Algorithmic debanking

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Penny Crosman writes, "One is a heavy reliance on AML software to monitor transactions overseen by decision-makers who don't know individual customers. Another is outdated rules used to determine which transactions are suspicious. A third is a set of incentives that push banks to rush and not take the time to understand individual cases."

It's true that algorithms alert financial institutions to transactions that appear suspicious. Thomson Reuters found the number of suspicious activity reports (SARs) filed by banks surged by 50% in just two years. Rather than investigate the flags, however, there's a growing tendency to close accounts and shut customers out.
...
... In a risk/reward trade-off, we're led to believe it's too expensive to include customer input and losing a "minuscule" number of customers is preferable to the inevitable "regulatory headaches."
...
The human impacts of SAR processes gone wrong were captured by the New York Times in a recent examination of over 500 cases of customers being dropped by their banks. Small businesses can't make payroll, credit scores take a hit, people can't pay their bills on time — it's all very messy.
...


So anti-money laundering (AML ) software flags accounts that deal with cash. Banks then close the accounts for these customers (including perfectly legal coin shops) rather than spend any thought or effort to discern whether the AML software is flagging legitimate concerns.

Whoever controls that AML software holds the reigns to a stealth Operation Choke Point on all cash heavy businesses. The drumbeats for the cashless society beat on. Is America listening?
 
I went digging a bit deeper on this story:
... AML software vendors include ACI, Nice Actimize, ComplyAdvantage, Feedzai, Quantexa and Thetaray. ...


... Multiple vendors offer transaction monitoring systems, each with varying types and levels of AI involvement, including ... Verafin, ... Manta (now an IBM company) .... Google also began offering anti-money-laundering AI this summer.

Another company offering AI-based transaction monitoring is Featurespace, ...


These are the unelected gatekeepers writing the rules that determine how much cash you can use before you get debanked:

ACI Worldwide (NASDAQ: ACIW) - Florida based - https://www.aciworldwide.com/about-aci

Nice Actimize (NASDAQ: NICE) - Israel based - https://www.nice.com/company/about-us

ComplyAdvantage - UK based - https://complyadvantage.com/about-us/

Feedzai - Portugal based - https://feedzai.com/about-us/

Quantexa - UK based - https://www.quantexa.com/about

Thetaray - Israel based - https://www.thetaray.com/about/

Verafin - Canadian based, subsidiary of Nasdaq, Inc. - https://verafin.com/verafin-story/

Manta - Acquired by IBM in 2023 - https://newsroom.ibm.com/IBM-acquir...omplement-data-and-AI-governance-capabilities
Mantas - Acquired by Oracle in 2006 - https://en.wikipedia.org/wiki/Oracle_Financial_Services_Software

Featurespace - UK based - https://www.featurespace.com/about/
 
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I was mulling over writing an article on this subject. It's the lynchpin justification for algorithmic debanking and the war on crypto. It's the fulcrum over which the seesaw of financial freedom teeters between security and liberty.
 
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The report directly addresses the issue of algorithmic debanking:
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De-risking refers to the situation where financial institutions choose to restrict or terminate their business relationships with specific clients or categories of clients, opting to avoid risks altogether rather than managing them. Several interconnected factors contribute to these decisions, including risk perception, profitability, compliance costs, the risk of sanctions, reputational risk, and a lack of proper understanding of AML/CFT requirements. The relative importance of these factors varies on a case-by-case basis. However, concerns about profitability play a primary role in driving de-risking. High compliance costs, even if unrelated to AML/CFT, can directly impact profitability and contribute to the decision to de-risk. It is important to note that the FATF recognizes the significant contribution of improper implementation of FATF standards within the AML/CFT framework to the exacerbation of de-risking in the financial sector (FATF, 2021b).
...
 
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The Consumer Financial Protection Bureau received 2,941 complaints about bank savings and checking account closures in 2023, about a 50% increase from 2022 and nearly double what it was in 2020. In addition, journalists at The New York Times have received more than a thousand complaints about sudden bank account closures in the past year.

Insiders chalk the increases up to a combination of aggressive AML rules, the automation of AML and the quest for efficiency and cost-cutting which leads to quicker investigations of suspicious transactions, if they are investigated at all. ...

 
An ongoing inquiry by Britain's cross-party Treasury Committee said that eight of the country's top banks shut almost 142,000 accounts held by small businesses in the last year, amid concerns some companies are struggling to access financing.

Figures supplied by Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro and Handelsbanken showed 2.7% of the 5.3 million business accounts held by small companies were closed for reasons including risk appetite and financial crime concerns.

"We can see from these figures that thousands of small businesses fall foul of their bank's risk appetite definition, leaving them without access to a bank account," Chair of the Treasury Committee Harriett Baldwin said in a statement.

Only three of the banks listed "risk appetite" as a reason for closing accounts, with 4,214 cases listed.
Baldwin said this raised questions over whether discussions on 'de-banking', the industry term used to describe a customer having an account closed or refused, may be happening "informally" and not "systematically recorded".
...

 
"It's true that algorithms alert financial institutions to transactions that appear suspicious. Thomson Reuters found the number of suspicious activity reports (SARs) filed by banks surged by 50% in just two years. Rather than investigate the flags, however, there's a growing tendency to close accounts and shut customers out."

Unless your name is Biden. Then they don't give a fuck about SAR's.
 
I was mulling over writing an article on this subject. It's the lynchpin justification for algorithmic debanking and the war on crypto. It's the fulcrum over which the seesaw of financial freedom teeters between security and liberty.
It teeters? I'd say it's stuck fully on the so-called security side. With security just being another word for complete financial control.
 
Sal's talking about Wells Fargo here.............

ALERT! Major Bank Closing Down Customer Accounts WITHOUT Warning! SHOCKING Reason​

Mar 18, 2024


11:31
 
I just saw the headline here - I don't know about the details:

 
From a few weeks ago:
Cutting access to our legacy financial system for Bitcoin/crypto companies — even for pedestrian fiat-only services — is still alive and well. On Tuesday, @billcom notified @Lightspark that based on their processing banks requirements, they couldn’t serve us anymore. Yesterday, our account was shutdown.

The terms of service they pointed us to, to describe our “industry”, didn’t even include services we provide. It didn’t matter.

Whether your business is in crypto, or not, don’t work with companies that have a patronizing approach to what’s acceptable or not when your activity is 100% legal and compliant.
...



h/t: @Peter89 (who posted this elsewhere on the internets)
 
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