Money Laundering is a made-up crime

With all of the recent news regarding FinCEN, money transmitters, and money service businesses, Bitcoin enthusiasts are able to witness a side of the law that usually operates in obscurity, not necessarily because of anything particularly sinister, but rather because it’s intolerably boring – unless, of course, it is affecting you personally.

The term “money laundering,” the process of concealing illicit sources of money, is getting thrown around a lot lately, particularly by the regulators. But it rolls off of the tongues of regular folks as well. Most people probably would agree, yes, we must do something about this money laundering problem. After all, money launderers are bad guys, and everybody knows that.

In fact, money laundering rests squarely in a category of laws that I like to call “made-up crimes.” A made-up crime is essentially when a law-making group or government is already targeting a particular, specific crime, but due to a number of factors (i.e. the nature of bureaucratic institutions, acute events that lead to public outcry, or ideological political agendas), new laws are created in layers upon the old laws in order to reduce the risk that an actual crime will take place. They criminalize behavior that is not actually criminal.

Let me give an example. And I might lose you on the first one, since the majority of people seem to be a fan of this law, even though most of them have broken it at some point in their lives. So even if you support this particular made-up crime, bear with me.

Drunk driving.

The magic of made-up laws is that you can take two things which are not crimes, put them together, and voila!, you have created a brand new crime enforceable by law and subject to punishment in court. In the case of drunk driving, we take drinking (legal if you are over 21) and driving (legal if you have a valid driver’s license), mash them up and are left with a wonderful new unlawful act.

But hang on, we know driving drunk is bad, right? Yes of course. It is horribly foolish, irresponsible, and disrespectful. But just because it’s a bad idea doesn’t mean it should be illegal. Driving drunk just increases the risk that you will commit a real crime, such as damage to other people and/or their property. If somebody, let’s call him Chester, owns 1,000 acres of uninhabited salt flats in Utah, chugs a liter of scotch and drives off in his pickup truck, most people would react with laughter. This scenario is funny? I thought that crimes weren’t supposed to be funny. Well, they aren’t, but made-up crimes can be. We can laugh at drunk driving Chester because we know he is unlikely to hurt anybody, including himself; he’s unlikely to commit a real crime.

Before I get back to money laundering and Bitcoin, I would like to give you another example of how easy it is to create made-up crimes. Let’s start with the real crime of domestic violence. Now let’s pick two perfectly legal things that when combined increase the likelihood of domestic violence occurring, and make their concurrence illegal: Watching football, and being married.

It is a well-known fact that incidences of domestic violence go up dramatically in towns that have recently witnessed their home-team suffer a sports loss. It is ridiculous, yes I agree, that this is the case, but it’s true. But, how can you argue with me that prohibiting people from both being married and watching sports would decrease the incidence of domestic violence? What, people could just be cohabiting but not married? Good point, let’s make up a new crime for that too.

Why stop at drunk driving? Why don’t we make it illegal to drive a car to a bar? After all, it is obvious that most people who drive to a bar are going to begin drinking, and then subsequently drive home. Why don’t we make it illegal for a woman to wear skimpy clothes and walk down a dark alley? Try this exercise for yourself. If our world has become one in which we can criminalize risky behavior in addition to actual criminal behavior, should we be concerned?

I would argue a resounding “YES!” What is the purported function of money laundering laws?  Going after organized crime? Cracking down on narcotics? Making sure terrorists don’t get funding? That’s the story. But the US government doesn’t do a great job of it. Regardless of your foreign policy beliefs, you have to admit that maybe it wasn’t the best idea to fund the Mujaheddin when they were fighting the Soviet Union, nor the Mujahideen-e-Khalq in Iran, nor the Jundallah in Pakistan… But when the government makes the mistake of backing the wrong radicals, it gets to say “Oops!” whereas any individual found to be funding and arming known terrorists would probably be sent to Guantanamo for life.

Money laundering is more likely a convenient way for the state to keep tabs on its citizens, ensure easier enforcement of taxation, and intimidate groups that it disagrees with, even if those groups haven’t committed any real crimes (here’s looking at you, Bitcoin world). These laws are sometimes enforced arbitrarily, more as a tool to engage potential or suspected criminals; a means to an end.

Of course we have become accustomed to being told what we can and can’t do with our money. There is a long laundry list (pardon the pun) of classes of products that we are not permitted to purchase, and/or in certain quantities, including illegal drugs, firearms, munitions, explosives, pseudofed, fertilizer, etc. It only seems natural that it should be illegal to try and hide money that was obtained illegally.

But, hopefully you can see the argument that I am making, which is very simple: people should be prosecuted and punished for crimes they commit, not behavior that implies a risk or possibility of a crime. Drunk drivers should be charged with manslaughter, abusive sport-loving husbands should be charged with assault, and money launderers should be charged with whatever crime they committed in the first place. 

In conclusion, money laundering is a sloppy, yet convenient, made-up crime that only serves to expand the reach of the enforcing agencies at the expense of individuals. Bitcoin users should be exposed to this perspective, and encouraged to be wary of over-enthusiastic state agencies who may be using money laundering laws to overstep their bounds. It may be boring when it happens to somebody else, but when you are the one in the regulatory bull’s-eye, the political rules under which we live become relevant indeed.




27 comments on “Money Laundering is a made-up crime

  1. Stumbles says:

    This might be the dumbest blog post I have ever read. Not only do you lack an understanding of how the legal system works, but the basic foundations of society, public safety, and government. Just appallingly bad.

    • chralash says:

      Please, illuminate me!

      • jmw74 says:

        Don’t listen to “Stumbles”, I totally agree with you and have made very similar arguments in the past.

        These “crimes” are just something law enforcement can pin on you when they lack the resources or evidence to prosecute you for a crime with an actual victim.

      • A_Pickle says:

        Social contract! Govermint is us! It’s a necessary evil! Kneel before the monopoly of force, chralash!

    • Narcélio says:

      This might be the dumbest comment I have ever read. Not only do you lack an understanding of how reasoning works, but the basic foundations of arguing, logic, and critic sense. Just appallingly bad.

      • chralash says:

        This might be the best comment to a comment I have ever read. You, sir, have mighty fine hair, and I suspect you are popular with the ladies too.

  2. Jeggy says:

    According to your logic, I should be allowed to play russian roulette with YOUR life on the stake, against your will, and only be punished if I randomly happen to kill you. A dud, at it was merely risky behaviour.

    Deeply disappointed with this post.

    • chralash says:

      This happens all the time. Do you think that because poor, fatherless, African-American, young males are highly likely to commit vandalism, sell drugs, and commit assault, that we should ban poverty, fatherlessness, blackness, or youth? Maybe we should just ship them overseas… Just food for thought, hoping to show that I’m not as radical as you may think.

      • Jeggy says:

        I don’t consider you radical. I actually agree with you, now that you mention it. Carry on!

    • Giles says:

      That is how the world works already though. Just a few days ago I nearly got hit by some idiot in an SUV, probably because he was texting or adjusting his radio. In this particular case the risky behavior is completely legal, and since the SUV didn’t actually hit and kill me he got off with no punishment.

    • jmw74 says:

      Drunk driving in particular is pretty bad law. BAC is not an estimate of driving ability, at least not in the ranges the says it is. Some people drive better at 0.08 than others do sober. Now, if you want to talk about 0.24, ok I’ll admit there’s probably no one who’s safe at that level. And whether piss poor driving is caused by alcohol, texting, or just being a careless driver shouldn’t matter. Being a bad driver on the road is what is risky.

  3. Good article. I have a very similar argument when it comes to leash laws for dogs in public places.

  4. Juhan Liiv says:

    Good read! Thank you!

  5. Whatever does not kill you, hurt you or damages your property should be legal.
    Simple as that.

    • A_Pickle says:

      I would change “you” to “others.” I think you’re free to hurt, kill or damage yourself or your property. It’s others that you don’t have the right to do that to.

  6. jmw74 says:

    Drunk driving is probably not a good comparison to make.

    Money laundering is just making the source of your money a secret. I don’t see how it negatively impacts anyone else.

    Drunk driving on the other hand, can be extremely negligent and harmful behavior.

  7. Eljin says:

    You neglect the notion that not all laws are made equal, more to the point, the law isn’t about the application of fairness. Social justice is about equality and fairness in the eyes of the law, the law is intended to deter criminal intent, punish criminals, and to secure the interests of established powers. If I’m to take what you say on face value, then I must also accept that law cannot serve both the security of the public at large, nor can it give victims proper redress until they themselves have been irrevocably victimized.

    Sorry, but your otherwise well meaning blog post lacks any semblance of rational thought. I’ve seen more warrants on a Buddhist monk’s criminal record.

  8. Patrick says:

    Chralash, you didn’t lose me on the first example, drunk driving, but you did on the second example, watching football and domestic violence. There is not a single credible study that links football to domestic violence but we can’t seem to shake this myth that was started in the mid-nineties. Other than that I agree with you. Money Laundering is a made up crime and it gives the government the power to pry into your finances under the guise of stopping gangsters and terrorists. The Orwellian name of the law that made money laundering illegal? “The Bank Secrecy Act”.

    • chralash says:

      Thanks for your comment. I thought this was an established fact, and did include a link in that paragraph to corroborate that viewpoint. However, if I am mistaken, then I apologize. The example was meant to be absurd, illustrating that we are surrounded my risk factors on a daily basis that are not illegal.

  9. Steve says:

    Excellent article. Government has been going too far with restricting our lives and enforcing all manner of costs upon us that ultimately have not delivered the results they promised in exchange for our sacrifices. Worse still, we are forced to pay for their stupid laws with our hard earned money. There is no perfect solution, no black & white and the public needs to grow a brain and get more involved with writing to politicians, voting out the poor performers, writing blogs etc. It DOES make a difference!

    It’s not really fair to blame government for everything, many of their laws are a reaction to some fanatical pressure group that doesn’t care about anything except their own objectives. (Mainstream media owned by a few extremists are just as much to blame for pushing agenda’s).

  10. […] Lees de originele tekst in het Engels hier. […]

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