"nothing could be done over the phone, though I was welcome to walk into a branch and try my luck there" - This is sadly common with UK banks. They want you to go to the branch for all sorts of things that really don't need it, but the branch is always closed or overcrowded when you have time to get there. It doesn't help that you have to use your own branch, not any of the others - as if they don't have a computer network between them? Or perhaps they feel the local staff somehow remember who you are and what your tedious banking problems are? Somehow they decide there's no need to be open in the morning, evening or Saturday afternoons, even though they're turning people away and squeezing the bloated queue inside the doors so they can get ready to close. I was also overseas when I was told the only way to get the few thousand pounds from my account was to go the the branch. Eventually they found another way.
Speaking of bank opening hours, this is something I really don't get. Where I live, all branches of most of the banks are open only Monday-Friday between 0900 and 1700, which is exactly when most people are at work. Every time I need to visit the bank in person (and 'till recently my bank didn't have cash deposit machines), I need to take half a day off at my work.
It's similar with some services, i.e. barbers. What I don't get is how do they make money when they're opened only when people don't have time to visit them. There must be something weird going on there, otherwise I'd expect the market to force them to shift opening hours so that working people could use those services.
Banks have these operating hours because the accounts on which they make the most money are small and large business accounts. Their profit margins on personal checking and savings accounts are much lower. It's all dictated by the market.
As for barbers, most shops in the U.S. are open until 7 or 8pm and weekends, pretty reasonable.
I mention this every time someone talks about small businesses closing in town centres. It's not the 1950s when wives would go to the shops. These days there's a bimodal distribution of society: couples working or commuting for >8 hours a day who have money but no time, and unemployed people especially single parents who have time but no money.
Banks basically don't need to innovate on their hours. If all banks are open similar hours, none of them feel the need to impact their costs by opening longer knowing that it will just force their competitors to do the same and level the playing field again, with everyone (banks not customers) losing out.
Barbers, all the ones I've known in a few UK cities have always had at least a couple of evenings they would open for, if not all evenings (though I generally go during the day anyway). Presumably because there's so many more than there are major banks, and because it's a key decision making factor for consumers - people are more likely to think "I'll get my hair cut at X instead of Z because it's open when I want a haircut" than "I'll bank with X instead of Z because some day I may prefer the opening hours". Not sure if my different experience is based on location or the fact that I generally go to not-cheap places which wouldn't use the term "barbers" to promote themselves.
The commercial banking industry has been watching TD Bank for the past few years.
Banks compete in 2 main areas: interest rates and services.
TD Bank has a far better service offering than Citibank, Chase, etc.
TD Bank offers ATM fee reimbursement anywhere in the world, much longer branch hours, free coin counting, nicer employees, etc.
And yet TD Bank is not crushing the competition.
TD Bank's better service offering is not enough of a competitive advantage to offset the stickiness of commercial banking.
A person's main checking account is a pain to transfer for most people. To change your checking account you need to:
1) Wait days for the new account to be approved and initial transfer to clear
2) Wait to receive new checks
3) Reset up your recurring bill payments
The reason that most banks don't innovate is that customers move to better banks very slowly.
The purpose of a bank is to lend money at a price. They want to hold on to their deposits as much as possible. I bet if willing they would only be open for an hour a day.
Same thing in Australia. Have to visit the branch for simple tasks that should be doable over the phone. Plus the branches are often busy and close early.
I recently got married and my wife changed her surname to my surname. The process of updating this was quite a pain for most Australian banks (even when she was just an additional card holder on a credit card).
However, for American Express card, this process was extremely easy. Phone up, customer service emails, reply back with a copy of marriage certificate, new card in the mail within a few days. Perhaps not 100% secure, but easy. Perhaps they take more processes from the US?
Interesting - what trouble did you have with the banks here?
I am a NAB customer and when we got married it was one form to fill in (with associated documentation) to update my wife's details across all of the accounts, including having new debit/credit cards sent out by post within the week.
I just moved back to the US after living in London for three years. I opened a local Lloyds Bank account when I got there, but was advised by my accountant to be paid into an offshore account for tax purposes. This turned out to be surprisingly easy to do through Lloyds International, and was facilitated by the local banker though they have no direct access, they were able to get the Lloyds International bankers on the phone and verify my identity, etc. It's actually a very sweet setup because the online banking makes it seamless to transfer money between the accounts, so I can have all the convenience of local UK banking when I'm there, but all the convenience of the International Phone Bank with its extended hours and designed to be used by customers anywhere in the world. I'm not sure of all the implications for UK citizens, but if you spend a lot of time abroad I'd say its definitely worth looking into.
Really? In Northern Ireland at least it seems to be the opposite. They're closing as many branches as they can and forcing you to do everything online or over the phone.
I'll give you a concrete example of something that HSBC UK requires visiting the branch for: opening a Certificate of Deposit. That is, if you have money already in their bank, and you want to take some from your current or savings account and move it to a CD, you must do it in person at the branch. The CD would be in the same name as the account the money came from; there is no risk to the bank at all. Yet they require a scheduled appointment at a limited selection of branches.
HSBC is also not a competitive bank - they have some of worst interest rates on the planet. HSBC is telling their customers to take their business elsewhere without so many words.
I am not a lawyer, but the author should consult one. Money transmitting businesses are heavily regulated in the United States, and operating such a business without registration and compliance with regulations may be illegal.
These laws are not a joke; there's a reason that all the mainstream Bitcoin businesses have these constraints, registrations, and rules, despite the way they impede customers and businesses: "know your customer", anti-money laundering and Patriot act constraints on terrorism funding are very real and serious interests of government units with powerful enforcement powers.
Be warned that this is not the same as selling lemonade in the government's eyes.
I'll cover money laundering first since it seems to get so often repeated here:
No, exchanging bitcoin for cash, or vice versa, is not in and of itself money laundering. Replace "bitcoin" with "casino chips". Is every casino in Vegas behind bars? No. Why not? Because there was no intent to launder, only an intent to exchange value for value.
Secondly, the concern over bitcoin dealing being a Money Services Business (MSB) is a little more legitimate. IIRC, FinCEN has already stated that these sorts of businesses are MSBs, and require all the usual compliance measures attached to that label. There are also some states that consider bitcoin trading businesses MSBs as well, on the state level. On a practical level though, hardly anyone is enforcing these rules. Does that mean there's no risk? No, of course not; there's definitely a risk. It's just not currently that large of a risk.
Lastly, with regards to unreported income, that's an issue with any income, regardless of source. If a stranger handed you $10 out of nowhere, that's income and you're required to report it. Hell, if you sold some crack to that stranger in exchange for those $10, you're required to report it. Unreported income is not a bitcoin specific concern.
I didn't mean it was necessarily laundering, just that there's a number of regulations intended to detect and control money laundering that may apply to the author.
How interesting. Makes me want to set up a similar service where I am. $500 minimum, mark it up a steady 10% based on price when the order is placed, and offer to buy the coffee when you meet at the local cafe to make the swap.
Hard to make a living unless you're doing it full time, but the hobby would pay for itself and then some, and you'd meet some interesting people and learn your way around the ecosystem.
As for the money... keep the cash! Use the cash! Cash is convenient, cash is universal! I've been thinking about going all cash for anything but purchases that must be made online, and even those can be made with prepay cards that can be bought with cash. edit: a moment of thought reveals you have to put the cash back into the system somehow or another in order to fund more bitcoins. So, there's that fantasy shot.
Another thing to shoot down that fantasy: someone makes a casual mention of illegal activity, and as soon as you complete the transaction they pull out their FBI badge and arrest you on charges of money laundering, aiding a criminal, etc. People from localbitcoins have been targeted and subsequently busted this way, for doing no more than this guy.
The rule of thumb is, if the person you are doing business with mentions intent of doing something illegal, you have to stop the transaction right away.
I'm not even sure that involved drugs or anything - they got busted on straight up AML. I can't find the drug case now, I saw it within the last six months but any Google search just returns tons of SR hits...
This guy is extremely lucky all that happened to him is that he got his bank account closed. With the amounts of money he was dealing in, what he was doing could have easily gotten him arrested.
Your reaction is a bit overblown. People have been and are currently buying and selling fairly large amounts of BTC both in person and online on localbitcoins alone.
Basically, while you are in theory free to move money around as you please - for yourself or as a service to others - doing so in large quantities will get you scrutinized. If uppon scrutiny there is any doubt as to from where the money came or where it went, you'll be flagged for "money laundering". Once that happens the "authorities" will essentially go with a haircomb through anything and everything you've ever done, and then, uppon dicsovering that you are in fact not a criminal, keep on looking until they actually find something to justify all of that effort they just wasted on you.
My error, I forgot he was in police state USA where you can be arrested without committing a crime. I thought he was talking about being somewhere sensible and as he had committed no crime I could not see how he would be arrested.
I think you you might just be blowing off some steam with your comment, but i found it interesing.
I found a quote on this:
American police need probable cause to make an arrest, but in the United Kingdom, officers can arrest on suspicion. Probable cause is defined as the belief that a crime was probably committed, and that the suspect was probably responsible. Reasonable suspicion means that a right-minded individual would have grounds to suspect that a crime had been committed and that the suspect might be responsible. To have probable cause, greater evidence is required.
Being arrested on suspicion in the U.K. isn’t so unpleasant as being arrested in the U.S. In fact, you’re likely to be released within hours without paying any bail.
If nothing else, you can feed the cash into transactions that would otherwise not have been. All your groceries are now paid with bitcoin cash, and the difference can be applied to buying more bitcoins. There's a ceiling there, but unless business is booming, I bet you never hit it.
So can anyone explain why banks would suddenly close an account like that in the UK? Would they do that in the US? He is despositing a lot of cash and electronically transmitting money from that account. Wouldn't any small business that does a lot of cash transactions run into this same problem?
No, because a small business that does a lot of cash transactions would, on review of the account, look like a business, not like a money transmitter. There would be checks written to vendors, withdraws from a payroll company corresponding to a predictable cycle, probably a rent check on a predictable cycle, etc.
If your only two transactions are "Deposit lots of cash" and "transfer it to another bank" the bank will come to the conclusion "To the extent that there is a business here, it is probably money laundering." The bank was right.
These transactions would be half money laundering only if the buyers only came from illegal activities and they were avoiding deposit in a typical bank. It's not laundering by the author as he is not involved or aware of the buyers' money's providence. I don't see how it would be money laundering more than say, buying $3000 of gold from a local gold and silver shop.
I'm hardly an expert in... Anything, though. If you care to explain that would be lovely.
Most of legitimate financial activity forms follow well known patterns. Illegal activities often follow different patterns. It's reasonable for a bank to flag suspicious accounts, even though you'll always have some false positives - because if it looks like money laundering, most of the time it is.
Also I don't know if this works with banks (having no personal experience here), but I remember back from the time when early Kickstarter projects got their PayPal accounts frozen, that the rule of thumb was: if you're going to do something on your PayPal account that looks weird/atypical, it's a good idea to call them in advance and tell them about that.
Banks have a strong incentive to avoid money laundering activities
Most banks have automated systems that flag on certain automated conditions (I know because I built one). Contrary to some of the posts in here, they do not want to flag accounts, and most do the absolutely minimal mandated under AML legislation.
We have no idea why his account was closed, but it is extremely unlikely it was due to suspected money laundering. If they suspect money laundering, they legally must report it (this is the case in the US, Canada, and the UK, at a minimum) to the appropriate government agency, where it will be investigated. They can't simply say "looks like money laundering, go somewhere else".
As always everyone is operating under very incomplete information.
We have no idea why his account was closed, but it is extremely unlikely it was due to suspected money laundering. If they suspect money laundering, they legally must report it (this is the case in the US, Canada, and the UK, at a minimum) to the appropriate government agency, where it will be investigated. They can't simply say "looks like money laundering, go somewhere else".
"Fill out AML suspicious activities report" and "close his account" are mutually exclusive courses of actions. Just because one happened doesn't mean the other ones didn't happen.
Like you said, we're operating under very incomplete information, so let's not assume "fill out AML suspicious activities report" didn't happen here.
They usually are mutually exclusive, at least in the US and Canada. If an AML flag is triggered, or there is reasonable suspicion, they have to report it and are barred from telling you that you've been reported. Kick you out as a customer would be a great way to undermine the whole AML thing.
It is entirely possible that if he simply had transfers to or from known Bitcoin entities, that would have triggered it. Not because he did anything illegal -- Bitcoin isn't currently illegal in most places, and they have zero onus to report anything in that case -- but that the bank is hedging that there will be issues that come up in the future and they don't want the hassle. That they have determined that Bitcoin is going to be a regulation hassle in the future so they simply want to have nothing to do with it. This is in no way money laundering, or suspicion of it, and they needn't report anything -- just tell him to get lost so in a year or two when this becomes a big thing they have limited their exposure.
>If an AML flag is triggered, or there is reasonable suspicion, they have to report it and are barred from telling you that you've been reported.
Completely agreed.
>Kick you out as a customer would be a great way to undermine the whole AML thing.
This is where I think you're overreaching. Do you have a source on this? AFAIK closing an account isn't against any AML legislations. There's no onus on the bank keep a suspicious account (whether it's AML related, Bitcoin related, or just because the bank manager didn't feel like serving this account was profitable proposition anymore) open even when it's against their financial interest to do so.
He is despositing a lot of cash and electronically transmitting money from that account.
I think that's your answer right there. Small businesses usually have personal connections with their bank and can easily dispel any suspicions of money laundering as well.
Banks have an obligation to report suspicious activity, and many will cut you off if they see a pattern or trend that could be suspicious to reduce risk.
The governor of New York's prostitution habit was discovered a few years ago when a bank risk guy flagged money transfers from his account.
Assuming you mean big risk, how so? It's very hard to counterfeit modern currency. Color changing ink, watermarks, and the embedded strip are all hard to counterfeit especially in tandem.
The best way to test is with a strong neodymium magnet. Magnetic ink is one of the last frontiers that counterfeiters have yet to break.
But better than all of that is to require the transaction to happen in a branch of your local bank, or post office, and be funded by a money order from the bank or post office.
I don't get it: They say that they started using Bitcoin to help transfer money overseas, yet later in the article they talk of using TransferWise to move money abroad (which deals in pounds and dollars, not Bitcoin)
If bitcoin's strength is meant to be its low cost for moving money around, how come even this Bitcoin peddlar cashes out back into fiat to move it?
If you bake pies at home and sell them to friends, do you have to register yourself as a business? There might be benefits to it but he could also just be self-employed. As long as he declares his earnings and pays taxes on them there shouldn't be a problem.
If it is strictly "to friends" in a way that is not legally to the general public, possibly not (but if you are soliciting people in public places, then its probably public sales.) For public sales of food, you probably need both a business license and separate health clearance for selling food, if your state law even allows selling food made in a home kitchen (California recently adopted a law allowing this, with very narrow limits.)
You can make a certain amount of capital gains in the UK without paying tax. It's in the region of 10K I think. I guess buying bitcoin at market price and selling at 'a different market price' counts as capital gains on an investment until the point where you've made enough money to have to declare it. And this would be on your tax form at the end of the year.
At least that's how I understand it. I'm not an accountant but have been unloading a few coins this year and I'm pretty sure I don't need to declare anything until I make more than a certain amount across all my investments.
In the US, as I understand it you wouldn't be able to use capital gains on this kind of thing because you haven't held the Bitcoins for a year. It would be "short term capital gain" which would be the same as ordinary income.
The real risk here is that if you don't track all the transactions and report and pay taxes on the profit (at, likely, ordinary income tax rates), you'll get nailed for tax evasion.
I imagine (though I have no experience) that this must be similar to having a marijuana based business. If you want to be legit you have to open a bank account... but not a lot of banks want to touch a business like that.
You might think you could just lie on the bank account opening form where it asks about what the business will be doing, and say you're opening a coffee shop or food cart (something with cash sales), but then you could be nailed for lying on a form, and since (again in the US) most accounts are FDIC insured, that could be under the rubric of lying to the Federal government (not good).
I don't have direct experience with this, IANAL etc., but these are some loose concepts that come to mind.
Too bad, great idea, classic good example of arbitrage/exploiting market inefficiencies. I think it's even do-able legitimately, though it's slightly too far along the risk-reward curve for my taste ATM.
Whether or not you have to pay taxes on the proceeds of the endeavor is an orthogonal question to whether or not you need a business license to engage in the endeavor.
I think (he/a contractor/a company) basically doesn't need to write a tac return/declare income if they make less than £10.5K gross a year, the threshold for completing a tax retirn as far as I know.
You don't have to register a business per se in the UK. If you're self-employed you have to tell the tax authorities even if you're making trivial amounts of money.
