Banks Seek Government Help to Track Money Laundering

Industry, anticorruption groups support creating a Treasury-run database of corporations and their owners

Efforts to overhaul U.S. anti-money-laundering laws are gathering steam, as large banks, anticorruption groups and law-enforcement authorities coalesce around the idea of creating a national database of corporations and their true owners.

.. The financial industry’s support for the plan, which would require new and existing corporations to register with the Treasury Department’s Financial Crimes Enforcement Network, could be pivotal.

.. Treasury in 2016 issued a long-awaited rule mandating banks to identify the true owners of companies they take on as clients. It also urged Congress to create a national database of those owners, a step that proponents said would stymie the creation of shell companies by bad actors.

.. Instead of just applying to suspected money-laundering or terrorism-financing activity, the measure would include a long list of criminal activities, including food-stamp fraud, the smuggling of counterfeit goods and environmental crimes.

.. “What you don’t want is a situation where the [government] is able to get private and sensitive information without having to go through that normal process,” she added, citing requests for a warrant or court order.

A Hedge-Fund Titan Puts Away the Punch Bowl

Ray Dalio of Bridgewater sees Americans’ debt as a coming drag on growth and markets

.. While he doesn’t see another crisis in the offing, he does see the same underlying stresses at work: Americans have accumulated far more debt than they have assets and income to support.

.. Not only will this drag on growth and markets, it will leave the economy acutely vulnerable to higher interest rates. The relevant parallel, he says, is not the early 1930s, when the economy imploded, but the late 1930s when the Federal Reserve tightened monetary policy and inadvertently extended the Great Depression. Today, the central bank must balance the short-term need for higher interest rates to contain inflation against the long-term need for low rates to work off the debt overhang and sustain high asset prices.

.. “It may not be a problem in the next year or two, but the risk of not getting it right increases with time.”

.. “We ‘finance people’ see the world very differently from the way economists do,”

.. The views of finance people tend to be shaped more by trading experience than by formal economics. They assign much more weight to financial factors such as debt, asset prices and cash flow than do economists who emphasize “real economy” factors such as employment and investment

.. Finance people are wary of how macroeconomic data obscures crucial details of individual companies and households. Some economists do think like finance people, such as former Fed Chairman Alan Greenspan, but they are in the minority.

.. since the 1970s, inflation-adjusted interest rates have steadily declined while investors have accepted ever lower compensation for risks such as bankruptcy, recession and volatility (i.e. the “risk premium” has declined). This directly raises asset values and indirectly lifts growth by spurring borrowing.

.. His team estimates this has contributed three percentage points a year to stock returns since the 1970s while boosting private and government debt to 325% of gross domestic product.

.. In 2007, Mr. Dalio’s team concluded that the cost of servicing Americans’ debts was growing faster than their cash flows, creating the conditions for a crisis.

.. By slashing short-term interest rates to zero and buying bonds to push down long-term rates, it engineered the right combination of economic growth, debt write-offs and low interest rates necessary to start the painful process of “deleveraging,” or working off all that debt.

.. it can’t raise them much either, or debt servicing​would swamp cash flow and asset prices would sink. Thus Mr. Dalio foresees years of low interest rates, and while he thinks stocks are appropriately valued, he thinks returns to a typical stock-bond portfolio over the next decade will be around zero after inflation and taxes.

.. his biggest worry is that lower corporate taxes and higher stock prices do nothing for the bottom 60% of households who own almost no assets and whose stagnant wages are the mirror image of expanding profit margins, feeding resentment and political polarization. Says Mr. Dalio: “If we do have an economic downturn, I worry we will be at each other’s throats.”

Which Nation Does the World Trust Most? (Hint: Follow the Dollar)

When businesses in two countries — say, India and Argentina — want to conduct a deal, they almost always arrange payment not in rupees or pesos but in dollars. Everyone wants to hold the world’s most trusted and liquid currency. Nearly 90 percent of bank-financed international transactions are conducted in dollars, a share that is close to all-time highs.

.. History also suggests that economic size alone will not be enough to propel China to financial superpower status. From 1450 through the late 1700s, the leading reserve currency was held by smaller countries — first Portugal, followed by Spain, the Netherlands and France. These nations were all major trading and military powers with credible financial systems, but not one was the world’s largest economy.
.. Throughout those centuries, the leading economy was primarily China. It never gained the advantages of having the leading reserve currency because, then as now, its financial system lacked credibility.

To Stop North Korea, Act Like Israel

So far, these crime bosses have been masterful at circumventing the sanctions that have primarily hurt the enslaved North Korean population.

That’s why the United States and its allies ought to take a page from an Israeli playbook and wage financial warfare against Mr. Kim and his cabal.

.. The notion behind using money as a weapon against terrorism belonged to Meir Dagan, a legendary soldier and spymaster who developed the idea in the nascent days of Israel’s fight against Hamas and terror groups supported by Yasir Arafat’s Palestinian Authority.

Mr. Dagan rightly believed that money was the oxygen that fueled the groups’ suicide bombing campaign against Israel. If Israeli security services could suffocate the funds that paid for the bloodshed, the attacks would stop.

.. Harpoon targeted the banks that held accounts belonging to Palestinian terrorist commanders, and the unit encouraged lawyers — including me — to launch suits in United States federal court seeking monetary damages for victims of state sponsors of terror

.. Harpoon went after Hezbollah’s cocaine business in Venezuela and in Lebanon, as well as its money-laundering activities in West Africa and America.

.. And when the Hezbollah hierarchy was cash strapped, Harpoon targeted the financial institutions that allowed the terrorists to move their cash across continents, ultimately shutting down the Lebanese Canadian Bank

.. Most military commanders acknowledge that there are very few, if any, feasible solutions to today’s standoff with Pyongyang. The only effective path is to unleash an offensive press against Kim’s inner circle.

.. This effort ought to include a full-court press of dirty tricks, coercion, heavy-handed threats and even direct action, all covert and deniable, against Kim’s financial wizards who handle the finances, dispense the narcotics and hijack Bitcoins.

.. Only when the money dries up will the loyalty of the men in Kim’s inner circle be compromised and cut away. The North Korean dictator will then be under enormous pressure to do whatever he can to alleviate the effects of the spies tapping into his cash and control.