Should we really be worried about bitcoin and financial crime?

Thursday 24 September 2015

A meeting of experts from the world of finance has expressed the harshest of condemnation for the crimes of the banking industry. Bitcoin, frankly, doesn’t come close.

Read also: The bitcoin doco, part 2 - review

A common criticism of bitcoin is that it facilitates and can be used for financial crimes, due to its relative anonymity and borderless nature. Whilst that may be true, bitcoin has a long way to go in terms of becoming the go-to platform for fraud and organised crime. Indeed, it doesn’t take much digging to realise that bitcoin’s less-than-spotless past makes it look positively angelic in comparison to the banking industry.

Money gun

Banks: 'widely identified now as nothing more than enterprise criminal organisations'

Just down the road from where I’m typing, Jesus College Cambridge has just hosted the world’s leading Symposium on Economic Crime. Over 500 distinguished speakers and panellists, drawn from the widest possible international fora, gathered in the college’s medieval buildings to make presentations to the hundreds of delegates and attendees about the most modern forms of financial crime. Here’s a summary of the mood, as described by one attendee. It’s worth quoting at some length because it’s a stark and uncompromising description, and it's practically unimaginable that such sentiment would have been voiced even ten years ago:

'What became very quickly clear this year was the general sense of deep disgust and repugnance that was demonstrated towards the global banking industry. I can say with some degree of certainty now that a very large number of academics, law enforcement agencies, and financial compliance consultants are now joined, as one, in their total condemnation of significant elements of the global banking sector for their organised criminal activities.

'Many banks are widely identified now as nothing more than enterprise criminal organisations, who engage in widespread criminal practice and dishonest conduct as a matter of course and deliberate commercial policy. Speaker after speaker addressed the implications of the scandalous level of PPI fraud, whose repayment and compensation schedules now run into billions of pounds. Some speakers struggled with the definition of such activity as ‘Mis-selling’ and needed to be advised that what they were describing was an institutionalised level of organised financial crimes involving fraud, false accounting, forgery and other offences involving acts of misrepresentation and deceit.

'One of the side issues which came out of this and other debates, was the general and genuine sense of bewilderment that management in these institutions concerned, (and very few banks and financial houses have escaped censure for this dishonest practice) have walked away from this orgy of criminal antics, completely unscathed. The protestations from management that these dishonest acts were carried out by a few rogue elements, holds no water and cannot be justified.

'Similar exercises were carried out examining other forms of financial malfeasance, including Forex manipulation and specifically LIBOR criminality… Particularly nauseating was evidence of the criminal defrauding (I refuse to use the weasel words ‘mis-selling’) achieved through the use of little-understood and unwanted derivative instruments…

'This was followed by a lengthy list of names of major law firms, and Big 5 accounting firms who were willing to join with these pariah banks to bring complex and expensive legal actions against these victims, bankrupting them, forcing them from their homes, repossessing properties they had worked for years to create, while all the time, the regulators and the other agencies, including to my shame and regret, certain spineless police forces, stood by and sought to justify their inaction.'

This describes nothing less than systematic and endemic criminal activity at every level of our traditional banking system, right through to organisational policy: if they are not defrauding customers, they are not doing their job properly.

There’s very little that can be or needs to be added to this - save to say that if bitcoin is supposed to be the platform of choice for financial crime, it’s got a long way to go.


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