By Tyler Jefferson – Money Morning.
Breathe a deep sigh of relief. There’s nothing to worry about. The government is here to help.
If that last sentence sent a shiver up your spine, you aren’t alone.
After Commonwealth Bank of Australia’s recent scandal, questions have been raised about how much we can trust Australia’s banks. And how much we can trust the authorities to regulate them.
In case you’ve missed the story, Commonwealth Bank is accused of failing to report 53,000 potentially suspicious transactions. It was all due to a glitch in CBA’s ‘Intelligent Deposit Machines’. A glitch that went undetected since the machines were first rolled out in 2012.
‘Potentially suspicious’ means deposits of over $10,000 cash. CBA should have been informing AUSTRAC (Australian Transaction Reports and Analysis Centre) about each of these. AUSTRAC is responsible for investigating money laundering and terrorism financing. So, not a small deal.
It’s impossible to know how much criminal activity went unnoticed due to this failure. Presumably, the majority of these ‘potentially suspicious’ transactions were perfectly innocent. But these issues came to light largely due to Australian Federal Police arresting a number of money launderers. Launderers who had been working for international drug traffickers.
CBA’s reporting failure went unnoticed for years. Unnoticed by CBA, at least. There’s no knowing how many criminals cottoned on to this. Sure, the Federal Police arrested a few. The glitch has been discovered. But who knows how many slipped under the radar before that happened? Remember, we’re talking about more than 53,000 transactions.
This week, the federal government announced that it would be strengthening laws that target money laundering in a bid to counter financial terrorism…and to regulate bitcoin.
What exactly do bitcoin and other cryptocurrencies have to do with CBA’s failures? Or with the criminals who exploited them?
Nothing at all. But that’s not the point. The government argues that bitcoin is used for money laundering, and so needs to be monitored. They’re likely right. And packaging the laws up with banking regulation, during a time when many are angry at and suspicious of banks, will make them easier to pass. If CBA’s scandal isn’t enough, there are plenty of other stories in recent years about big banks being fined for failing to report drug cartels, terrorists and other criminals washing their money. Who could disagree?
But, while the blame has rightly been laid at CBA’s feet, it isn’t the only responsible party. It’s worth noting that regulatory authorities like AUSTRAC already exist, and did so for the entire period of CBA’s negligence.
So what form will the government’s new regulatory powers take? Greater fines and punishments for failure to comply? That may incentivise banks to make sure they’re compliant. But from all appearances, CBA’s failure was a monumental mistake, not an active attempt to break the law. Harsher punishments would have been unlikely to change that.
If our existing regulators took years to spot a massive error in a relatively simple smart-ATM, how can anyone expect them to keep up with the every-changing revolution that is cryptocurrency? This is a world that is constantly redefining and reinventing itself. Crypto experts like Sam Volkering will tell you that many of cryptocurrency’s greatest achievements haven’t even been thought of yet.
Cryptos like bitcoin are already revolutionising the financial world. But more recent entrant Ether isn’t even intended as a currency for spending. Instead, ether is more like an energy source for the next stage in the internet’s evolution.
(If that doesn’t make a lot of sense to you, you should check out Sam’s Secret Crypto Network. He’s been reporting on cryptocurrencies since their early days, and he understands their uses and potential better than anyone else I know.)
If we haven’t even thought of some of the most important uses for crypto yet, how can regulators possibly hope to control it?
Of course, that doesn’t mean they won’t try. It’s inevitable that government will stick its nose in.
The world of cryptocurrencies will keep innovating and evolving. It will be years before government can catch up, and begin to understand or effectively regulate this world. That comes with freedom, but also with risk. If you’re considering dipping your toe into the world of cryptos, and trying to get a piece of the incredible gains being made there every day, you need a guide.