Try to open a bank account for a corporation nowadays in an FATF compliant or OECD country. You’ll have to fill phone-book thick forms, be scrutinized to your underwear sizes, and have to produce numerous certified documents as to who you are, where you live and who may surely hide behind you. This regardless of your turnover or how obviously legit your business is. If you voice some frustration at this, you’ll be told sententiously that KYC compliance is important and mandatory, that it aims at deterring money laundering and terrorism financing, yes, no less than that! And that if you want the account open, and access banking services, you have to answer all questions, how irrelevant or formal they can be. Plus unintelligible FATCA forms which the bank won’t help you fill out even if you have nothing to do with the US, plus now similarly esoteric CRS questionnaires, because you are presumed evading taxes. Armies of often young compliance officers have the right to block your account opening because they are not satisfied with your answers or want more « just in case ». And can override account officers and management while they never managed even a grocery store or a newsstand in their life. Armies of useless nonsensical tick-the-box cover your-ass-legislation little soldiers. And this precisely doesn’t work while making legitimate people’s lives a soft goulag, e.g. 1MDB.
The 1MDB case is emblematic of this. Billions were moved in hundreds of transfers between more than a dozen bank including majors like Deutsche Bank, UBS, JPMorganChase, RBS, Goldman Sachs, plus a handful of smaller ones including defunct Swiss BSI. KYC and compliance did not prevent this from happening at all these banks simultaneously, in the same context and with the same origin of funds, while all banks are submitted to the same standards. So what KYC and compliance has become simply does not work. These assets allegedly embezzled from the Malaysian sovereign fund were dissipated on a large scale, buying houses and goods, benefitting tens of people, where relevant questions could have been asked and relevant suspicious factors identified. It doesn’t work because of the nature of compliance work. It does not work because senior management and account officers’ common sense is set aside in favor of tests by people who have no clue of what is legitimate or suspicious in real life – because, let’s face it, they’re just back office. The real risk assessment expertise is with senior management and account officers, who have that real life experience of business and context. But now that compliance knows better and ticks boxes, why should they care while, at the same time, they have to perform, achieve their targets and acquire assets. Compliance will take the blame, and they can’t be blamed when the costly resources dedicated and trained for this were abused – because all boxes were ticked.
Soft Goulag is the title of a 1989 book by Swiss writer Yves Velan in the footsteps of 1984. The term is evocative of what FATF, FATCA, CRS, etc. have created in banking and finance. Terrorism financing accounts for an infinitesimal part of daily money transfers worldwide. Terrorism itself is infinitesimal, and cheap. Yet everybody on earth is scrutinized on what is a mere and phoney pretense. And all this participates in creating a context in which everybody has the false impression that terrorism is at their doorstep. Soft Goulag it is. Because regulatory matters are perfidious as they arise from good intentions – who would not be against money laundering and terrorism financing? -, are always assessed and imposed from a narrow perspective, and never looked at again with hindsight. Governments want big and all data on you and your money. This has nothing to do with terrorism or else and does not even prevent unsophisticated embezzlement of billions. Let’s fight!