The Associated Press reports that financial institutions in North America are paying 71 percent more over the past three years to comply with government anti-money laundering rules and regulations. Even supporters of the current approach admit that the costs are enormous, totaling about $7 billion yearly (and that estimate is three years old). This steep burden might be worthwhile if it led to a reduction in crime and/or terrorism, but as I have explained elsewhere, there is scant evidence that anti-money laundering laws reduce underlying criminal/terrorist behavior. Indeed, because law enforcement resources are being used to spy on everybody rather than targeted at those who want to harm the country, it is possible that the misallocation of resources required by anti-money laundering policy actually makes America less safe:
Complying with anti-money laundering laws has been much more expensive than banks anticipated, and some still aren’t meeting all requirements, a new survey says. …Among the six regions surveyed, North American banks saw the highest percentage cost increase, with costs rising 71 percent over the last three years. …Many governments require that banks take steps to prevent money laundering. Money laundering involves making certain financial transactions to hide the source, nature or destination of illegal funds. The United States has the Bank Secrecy Act, which was passed in 1970 and amended by the USA Patriot Act of Oct. 26, 2001. It has since been used increasingly to stop the flow of financing to terrorist organizations.