moneyFYI
Financial Freedom Is Merely Organized Common Sense
Over Regulation Is Pricey
I recently attended a mind-numbing seminar on anti-money laundering, tax fraud, privacy and security. It does not take a lot to numb my mind but this was overkill.
I have no real concern about the idea of protecting clients from the tiny percentage of advisors who are trying to take advantage of their clients, not do I have a problem with protecting society from criminals. I have noticed that the financial services business is becoming regulated to the point where a lot of it is regulator-centric instead of client-centric. Perhaps it is necessary, but it is time consuming and most of the clients resent the time and trouble they must go through to achieve the regulatory goals.
I can appreciate the need for breaking up the money supply for terrorists. I can see the need to prevent drug dealers and tax evaders form laundering their money. I can understand the need for proper identification of clients. I am aware of the need for privacy and security of client information. But, I would expect to start with the theme that most people are trust-worthy and “proving” they are not a candidate for the bureaucratic morass is overkill. If I wished to set up a new unregistered account over $100,000 for my wife of 48 years, I would be required to provide information to establish that she did not acquire the funds nefariously. Maybe she did, but I doubt it.
A small dose of common sense would be appreciated.
The regulators seem to think advisors exist to meet their needs. Most advisors see them as complicated and unnecessary overhead. Some refer to these bureaucracies as “The sales prevention department.” There should be a good reason to do it and to do it the way they want. Wanting the information is possibly good, but they can’t prove the value.
It is like airport security in the United States. The TSA presently has 3-hour lineups to no purpose. Random tests of efficacy have found that 95% of the “smuggled bombs” reach the airplane. Regulators always get caught up in their purpose, but common sense argues that only stupid money launderers will get caught up in the process. A simpler process can find those.
Like most regulation these only apply effectively to people that do not require regulation. Like the old idea, “Locks keep out honest people.”
What studies have been done to establish that the system catches everyone that tries to launder money, evade taxes, and finance terrorism? I don’t care who they have found, I want to know what share of the total they think they are catching. One in a million or even in a thousand is not the answer given the trouble it takes.
Every accountant can tell you that data capture is expensive and data processing is cheap. The regulators want others to pay for the data capture.
There is a moral hazard there.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. don@moneyfyi.com
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