Saturday, June 11, 2016

"Know your customer" rules at banks could have unintended consequences that spread

A story by Elinor Comlay in the New York Times ("Deal Book") on June 10 refers to some of the perhaps unintended consequences of “know your customer” rules for financial institutions, trying to print money laundering. The story concerns a business in Atlantic City that handles money transfers and cash services for low income people with relatives mainly in Mexico, including the ability to send money to relatives.  This is a practice, for one thing, that Donald Trump wants to use as a bargaining chip to build his “Green Monster” border wall.

The business reported in the story (Interamerica Express) keeps having business accounts at banks cancelled, because the banks fear compliance problems with the law. 
Imagine if the idea of “know your customer” applied in other areas.  Could banks be recruited to serve as auxiliary gatekeepers when people “inherit” estates, for example? 

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