Investigated until proven guilty

Before we dig into rather ominous developments in the world of surveillance, a quick reminder. Something rather less ominous is about to happen to your next mobile phone. It’ll allow you to do things science fiction authors only dreamt of.

They call it the “Genesis Chip” and it’s about to be installed in 369 million devices. If you’d like to know what it is, and how to invest in the “silent supplier” making this radical change possible, click here.

Or don’t, and miss out.

Now, on to gloomier matters…

You’ve heard of surveillance capitalism. Where companies know more about you than even you do. And they use that information to manipulate the marketing you see.

And then there’s the surveillance state. The Stasi-esque monitoring of your behaviour by the government. A fishing expedition for anyone breaking the law.

What do you get when you combine the two? Surveillance state capitalism?

Nope, you get our modern banking system. That’s what the latest Aussie banking scandal has exposed. But don’t rest assured, the same applies here in the UK.

So what did the Aussie banks get wrong this time? They forgot to monitor, screen and report to the government their customers’ suspicious and suspiciously large transactions. This breaks the law.

For now, the media attention is all about a potential 483 trillion Aussie dollar fine which one bank faces. And the possible paedophiles, terrorists and money launderers who may or may not have got away with 23 million transactions thanks to lax monitoring by their bank, Westpac.

But nobody is asking why the bank should’ve caught them in the first place. Since when are banks responsible for monitoring, investigating, and reporting on their customers?

Since AMLCTF in the UK, or as the Aussies call it, AUSTRAC. Anti-money laundering and counter-terrorism financing legislation, that is.

It’s a set of laws designed to make life difficult for criminals to use the banking system. By making the banking system spy on its customers and report anything suspicious, or suspiciously large, to the government.

But doesn’t that 23 million sound like a lot of contraventions to you? A lot of transactions that Westpac failed to monitor and report to the government.

The population of Australia is 24 million. How many paedophiles, money launderers, terrorists and criminals are there amongst Westpac customers? How much time do they spend on online banking, let alone dubious websites?

Here’s what’s really going on. Under AUSTRAC legislation, and the corresponding UK legislation, banks are required to spy on you. The idea is that money is involved in all illegal activity, so following the money is the easiest way to catch criminals, regardless of the crime.

It’s also the easiest way to convict them, a bit like with Al Capone. A conviction is a lot easier to get if the evidence includes proven financial flows from bank documentation. Proving someone paid for a crime is often enough. Otherwise prosecutors need witnesses of the crime being committed. But they are often unreliable.

Cash is much more vague and open to interpretation under rules of evidence because it is not traceable. Not to people and not to crimes. Defence lawyers like cash, in more ways than one.

But why are the banks doing the spying? Because government is of course not competent enough to do the spying themselves. Or they run into cumbersome legal protections citizens have against their government. Something called civil rights.

There are two solutions to these cumbersome constraints. Ask a friendly foreign government to do the spying on your citizens for you, which I’ve written about before. Or you legislate for the banks to do it for you. Place the burden of catching criminals on those who already have their personal information and thereby don’t need to worry about privacy laws.

The AUSTRAC obligations are quite onerous. And Westpac failed to fulfil those obligations because of costs, in part. To be clear about what this actually means though, they failed to sufficiently spy on their customers sufficiently. And so they deserve to be punished. A few hundred trillion dollars is proportionate to the crime of failing to report ordinary customers’ ordinary transactions, right?

Of course, nobody is going to explain it to you like this. Not when AUSTRAC is throwing words like “paedophile” around in association with what Westpac did. Or, in this case, failed to do.

But take a deeper look into what those contraventions are and you’ll be surprised how much your banker is required to stick their nose into your affairs. It’s not just suspicious transactions.

Here’s an AUSTRAC table to help you:


In other words, rather a lot of information must be kept and reported to the government. Large transfers, payers, payees, incoming transfers, outgoing transfers, sources, international transactions and anything else you can think of. All this must be handed over to the government. It’s much the same in the UK.

When I learned about all this for my certification, once in Australia and once recently in the UK, I couldn’t help wondering just how much information it would create for the regulators. It sounded like a fishing expedition, not investigation.

And so the trouble with all this became obvious. It’s a system of bank spying for the government which gets around a lot of safeguards citizens have from their government. Hard-fought safeguards, some Hong Kongers might say.

AMLCTF legislation outsources the investigative functions of government to a place where those safeguards do not exist – banks. And it creates the obligation to report anything suspicious, or suspiciously large.

Your banker doesn’t need any sort of permission to check your financial statements in the way a government official does. In fact, the government has charged them with actively monitoring your financial transactions – what Westpac failed to do.

It’s a case of investigated until proven guilty. Continuous monitoring. A surveillance state which outsources its functions to those who are not constrained by privacy law and civil rights.

Now I’m not usually a privacy warrior, unlike many of my colleagues. But here’s an example of why this sort of thing matters.

Did you know that the US authorities confiscated and kept US$20,000 of a Danish policeman’s money because he tried to buy Cuban cigars from Germany?

You might think this transaction has nothing to do with the US, so how did they even get the money, let alone find out about it, or keep the funds?

The same type of legislation and transaction is what caught him up in the net. The payments went via SWIFT, something Westpac is accused of evading by AUSTRAC.

In the future, if laws are changed, or if you choose to do something illegal, your ability to hide under the radar has been taken from you. Non-compliance, ignoring the law and civil disobedience are no longer plausible. Your banker is an informant, whether they like it or not.

Good luck out there, in the future…

Until next time,

Nick Hubble
Editor, Southbank Investment Research

Category: Technology

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