Forced de-banking

AML compliance in the US is imposing a lot of harm on people mistakenly suspected of moneylaundering. 

The New York Times provides a few worrying examples. The algorithm flags something, and accounts go poof. 

Bryan Delaney has owned several New York City bars over the decades, and he and his business partner and general manager, Jennifer Maslanka, have a longstanding system for handling cash: It goes to the bank on Fridays and Mondays.

As card use has increased over the years, the size of the deposits has decreased. To make the accounting easier on new staff who started working during the pandemic, Mr. Delaney and Ms. Maslanka often rounded deposits down to the nearest thousand and kept the rest of the cash on hand to make change.

This year, Chase closed the bar’s account, plus personal checking and credit-card accounts for Mr. Delaney, his wife and Ms. Maslanka, giving them a handful of weeks to make other banking arrangements.

Federal law requires depositors to fill out a form if they’re depositing or withdrawing more than $10,000 in cash. Sometimes, in an attempt to avoid the gaze of the authorities, account holders will engage in “structuring,” making a series of transactions just under $10,000. It’s one of the top reasons that banks file suspicious activity reports.

Mr. Dubrowski, the JPMorgan Chase spokesman, said the bar’s series of deposits was indeed the problem.

“We must know our customers and monitor the transactions that flow through our bank,” he said. “That includes instances where we see a pattern of cash deposits that are just below federal currency reporting thresholds.”

Mr. Delaney said he had not been engaged in structuring when depositing money in round numbers. All the cash had come from the bars, he said, and he reported his income and paid his taxes as he was supposed to.

The bank’s explanation is especially maddening, given that he and Ms. Maslanka had filled out plenty of the $10,000 forms over the years. “What’s to gain from not filling it out?” he said. “What’s the risk of filling it out? I’ve done both when deposits warranted that.”

“I’m still so confused,” Ms. Maslanka said. “Do you think I’m part of some underground Mafia, laundering money through my little beer bar?”

I wonder how common this is in NZ.