November 5, 2015
Sovereign Valley Farm, Chile
They called it the Bank Secrecy Act (BSA). But it’s one of the most poorly named pieces of legislation in US history.
They might as well have called it the “Bank Sell-Your-Customers-Out Act”, because that’s ultimately what it amounts to.
The BSA is a cornerstone regulation that requires banks in the Land of the Free to be unpaid spies of the government.
One of its many commandments is for banks to file ‘suspicious activity reports’ (SARs) when customer transactions might possibly indicate tax evasion, money laundering, or some nefarious criminal activity.
One of the most common types of SARs includes “Transactions With No Apparent Economic, Business or Lawful Purpose.”
It’s amazing that spending your own money without a clear purpose is considered suspicious now in the Land of the Free.
This is in effect financial pre-crime.
One key threshold is that banks must file a report for any deposit, withdrawal, exchange, etc. that involves $10,000 or more.
Back in 1970 when Richard Nixon signed this into law, that was a massive amount of money.
$10,000 would have bought you two brand new Chevy Corvettes with plenty left over. Median household income at the time was only $12,000.
Not that there’s any inflation, but $10,000 just doesn’t go as far as it used to 45 years ago.
Yet the currency threshold hasn’t changed a bit.
Perhaps that’s why banks today submit nearly 55,000 Suspicious Activity Reports (SARs) every single day.
And the BSA requirements extend not just to banks, but to nearly every industry that deals in cash, including: casinos, payday lenders, gold dealers, money changers, check cashers, etc.
Now they’re expanding further into “rewards-based crowdfunding platforms”, sites like Kickstarter which help entrepreneurs find money to start a business.
There’s even an entire agency devoted to making sure that all these companies are filing an appropriate number of SARs.
It’s called the Financial Crimes Enforcement Network (FinCEN).
And their big concern right now is that a “statistically significant” number of credit unions in the US haven’t filed a single SAR in nearly two years.
I find it quite convenient that the US government considers it suspicious when banks don’t rat out their customers.
It gives you a pretty clear snapshot of what the government thinks about its own citizens– that an entire agency is up in arms because Men in Caves might get funding on Kickstarter. It’s surreal.
The financial system has become completely Orwellian.
Just like law enforcement agencies who have sadly deviated from their original purpose of serving and protecting, banks simply no longer exist to be responsible custodians of other people’s money.
They make horrible bets with your hard-earned savings and maintain precariously illiquid balance sheets.
They’re supported by an undercapitalized deposit insurance fund and an insolvent government.
They’re constantly being fined for price fixing and market manipulation.
They treat you like a criminal if you try to withdraw too much of your own money.
They’ll freeze you out of your own funds in a heartbeat. They routinely report you to government agencies.
And your reward for all this trouble is a whopping 0.1% interest.
Stepping back and looking at the big picture, it’s pretty nuts to keep 100% of your life’s savings tied up in a system that is clearly rigged against you.
Fortunately there are alternatives.
The technology now exists for nearly every possible financial transaction—savings, borrowing, foreign exchange, money transfers, etc. to be conducted better, faster, and more secure without using banks.
And even if you find new financial technology to be a bit esoteric or complicated, at a minimum, consider at least holding 1-2 months’ worth of living expenses in physical cash.