How the SPLC became financial infrastructure

**Patrick McKenzie** (0:02)
Welcome to Complex Systems, where we discuss the technical, organizational, and human factors underpinning why the world works the way it does.
Hi to you, everybody. My name is Patrick McKenzie, and I'm better known as patio11 on the internet. I love fraud. No, sorry, not that way. I love fraud as a lens for how the world really works and doesn't work. I also love how we attempt to interdict fraud for the same reasons. This episode is first in a series split due to length. Today's is a very, very typical for me read of a portion of a Bits About Money piece, which covers an indictment for bank fraud, the Bank Secrecy Act surveillance regime, and how white college prosecutions are designed to feed off of it. The next episode in this series is uncharacteristic of Complex Systems or Bits About Money. It is a public interest reporting adjacent to a national political news story of lasting importance on actions of a coalition of nonprofits. Many knew but couldn't say, many suspected but couldn't prove, many could prove but couldn't risk it. And then one very necessary piece of the puzzle was seen on the WordPress server published in the clear light of day. This series assembles parts of the puzzle for you. You may infer what you want about the shape of the rest of it. I found the WordPress server while truffle hunting for juicy documents about a bank fraud, as is my job and hobby. To paraphrase one of my favorite characters, Lester Freeman from The Wire, followed the money and you never know where it will take you. With that, the piece. I consider the version published at bitsaboutmoney.com the definitive version. But this episode is a service to people who prefer to listen rather than read.
The financial industry understands itself to be in armor of the government. We were inducted into the service other than willingly through the ordinary operation of law and regulation. This is uncontroversial and unsurprising to insiders. A claim which will be more surprising. Some regulated financial institutions have delegated authority for account and transaction level decisioning to a non-profit. Another, that non-profit includes a private intelligence agency which runs covert assets, publishes intelligence estimates, develops target lists and communicates them to decision makers. Still another, the non-profit through the private intelligence agency co-created a coalition of like-minded non-profits. A coalition member posted a targeting package co-signed by many coalition members on its website. That targeting package recommends a decisive strike against the Political Action Committee of an American politician for the purpose of interfering with fundraising and rallies. Last week, the Department of Justice unsealed an indictment against the non-profit for bank fraud. This was based, in part, on transactions it made to pay the intelligence agency's covert assets. They likely developed evidence for that indictment using the Bank Secrecy Act BSA mandatory reporting regime. The same non-profit testified in Congress asking it to expand that regime contemporaneously with the indicted conduct. We begin, as always, with the bank fraud.
The strategic logic of bank fraud charges and white collar indictments. White collar prosecutions are structurally difficult because they frequently depend on intent. It is difficult to prove intent beyond a reasonable doubt, as it frequently depends on subjective mental states which we cannot directly observe. This problem is discussed in depth in the literature, including in book-length treatments.
There exist ways to overcome this difficulty as a prosecutor. The classic one is waiting for the criminal to violate Bringer Bell's dictum on the wisdom of taking notes on a criminal conspiracy. You then introduce their notes into evidence. They will frequently contain explicit statements demonstrating men's rape, a legal concept of a guilty mind. The register of those statements will be less guilty and more gleeful. Crime is awesome! Wow, I sure hope the government never reads this because we are committing so much crime right now! The prosecutorial toolbox has other tricks too. Rely less on charges which require demonstrating intent. Rely more on what the Economics of Law field calls Bright Line Rules. For those crimes, you do not need to demonstrate what emotional valence someone experienced while committing a criminal act. You only need to demonstrate the fact of the act. Interdicting crime is an iterated game. Responding to our noted inability to manage some forms of crime, legislators have intentionally added some items to the prosecutorial toolbox. Whether one describes them as tools or weapons depends mostly on whether one touches them with the hand or the face.
As Bits About Money has covered frequently previously, the Anti-Money Laundering, AML, Know Your Customer, KYC, and related regulatory edispaces, which the financial industry operates under, have some subtle goals. To achieve the overall objective of stochastically interdicting crime, they are designed to force criminals into repeated unpalatable trade-offs. One is, you can choose making money, or you can choose never interacting with banks, but it is very difficult to choose both.