“For it is only the finite that has wrought and suffered; the infinite lies stretched in smiling repose.”
—Ralph Waldo Emerson
Last week I received a retirement check and I decided to take it in cash. I’d been warned that if you ask for a “lot of cash” from your local bank, they’ll ask you why. So I gave them a reason. I said I was going to buy an RV. Fine, they said and gave me the money. (I muttered about a seller wanting cash for a 26′ 1990 Fleetwood Tioga for $9500 listed in www.traderonline.com. Young teller people believe all old farts are on their way to buy an RV. ) But after my temporary victory faded, I began wondering why the bank cared. Turns out that here in the land of the somewhat free and the home of the alleged brave, banks are required to care. There are statutes, like the Bank Secrecy Act, the Anti Money Laundering Act that make bankers pretend they have an interest in your everyday life.
THE BANK SECRECY ACT
The Bank Secrecy Act (BSA) was passed in 1970. It was laughably mis-named. It actually destroyed bank secrecy, and required financial institutions to track and file a report on all cash transactions greater than $10,000. The financial institution must get a name, address, social security number, and the purpose or source of the funds, for all such $10k+ actions, and file a basic Currency Transaction Report (or CTR on FinCen Form 104) with the IRS. From there, the CTRs go on to gather dust like the Ark of the Covenant at the end of Raiders of the Lost Ark.
Any cash transaction between $3,000 and $10,000 must be filed on the transacting bank’s Monetary Instrument Log, and the record kept for five years. Big Brother had been collecting these reports for years, but inactivity was the rule. But in the meantime, the banks developed computer skills to track a wide variety of transactions and aggregate them, so that spreading out cash collections over a few days did little good. http://en.wikipedia.org/wiki/Bank_Secrecy_Act. The public motivation for the BSA was to catch tax evaders. Further motivation was to chase drug smugglers and their ill gotten gains.
Since my transaction was not ‘greater than’ $10,000, and I seemed to have a good reason for wanting cash, only a Monetary Instrument Log was created. No red flags. No yellow caution tape needed. Nothing to see here. Move along.
OTHER BSA REPORTS
The Bank Secrecy Act was the one that created the requirement that anyone with an overseas account worth more than $10,000 must file an annual report with their income taxes-a Report of Foreign Bank and Financial Accounts (FBAR).
And it requires that any person who takes or mails currency, travelers checks or certain other monetary instruments of more than $10,000 into or out of the United States must file another form, a FinCen Form 105, a Currency or Monetary Instruments Report (CMIR) also forwarded along to the IRS. So far, as long as the cash aggregator has a good reason, this is all so much pettifoggery and mindless government reporting.
(Precious Metal/Coin Dealers are also required to report cash transactions, with similar thresholds, if the store’s annual sales exceed $50K/year.. See: http://www.fincen.gov/statutes_regs/guidance/pdf/fin-2010-g001.pdf.)
THE MONEY LAUNDERING CONTROL ACT
But in 1986, the Federales noticed that the only way a real financial red flag was raised was if some persnickety bank teller called the police. So the Anti-Money Laundering Act of ’86 was passed requiring banks (and other financial institutions) to file additional reports whenever a pattern of cash deposits or withdrawals over time (45 days) exceed the $10,000 threshold and look “suspicious.” Evading the bank’s questions about why you wanted a lot of cash is one of those triggers that raises the issue of suspiciousness. The MLCA also made evading those questions a crime. The motivation for the all this reporting was to catch drug smugglers.
The Drug Cartels, like active viruses, had grown throughout the 1980’s, and had morphed into truly creative organisms. Drugsters bribed bankers to accept their cash. Or, the cartels used slightly offshore “Cambio Exchanges” that didn’t inquire too carefully into the origin of stacks of $100 dollar bills, and mucho dinero entered the banking system. The cartels also hired “mules” to make deposits in small amounts in dozens of different banks. Once deposited, the cash moved merrily on through the global banking system.
Wachovia, a bank now owned by Wells Fargo, somehow “inadvertently accepted” $400 billion dollars in its Miami branches through Cambios, got caught, and paid a rather piddling fine of some $160 million dollars. Riggs Bank paid a $10 million fine, and other banks have also paid chump-change fines for failing to observe gigantic gobs of money sloshing through their bank wires. But, I digress.
A Suspicious Activity Report (SAR, on a Treasury Form 90-22.47) is sent to the Financial Crimes Enforcement Network (FinCen) located in Detroit. http://www.fincen.gov/ When you get to the suspicious level, somebody reads the damn reports. Think Eliot Spitzer here, who wasn’t a drug dealer, but had grabbed large wads of cash for “entertainment expenses.” Lawyers should know the law. http://en.wikipedia.org/wiki/Anti-money_laundering
THE REFORM BILL WILL ONLY MAKE THIS WORSE
As described by Brian Johnson of the Washington Times on May 19, 2010, Senator Chris Dodd’s “regulatory reform” bill, the Restoring American Financial Stability Act of 2010, gives Bernanke’s FED even more Big Brotherly reports.
The new Act creates an autonomous agency within the FED, called the Bureau of Consumer Financial Protection, where it will function independently of traditional checks and balances…checks like the Court systems. “Neither Congress nor any other agency will have veto power over the BCFP.” (The Lords and Masters working at the FED can “oversee” the BCFP, of course.)
1. The BCFP is given the authority to monitor consumer financial patterns and, “implement and, where applicable, enforce Federal consumer financial law.” Specifically, Subsection C gives this agency authority to “gather information and activities of persons operating in consumer financial markets.”
2. The BCFP is allowed to “use the data on branches and individual and personal deposit accounts” across income and minority level of census tracts; and may use the data for any other purpose as permitted by law.” In other words, the federal government can actively aggregate data on every single personal and business financial transaction in the U.S. And the BCFP is being given a budget of almost $650 million to handle their new chores. Think “Consumer FBI” here.
3. Every financial institution is required to maintain a record of the number and dollar amounts of all deposit accounts of customers, and every penny of every individual deposit will be linked to the census-based personal address of each customer. The bureau is permitted to share this data with whomever they wish.
Imagine, therefore, the enhanced ability of Wall Street and merchants to target consumers based on money patterns they did not cognitively realize they were engaging in. I suppose it would be piling on to mention that the Soviets believed the best way to control their population was to track their money electronically.
Just as the Racketeering Act has been applied to retail sales and political campaigns, and the Patriot Act has been applied to Las Vegas strip clubs, the BCFP is being created to abuse consumers…people who used to be called citizens.
SMART CITIZENS RUNNING TO THE COMEX
Small coin store sales and COMEX Gold deposits are not currently tracked by FinCen. Adrian Douglas, GATA Board member, reported on COMEX Warehouse Stocks as of June 1, 2010:.
GOLD: Total Dealer (Registered) inventory: 3.24 M Ozs.
Total Customer (Eligible) inventory: 7.49 M Ozs.
(Only Dealer Inventory can be delivered against a futures contract. Eligible inventory can be Registered, but is really just stored in Comex Warehouses.)
The remaining open interest in JUNE gold is 6,497 contracts or 649,700 ozs. With the delivery notices issued, the total gold standing for delivery could be high as 2.5 M ozs. This is 77% of the dealer inventory of 3.24 M oz of gold! I don’t see how the dealers are going to handle this demand!
Gee, somebody read Adrian’s post. Gold was up $23 yesterday, a highly unusual pattern to occur when the Plunge Protection Team is operating after the London close. (10AM New York time) Somebody seems to want to buy gold.
Precious Metal shares still look like the last birds to head North for hot times. You might want to invest in a few before they all get the flock out of town.
FF does not own, or plan to own, bank stocks. He does own gold shares, and he is, of course, actively seeking that illusive RV…