today the cartels are laundering avocados, tomorrow it can be whatever else high-demand product of the western world that is available in Americas. The mafia cartels will always find a new field to profit from.

Ending Prohibition saw a vast reduction in crime.

In between-gang crime, which is not really relevant...

Yes it is...

> The mafia cartels will always find a new field to profit from.

Only if they are finding people to work for them. Mafia and other organized crime thrives in areas of weak and/or authoritarian government and poverty since they can lure young people, most often men, with the promise of luxury and riches while at the same time being certain they won't get into too much trouble with the authorities (or can bribe them off if need be).

Remember that mafia started in Sicily (Italy) back in the 19th century when the central government was not much a thing and feudal landlords organized "security" on plantations in exchange for protection money from small farmers.

The solution to get rid of the mafia or at least drastically cut their influence is to strengthen civil society, democracy and governments in plagued regions. Unfortunately, the general trend is exactly the opposite with many governments that have been weak before corona hit now getting absolutely destroyed.

> tomorrow it can be whatever else high-demand product of the western world that is available in Americas

Would that be bad though? That's just the market at work. If crimes are being committed (such as stealing the to-be-resold goods, etc) then go after it but otherwise I see no problem with cartels reinventing themselves as somewhat-legitimate businesses.

We're only talking about money that is being generated by crime. That is the purpose of money laundering. If the produce they were selling was procured legally, they wouldn't need to launder the money.

> they wouldn't need to launder the money

This may be the case if you're looking from a first-world standpoint.

There are too many shithole countries with governments so corrupt or tax system so disfunct that any money generated could not be legalized in the eyes of US regulators.

Someone who's not me lives and works in one of those countries doing 100% legal and clear business (think software development or furniture manufacturing). This person is forced to acquire money laundering services.

Do you have any problem opening a company in Singapore with bank account in Switzerland? For a US citizen this is a matter of days if not hours and with no problem whatsoever.

This used to be possible for people of my country, albeit it took weeks. Now it is impossible. Banks all over the world refuse to open accounts for companies whose founders come from my country, no matter how good is the reputation. Opening a US company? Not even on the table.

Can someone open a local company and bank account? Sure. But nobody in the world is going to wire money there just because of the same reasons. And even if they did, this someone would have not much less problems legalizing the incoming wire transfer in the eyes of the local banks and would be eventually fucked up by local financial monitoring authority anyway. They want you to be in the dark.

At this point you may be imagining some african desert with dust in the wind and eeries silence around with rare beaten up toyota pickup trucks passing by on the lone road. But that's not the case. If you google "<my city> skyline" you would find pictures looking no different than Manhattan.

TL;DR: AML/KYC laws not only make criminal transactions hard, they make small business lives outside of the US even harder. These laws deepen the trench of the Global Digital Divide[1].

[1] https://en.wikipedia.org/wiki/Global_digital_divide

Human trafficking is a major source of laundered money.

https://ngm.com.au/money-laundering-human-trafficking/

https://www.state.gov/report-to-congress-on-an-analysis-of-a...

> It can't because the demand is relatively inelastic. Heroin addicts gonna buy heroin.

It is elastic if you can regulate the number of heroin addicts.

That's not the wrong layer of abstraction, that's a different problem entirely - idiotic drug laws - that ends up involving money laundering.

If you really thought that supplying drugs was actually evil at a conceptual level, e.g. sex slavery - which also exists, and benefits from money laundering - then its profitability would be irrelevant. I'm not "fixing money laundering" by legalising sex slavery. And "fixing money laundering" was the topic, not "fixing idiotic drug laws".

You're both not wrong in my eyes. It's that drugs have a disproportionally large section of the income pie. It's way more scalable than sex slavery.

But you're right in that AML also includes things like terror financing which wouldn't be fixed by... legalizing terror???

Terror has a pretty sizable portion of the pie... maybe... the lines get blurry really fast when say a state level actor is terrorizing its own people.

And then you're looking at a different problem with a different root cause. And the whole claim about "terrorism funding" is a farce anyway. It came out of the use of 9/11 to justify whatever privacy-destroying rules they wanted, so everything was "fighting terrorism" even if that made no sense. 9/11 was funded by the Saudis, who have their own country and banks. They didn't need to launder the money, they already had it.

Moreover, "terrorism funding" is a joke. It costs only a few thousand dollars to fund a major act of terrorism. You're never going to stop it by depriving them of money because the primary cost of doing it is that it's punishable by death, not that they can't afford the monetary cost of a plane ticket or some fertilizer.

So once again you have to use solutions that address the root of the problem. Which for terrorism would be things like putting terrorists in prisons and coffins, or not conducting foreign policy by propping up authoritarian regimes whose victims then get so pissed off that they're willing to give their lives over it.

When a government gets consumed by drug cartels, the UN security council should vote to conduct "peacekeeping" (blitz war) on all the drug dealers, burn all their plantations with napalm.

Drug dealers can't harass the family of a peacekeeping soldier from the other side of the world. So all those intimidation tactics involving people's families get invalidated and everything that's left are the drug dealers alone against thousands of well equiped professional soldiers.

Unfortunately, the UN starts with the premise that governments should deal with their own stuff, something that in practice doesn't work.

That sounds like an authoritarian nightmare. Its bad enough with US stormtroopers imposing US will around the world. We do not need a supranational entity raiding sovereigns for what they perceive as a problem.

Plus economically it is certifiably insane - destroying competitors and reducing the supply for a relatively fixed demand is subsidizing the same problem they are fighting against.

If stability was the number one priority the proper thing would be to have the government provide the supply for too cheap to compete with. Fill the power vacuum to prevent the reincarnation of organized crime. It turns out economic fungibility also includes criminals.

People in Mexico already get routinely kidnapped, murdered, tortured, extorted, trafficked, etc.

If anything, this would be an improvement. It is bad, yes. But far better than the status quo.

CJNG for example lost all respect and now they have an army, with uniforms, vehicles, military grade weapons and all. They do not hide who they are anymore. It is a joke.

Under normal conditions, you can deal with an infection with an antibiotic. But when left untreated long enough, you have to amputate. That is what is needed here. A complete amputation of those clowns from reality.

That is what the US would do if an organization dared to pull off 1% of what these clowns do every day.

Blitz war on cartels with army, navy and air force, missiles, bombs, napalm, tanks, helicopters, armored personal carriers... leave no trace of them.

The prohibition era analogy argument stops working when you realize cartels traffic people too.

Well, maybe. The fact that crime is, in fact, already illegal points suggestively at AML laws not actually being targeted at criminals. The law itself is mostly relatively new (article notes 1980s) and probably correlates to driving out people competing with entrenched US banking system and/or supporting the US's campaigns of using the dollar against rivals or inconvenient countries like Iran.

Freezing people out of the monetary system is less effective against criminals and more effective against business ventures the US doesn't like.

Anything linked to the Patriot Act is bad news; it was one of the 'rush stuff through in a crisis then refuse to unwind it' plays that the government makes when it wants unpopular law changes.

It seems like money laundering laws make honest people more honest, and the already dishonest, more so.

Then you can prosecute them for lying.

http://journal.sjdm.org/20/200824b/jdm200824b.html

Selection effects on dishonest behavior

>Abstract: In many situations people behave ethically, while elsewhere dishonesty reigns. Studies of the determinants of unethical behavior often use random assignment of participants in various conditions to identify contextual or psychological factors influencing dishonesty. However, in many real-world contexts, people deliberately choose or avoid specific environments. In three experiments (total N = 2,124) enabling self-selection of participants in two similar tasks, one of which allowed for cheating, we found that participants who chose the task where they could lie for financial gain reported a higher number of correct predictions than those who were assigned it at random. Introduction of financial costs for entering the cheating-allowing task led to a decrease in interest in the task; however, it also led to more intense cheating. An intervention aimed to discourage participants from choosing the cheating-enabling environment based on social norm information did not have the expected effect; on the contrary, it backfired. In summary, the results suggest that people low in moral character are likely to eventually dominate cheating-enabling environments, where they then cheat extensively. Interventions trying to limit the preference of this environment may not have the expected effect as they could lead to the selection of the worst fraudsters.

And then address the problem on the demand side through regulation and treatment programs etc. rather than prohibition.

Why do that at the end? Start by treating drug addicts as patients to be treated instead of criminals to be punished, set up comprehensive evidence-based well-funded programs to do so. First decrease the demand, then the supply will settle itself.

That would maybe work for the drug cartels (assuming they haven't diversified their business model off of drugs into other criminal enterprises by now). But then you're still left with all the non-drug related criminal activity under which money laundering is commonplace.

"The accused admit their crime, you get a quicker resolution, and the government gets more tax revenue. "

The problem there is that the government has no need of their 'tax revenue' because no such thing exists in sovereign currency areas like the UK and the US. (As explained by Beardsley Ruml decades ago: http://home.hiwaay.net/~becraft/RUMLTAXES.html) If they don't get it from the fraudster, they'll get it from the next person in the spending chain. It all happens anyway. (And if they divert it, then the downstream doesn't happen and they lose 'tax revenue').

For the integrity of the tax system, tax evasion must always involve significant jail time. It's the most valuable thing you can take away from the people who undertake these sorts of frauds.

It's the public (aka the holders of the currency) who get the benefit of tax enforcement, because it causes demand for the currency and so contributes to it having value in the first place.

But there's multiple levels of government and not all of them get to print money; the US federal government does a lot of payments but doesn't give states whatever they want.

Printing money is just taking on debt. Anyone can do it in proportion to their assets and future income. just your interest rates are different. Local governments issuing municipal bonds is essentially printing money.

Printing money isn't just taking on debt. For fiat currencies, printing money is inflation: a tax on money.

All money is debt. Government always spends by "printing money". That's how bank payment and clearing works.

So if it caused inflation then we'd have loads of it, and we don't.

Whether a bank ends up holding reserves, or holding a government bond is just a difference between a floating rate debt receiving the base rate, or a fixed rate debt receiving the bond rate. Just an interest rate and term difference - nothing else.

The last year has completely debunked any question that 'creating money' is inflationary. Believing otherwise is up there with anti-vax thinking.

Creating money is inflationary when it's not backed up by something like bonds (which temporarily destroy money) or taxes (which permanently destroy money).

And yet we have 30 years of QE in Japan, and 10 years of QE in the UK and US that debunk that belief as well.

If the state creates $100 and you stick it in a drawer, or just leave it in your bank account, where's the inflation coming from?

It's 'not spending' that causes deficits in the first place. If everybody spends and never saves then there can be no deficit for any positive tax rate.

There is no magic in bonds. It's a myth.

I was with you until “there is no magic in bonds”; you haven't shown that. Bonds are a way for everyone to know that that money is _staying_ in that drawer.

It can be inflationary but it isn’t necessarily - sometimes you don’t have enough users of your currency, because there isn’t enough of it, and it becomes more useful and therefore stronger once you acquire some more users.

Even in crypto, Bitcoin is still in its inflationary phase until mining runs out.

This is also an executive vs shareholder agency conflict-of-interest problem, which is a consequence of limited liability in this context.

The executives have an attractive call option.

Get caught = limited downside (being fired, no jail time), and the fine is paid fully by the shareholder.

Don't get caught = unlimited upside (bonus).

This. Having the company (aka shareholders) pay for the crimes of the executives is a hugely skewed incentive.

"The accused admit their crime..."

Many times the settlements allow them to avoid making any admissions of wrongdoing.

> corporate veil were pierced

This refers only to going after shareholders. Employees can always be held responsible for their actions.

I don't think there has ever been a case in modern history where shareholders have been criminally tried for a crime committed by the company.

That’s the point of limited liability companies. Shareholders are able to invest capital without needing to invest anything else (like time) and without worrying that they will go to jail for something the company does, with or without the consent of the shareholders. This is hugely important to VC funding and to the entire share market. Imagine buying shares on the NYSE and next week you’re in prison!! So that is sensible I think.

The flip side is that shareholders don’t get to make any material decisions about running the company; that’s the job of the directors (who might not be shareholders). Directors are, in theory, legally liable for the actions of the company they manage.

All this would be fine with me, and directors certainly have gone to jail for crimes committed by their company, but it’s incredibly rare, and in Australia where I live, is generally related to trading insolvent, tax avoidance, or other clear and simple legal issues. But go ahead and let your company illegally blow up irreplaceable ancient cave paintings in the outback, and you’ll be fine.

In fact, in Australia at least, the corporate regulator ASIC is so toothless that there is no straightforward way to enforce director’s breaches of company constitutions or other governance agreements other than directly with lawyers. This makes enforcement of the governing documents of a company (the documents that the shareholders sign up to) incredibly expensive and intimidating. Even clear breaches of the Corporations Act, the governing law of business in Australia, must be dealt with through civil law.

So if you are a minority shareholder in an Australian Pty Ltd company and the directors decide to break their agreements with you - say an agreement to use green energy or to use ethically sourced labour - you’re screwed unless you sue them. If you’re a small time investor or if a significant portion of your wealth is invested in that company, you’re shit out of luck. The directors can do what they like.

That’s messed up, because it means that directors can get away with almost anything, even if the minority shareholders disapprove, and there is zero recourse in the justice system.

I presume that, as with many things legal, Australia follows the US in this regard, but I don’t know this for certain.

>>Imagine buying shares on the NYSE and next week you’re in prison!! So that is sensible I think.

If you give your neighbour some money and he goes and buys a gun with it and kills someone, you can be held liable in that scenario(depending on the intent, on how well you knew what he was going to do etc etc etc).

If you give a company money(investment) and they go and destroy the Amazon illegaly.....your hands are clean?

I mean, obviously I understand what you mean. I own some shares myself. But there has to be some middle ground between "100% responsibily, straight to jail" and "give money to people who do bad things, have 0 responsibility".

I'm assuming - hoping - that if could be demonstrated that a LLC was open about trying to engage in illegal practices, and the investor knew that before investing, then the investor could be charged with facilitating crime.

Lots of companies operate in a grey area. PayPal, Uber/Lyft, AirBnB, and others were all open about “disrupting” which is code for breaking regulations that some people don’t agree with.

All four of those companies have made my life better and I’m glad someone invested to make them happen.

I'm sure people say the same about drugs

It was entirely possible to achieve the same disruption without breaking laws, so think instead of the opportunity cost - the damage done to the markets, granting wealth to people who demonstrated sociopathic tendencies and blatant disregard for the law, allowing those people to follow their principles and abuse their workers/"partners" at scale, and erosion of public trust in local governance.

All of which could perhaps be avoided if the investors were afraid to be associated with such scummy business practices, and instead pressured aforementioned startups to stay fully above board while realizing their vision.

To test that with a simple example, could you describe how Uber could plausibly disrupt medallioned cabs in NYC without breaking any laws?

You're describing a world where quite possibly no-one would be stupid enough to start PayPal, Uber/Lyft or AirBnB. Limiting risk is one of the most counterintuitive laws that has ever stuck, and one of the most devastating for the poor countries who didn't adopt it fast enough.

Without those protections it would be far too risky to invest in companies that people weren't intimately involved with. The scope of human activity would be limited to things that could be achieved with a small business. While not necessarily the end of civilisation, it would be a huge change. And quite likely knock down one of the ladders (a well balanced stock portfolio) that people use to move up into the middle class.

I'm not a fan of the idea. It entrenches class divisions and probably shrinks the middle class. It raises difficult questions of how retirement would be set up too, it would be much harder to organise an independent retirement without access to the share market.

That could get very complicated very quickly if the company is included in a popular index fund.

one version would be to make sure that fines is paid in freshly raised (and dedicated) capital and not from the operating budget, or that shareholders are made financially responsible up to the value of their shares for criminal fines against the company.

If you combine that by making should have known the company was doing things illegally an good enough reason for the shareholders to sue the responsible executives into bankruptcy and you might see a change in behavior.

The problem is that when all of the costs comes out of the operating budget there is very little reason for the general assembly to hold the board responsible and if the board is not held responsible neither will the executives.

This seems like an awesome idea, at least on the surface. I’d say fines should be paid in issued capital - I’m going to be thinking about this for a few days I think!

Several problems remains however.

Simply knowing that the company was breaking the law isn’t sufficient for a shareholder to be able to do anything about it. If you own <5% of a company’s shares[0], you have basically no way to change the behaviour of a company even if you know it’s wrong and want it to stop.

Also, the value of a privately held business is difficult to compute. Although setting fines as a percentage of issued capital rather than a dollar value would ameliorate that.

Finally, what would the government do with those shares? If the government simply destroys them then the actual value of the remaining shares won’t change. And the market for privately held shares isn’t huge.

Still I love the basic idea. Can’t imagine it happening though, nobody wants to be held accountable.

[0] if you’re a shareholder with less than 5% of shares in Australia you basically have no right to access anything other than the annual reports, so your ability to even know what’s going on is extremely limited. Don’t know if it’s the same in other countries.

What i mean is that the shareholders should be able to reclaim lost value from any CEO who can be found to should have known the company was breaking the law, in civil court.

The shareholders should be held financially responsible for any fines not levied directly at the board or the executive team, hence why their liablity should be capped to the value of the shares.

The point is to force the large institutional investors to really care about the integrity of the boards they elect, so it might be worth putting in an lower limit to exclude retail investors with trivial amounts along with holders of non-voting shares from liability.

The government would not be holding or owning the share they would be paid their fine in USD raised by the company from either newly created shares, or fresh investment in the case it's not publicly traded. And if they cant it's up the current owners to either pony up loose all of their investments. It should be up to the company fined to market those shares not the goverment.

Remember that issuing shares without generating investment money devalue the existing shares, which is the point of the operation.

IT might not be the one true solution but letting fines be paid from revenue disincentivize the owners from caring that much about legal fines.

To be clear, I think there are huge problems with how corporations (and by extension the directors) are able to act with impunity, but most of those problems would be resolved by proper enforcement of the existing laws. I can’t see how investment can work if the shareholders were made accountable, but even if this became law, nobody would actually be thrown in jail under the current hands-off regime that seems prevalent in the Anglosphere at the moment.

The fact that directors and CEOs have so much control over a business, but that it’s extremely difficult to hold them to account, is very bad IMO. But changing the law won’t fix anything if the law itself is not properly enforced.

In practice it’s overwhelmingly common for Directors in a company to be shareholders. I’m sure there’s a counter-example somewhere, but it’s quite rare.

Not at all. At least in Australia, loads of companies have outside “trophy” chairs or directors who don’t own shares, and just earn a wage; it’s an arrangement that is intended to effectively buy prestige for the company. This may be because shares must typically be declared and taxed as income at the time of issue, which means there’s a significant out of pocket cost to the recipient, and which probably makes it more common for non shareholder directors than in the US? I’m just speculating, but the situation is pretty stupid here. There were some reforms a few years ago, but they didn’t go far enough.

Directors being shareholders doesn't stop directors having a big incentive to screw over shareholders.

Imagine I'm the CEO of FooCorp, I own 5% of the shares, and FooCorp have $10 million in profit. I'll make $500k if I pay out that profit as a dividend - but I'll make 20x as much if I pay it as a 'pension contribution' to myself.

I think white collar criminals should be punished with prison time, but in the end how would it look - I guess the criminal sentences would have about the same deterrent effect as harder sentencing has on violent crime, drugs, burglary or whatever else. People would commit the crimes hoping not to get caught.

> strong regulatory capture protections

What are some examples of this or where can I read about how to do that?

> The DOJ (and perhaps similarly in GB?) has repeatedly preferred to prosecute white collar crimes seeking fines instead of jail time

The fine just became a cost of doing business for the banks and corps, and a funding the gov budget, truly a vicious cycle.

> What would the banking industry look like if HSBC executives had been personally indicted for the many money laundering issues they allow to happen?

It would look the same, we already know that harsher sentences do not provide effective deterrence.

That is true for friday night stabbing type of crime, pretty much anything drug related (excepting the higher-up El Chapo types), and anything driven by poverty.

Do it also hold for white collar greedy banker type crime?

Now they'll scapegoat cryptocurrency even though its use for ML amounts to a tiny percentage of the massive global ML industry.

The vast majority of ML is via real estate, all manner of fake businesses and fake equity deals, the "aaaaaaht" market, creative use of things like penny stocks, etc.

This is sort of like how they go after street dealers and small time drug "kingpins" while the real leaders of the industry (and there's a heavy overlap there with the major players in ML) aren't prosecuted. The real drug kingpins generally don't touch the product.

I don’t know. Incarceration is an old idea with surprisingly scant evidence, despite it long predating our ability to analyze it dispassionately. Besides, many white collar crimes, like money laundering, lack a proper victim. So you’re missing both the quantitative and qualitative justification to send executives to jail.

Your outrage shouldn’t be focused on this. Instead demand that all justice for all crimes be evidence based, especially for crimes committed by normal people.

In Germany if your tax fraud exceeds a million Euros it's prison for you, though it can be on probation.

severity of the sentence in Germany depends on who. https://en.wikipedia.org/wiki/Uli_Hoene%C3%9F#Tax_evasion_an...

a brown person and refugee who gets convicted with a few gram of weed AND for not having a registered address with the police (as is law in Germany) often spends more time behind bars than somebody like the above. Bavaria (CDU/CSU) is especially notorious for being tough on immigrants or foreigners.

Reply on news.ycombinator.com