In these days of low interest rates, we find it necessary to move money around regularly to take advantage of the best returns. Every time this happens the institutions invoke the money laundering regulations even if the amount being deposited is as little as £1.

The institutions all behave differently in the way they check for money laundering. Some insist on paper documentation being sent through the post, others will carry out an electronic check.

Those requesting paper documentation risk that documentation being lost. Worse still, that documentation is the very documentation that would prove useful to a money launder or identity thief, wishing to obtain a “clean” identity.

Those carrying out electronic checks, use credit reference agencies. The results of these seem arbitrary. For instance in the last two weeks my wife and I both opened two online savings accounts. On one of these both of us passed the checks, but on the second I passed whilst my wife was rejected. She phoned the call centre but was fobbed off by the bank with the check was failed by the credit agency. They could not tell her why she failed, even though we have lived together at the same addresses for over 30 years and as far as we know have identical official documentation. Now she is back to risking her documentation (and identity) in the post. Worst of all, my savings account became available today; hers will take some time making her feel unfairly discriminated against.

It is not clear why money laundering regulations are required.

1.        How many people do these regulations catch? Those who are laundering money surely already have their own methods to avoid being caught.

2.       All my money comes from another bank account in my name so it’s already been through “money laundered checks”. 

3.       The requirement for “identity” documentation puts those documents and the individual’s identity at risk if the documents are lost in the post.  In every financial institution, there is a department that contains an Aladdin’s Cave of identity documents – ripe for the picking.

4.       Opening financial accounts is delayed whilst these dubiously effective hoops are jumped through.

5.       Time and effort is wasted both by the customer and the bank officials for what seems like box-ticking.

Money Laundering regulations seem like a using a hammer to crack a nut – and missing. Everyone is plagued by it, yet no-one seems able to explain how it stops money laundering.  Having opened a legitimate account how does it stop  “dirty” money being funnelled through it?

  • Repeal its current use
  • Identify what the real problem is that it’s meant to be addressing
  • Find an effective replacement

Why is this idea important?

It is important as

1. It leads to identity documents being put at risk – either in the post or  where they end up being stored and processed.

2. It wastes a lot of time. and delays the business of investing

3. It is ineffective and those operating it do not know how it is meant to carry out its purpose. At best it may deter the stupid; at worst it is adding significantly to the costs of fraud and identity theft.

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