The State Department’s Misguided Money-Laundering Wish List

A couple of decades ago, there were no laws against money laundering. Instead, governments fought crime by…well…fighting crime. Then politicians came up with the idea of making it illegal to use the proceeds of crime. This was not necessarily a bad idea. After all, crime theoretically will be reduced by polices that either increase the expected punishment or lower the expected rewards. Unfortunately, anti-money laundering laws have been an expensive failure. They costs billions of dollars yet there is no peer-reviewed literature showing that they have any impact on crime. Heck, they don’t even stop crooks from laundering funds. Yet the myopic bureaucrats at the State Department publish an annual report hectoring other nations to make their anti-money laundering laws more intrusive and burdensome. Richard Rahn’s Washington Times op-ed reviews some of the sillier suggestions:

This month, the State Department has set a new record by managing to insult the citizens of 123 different lands at one time in the “International Narcotics Control Strategy Report: Volume II, Money Laundering and Financial Crimes.” The 450-page report discusses what other countries are doing to reduce money laundering and financial crimes, which is fine. But then the authors go on gratuitously lecturing each of the countries by name about how they could do things “better.” To understand the total hypocrisy of the State Department nags, it is important to remember that more money laundering goes on in the United States than anywhere else, and that the U.S. is the world’s biggest market for illegal drugs. The Report…is filled with endless demands that other countries do a better job enforcing their laws, pass more laws, sign more international treaties and engage in some practices that would be illegal and unconstitutional in the U.S. Many of the demands would not meet a reasonable cost-benefit test… Some examples: The Belgians “should strengthen the adherence to reporting requirements by some nonfinancial entities, such as lawyers and notaries,” so says State, while completely ignoring the importance of lawyer client confidentiality. …To the Germans they say, “Amend legislation to waive the asset-freezing restrictions in the EU Clearinghouse for financial crime and terrorism financing, so that the freezing process does not require a criminal investigation.” Perhaps, the folks at State Department forgot there are certain historical reasons why the Germans now insist on strong legal protections against a potentially abusive state. The Greeks (and others) are told, “Abolish company-issued bearer shares, so that all bearer shares are legally prohibited.” Maybe the State Department gurus were unaware that bearer shares are perfectly legal in some states in the U.S., such as Nevada, and can serve a sound economic and personal privacy purpose. The authors say the government of Dominica “should eliminate its program of economic citizenship.” But then again, maybe they were unaware that many, if not most, countries allow permanent residency and/or citizenship (including the U.S.) to noncitizens who invest a certain amount in their adopted homeland. …Singapore is told that it “should add tax and fiscal offenses to its schedule of serious offenses.” Perhaps again, it did not occur to the folks in State that the highly educated and prosperous citizens of Singapore are quite capable of figuring out for themselves which laws ought to be “serious offenses.”

Reefer Madness Again

Cato senior fellow Randy Barnett writes in Saturday’s Wall Street Journal about the latest court decision on medical marijuana. After the Supreme Court ruled in 2005 that the application of the Controlled Substances Act to personal medical use of marijuana did not exceed the federal government’s constitutional authority, Angel Raich went back to court to argue that the ban violated her fundamental right to preserve her life. Alas, the Ninth Circuit Court of Appeals rejected that claim, too.

But as Barnett notes, the court did seem unhappy with the decision it was forced to reach:

For now, federal law is blind to the wisdom of a future day when the right to use medical marijuana to alleviate excruciating pain may be deemed fundamental. Although that day has not yet dawned, considering that during the last 10 years 11 states have legalized the use of medical marijuana, that day may be upon us sooner than expected. Until that day arrives, federal law does not recognize a fundamental right to use medical marijuana prescribed by a licensed physician to alleviate excruciating pain and human suffering.

Pity a panel of judges forced to tell that to a suffering plaintiff.

The Washington Post on the Iraq War, Four Years Later

As the Iraq war entered its fifth year, with no end in sight, the editors of the Washington Post offered a mea culpa, of sorts, in yesterday’s Outlook section. Where they admit fault with their analysis of the Iraq war, it is largely in the ”questions not asked” category. These unasked questions pertained to the likelihood that Saddam Hussein would develop “a dangerous arsenal.” They were too accepting of the conventional wisdom on a host of issues. “Clearly, ”they explain, “we were insufficiently skeptical of intelligence reports.”

Their greatest error, however, was in underestimating the challenge of reconstructing Iraq.

The question that Gen. David H. Petraeus posed (as recounted in Rick Atkinson’s history, “In the Company of Soldiers”) as he led the troops of his 101st Airborne Division from Kuwait across the Iraq border, “Tell me how this ends?” – that question must be the first to be asked, not the last. The answer won’t always be knowable. But the discussion must never lose sight of the inevitable horrors of war. It must not be left to the generals in the field. And it must assume, based on experience from Germany to Korea to Afghanistan, that a U.S. commitment, once embarked upon, will not soon be over.

We raised such issues in our prewar editorials but with insufficient force. In February 2003, for example, we wrote that “the president [must] finally address, squarely and in public, the question of how Iraq will be secured and governed after a war that removes Saddam Hussein, and what the U.S. commitment to that effort will be… . Who will rule Iraq, and how? Who will provide security? How long will U.S. troops remain? … Many of these questions appear not to have been answered even inside the administration… .” They were still unanswered when the war, which we nevertheless supported, began. That should never happen again. (Emphasis mine)

No, it should not. And I take the Post editors at their word that they will strive to prevent that from happening again. In practical terms, however, does this mean that the Post would withhold support for military action against, say, Iran, if these questions are not answered to their satisfaction? I’m not sure.

But I can’t help but feel that their failure in early 2003 to ask such questions about war with Iraq derived not so much from sloppy analysis and insufficient curiosity (though those conditions certainly existed), but rather out of an inchoate concern that honest answers to such questions would have eroded support for a war that the Post editors believed – then and somehow still – to have been not merely justified but necessary. 

My suspicions are largely confirmed by the lessons that they have drawn, so far, from the Iraq experience. These include a conviction that preventive war is still a legitimate counter-proliferation strategy. (Jeffrey Record convincingly argues otherwise here). They have learned that democracy promotion is a difficult business, but they contend that the public demands that it remain a core object of U.S. foreign policy. (The latest polling data, as reported by the Post’s own David Broder last week, refutes this claim.) The Post editors have learned that multilateralism is preferable to unilateralism (who disagrees?) but that “international law and multinational organizations” cannot “always be counted upon.” In which case, what? They don’t say. Instead they concede, “Unfortunately, none of this provides bright guidelines to make the next decisions easier…”

But there is and should be a bright guideline for future military interventions, and it is nicely encapsulated in the final line of Ted Carpenter’s latest Policy Analysis: “Launching an elective war in pursuit of a nationbuilding chimera was an act of folly. It is a folly [U.S. policymakers] should vow never to repeat in any other country.”

It is clear that millions of Americans who supported the war in March 2003 on the erroneous belief that the war would be cheap, easy, and decisive, have since changed their mind. Knowing what they do now, most Americans believe that the war was a tragic mistake, a bad idea at the outset, made worse by the many errors committed by the Bush administration along the way.

The editors of the Post, apparently, have not learned this central lesson. And they, therefore, can be expected to support more elective wars in the future.

Europe’s Insane Agriculture Subsidies

American politicians have created a wretched system of agricultural subsidies, but it seems that Europe’s lawmakers win the prize for concocting the most perverse ways to squander tax money. The Times reports that there is now a secondary market in buying and selling agricultural subsidy entitlements:

City dwellers are making huge profits out of an EU loophole that allows people who have never set foot on a farm to claim European farm subsidies. …Auctioneers and brokers who used to sell cattle and farm-land are now focusing their attention on selling the rights to receive European taxpayers’ money — known as entitlement trading — in what one described as a “ferocious” market with the rights to subsidies “flying off the shelf”. …Open auctions are being held — with one in Aberdeen due next Friday — while investors are also buying the rights to subsidies over the telephone, through brokers, through internet auction sites and inter-active trading. …Under EU regulations, only someone classified as a farmer can buy the right to receive subsidies, but to be classified officially as a farmer, people need only hold a lease on a minimum of 1.7 acres for ten months of the year, and never need to visit it. Scottish landowners are now leasing out vast tracts of rocky highland for as little as £5 an acre a year, so that investors can claim to be farmers. For each acre you lease, you can buy annual subsidies averaging £100 an acre, but which can rise to over £1,000 an acre.

A newspaper in Scotland, meanwhile, reports that one dairy farmer has figured out how to scam the system for about $2 million per year - most of which is received as a subsidy for milk that does not exist:

A Scottish dairy farmer has exploited a glaring loophole in European law to annually earn the right to claim more than £1million in subsidies. William Hamilton and Sons, of Meldrum Farm, Blairdrummond, Stirling, has taken advantage of a flaw that allows it to get handouts on almost nine times the amount of milk it produces. Under EU law, the business will continue to qualify for the lottery-size payment annually until 2012 - even if it stops producing milk.

Property Rights at the Supreme Court, Again

It’s being overshadowed by the Bong Hits 4 Jesus case, but there’s an important property rights case before the Supreme Court today. Timothy Sandefur, author of Cornerstone of Liberty: Property Rights in 21st-Century America, writes about the case in Legal Times today.

The case involves a dispute that arose when Harvey Frank Robbins bought some land in Wyoming. The Bureau of Land Management claimed to have an easement on the land, but that wasn’t recorded on the deed. The government demanded that Robbins agree to the easement, and he resisted. Government agents promised him “a hardball education,” and they delivered – harassment, citations for minor offenses, belligerent visits, and criminal charges for interfering with government agents, charges of which he was acquitted after 30 minutes of jury deliberation. Sandefur takes the story from there:

After enduring years of such treatment, Robbins sued, arguing, among other things, that the BLM agents had violated his Fifth Amendment right to exclude others from his property. The trial court and the U.S. Court of Appeals for the 10th Circuit agreed, but the government asked the Supreme Court to reverse in Wilkie v. Robbins. “No court,” said Solicitor General Paul Clement in his brief, has “ever recognized a constitutional right against retaliation … in the context of property rights.”

This astonishing argument is potentially far more dangerous to the rights of property owners than the notorious Kelo v. New London decision two years ago, which held that government can use eminent domain to transfer property from one private owner to another whenever politicians think doing so would be in the public interest.

If the Court rules against Robbins, home and business owners would find it much harder to resist when the government demands their property.

Harvard Law professor Laurence Tribe argued the case for Robbins, with the Justice Department defending the BLM. Watch for news stories later today.

British Taxpayers Pay to Give Self-Esteem Massages to Welfare Recipients

In the global contest to waste taxpayer money, the U.K. has a very strong entry. According to the Times, people who already receive handouts are now getting taxpayer-financed shopping sprees, beauty treatments, and other goodies to supposedly build their confidence. Not surprisingly, European Union funds also are subsidizing this boondoggle, so at least British taxpayers can take comfort from the fact that some of the cost is shifted to people in other parts of Europe:

The government is paying for unemployed single parents to have massages, beauty treatments and shopping sprees to “boost their confidence” and encourage them to attend job centre appointments. The treats, part of a programme named Big Brother…, include £30 to spend on a day out, as well as lunch and childcare. …A brochure describes it as a “free two-week scheme that will boost your self-esteem and supercharge your confidence”. Organisers said it would be “nice” if participants found work, but this was not vital. …A man from Whitley Bay, Tyne and Wear, whose teenage daughter works at a salon involved in the scheme, said: “She was baffled when she was told these women were getting treatment for nothing. They had their make-up done, they had facials, they had their nails filed and some even had their ears pierced. “My daughter doesn’t get a penny from the government and will earn less than these single mothers get in benefits. What message does this send out?” …Martin Callanan, a Conservative MEP for the North East, said: “There are lots of other parents, not to mention pensioners, who would like the state to pay for their pampering. It is suspicious that they are unable to tell us how much this is costing taxpayers.”

Confidentiality

Washington University School of Law professor Neil Richards and George Washington University Law School professor Daniel Solove have an important new law review article out.  Privacy’s Other Path: Recovering the Law of Confidentiality is a useful reminder of a dimension of privacy apart from the privacy torts so famously inspired by Warren and Brandeis in their 1890 Harvard Law Review article.

Confidentiality is the idea that you can share information subject to restrictions on further disclosure and use.  There are often implicit understandings about how shared or mutually created information should be treated.  It’s an important point that’s been conveniently forgotten in government arguments for “data retention,” for example.  Confidentiality in the financial services sphere has been eviscerated by the Bank Secrecy Act and the Supreme Court cases that followed it, as well as Smith v. Maryland in the telecommunications context.

Richards and Solove’s work has its awkward turns - they characterize continental Europe’s focus on dignity and America’s focus on liberty as highly individualistic, while suggesting that confidentiality is ”based on the protection of relationships.”  If these characterizations are relevant at all, confidentiality can be seen just as much as a protection of individuals, the difference being that confidentiality is rooted more deeply in contract.  Small matter, though. 

Overall a good work, and an important reminder.

(HT: Schneier)