The Arithmetic of Enforcement
Europol estimates that European law-enforcement agencies confiscate approximately 1.2 billion euros in illicit funds annually. At first glance, this seems like an impressive haul—evidence that the elaborate machinery of financial surveillance is working as intended. But consider the cost of maintaining that machinery. Banks and financial institutions across Europe spend more than a hundred times that amount—over a hundred billion dollars annually—implementing and maintaining Know Your Customer and anti-money-laundering procedures. The arithmetic becomes even more sobering when you expand the lens: a recent study examining Switzerland, the United States, and South Africa found that these three countries alone spend 110.85 billion dollars each year on AML and KYC compliance.
These three economies represent roughly twenty-seven per cent of global G.D.P. in nominal terms (the United States accounts for about twenty-six per cent, Switzerland less than one per cent, and South Africa roughly 0.4 per cent). Even if we assume—generously—that compliance costs scale proportionally across all economies, the global expenditure would still exceed four hundred billion dollars annually. And how much criminal funding does this vast surveillance apparatus actually intercept? Approximately three billion dollars per year globally.
The conclusion remains stark regardless of the precise calculations: the system costs more than a hundred times what it recovers. One might quibble with the exact multiplier—is it a hundred and twenty times? A hundred and fifty?—but the fundamental absurdity of the cost-benefit ratio is inescapable.
The Mysterious Case of the Closed Account
A growing number of Americans are discovering, with little warning, that they can no longer access their bank accounts. Small-business owners find themselves unable to make payroll. Individuals cannot pay rent. No one explains what they did wrong. The banks call this practice “derisking”—a euphemism that obscures a more troubling reality.
This is not the standard procedure for customers who have bounced too many checks. It is the product of an enormous financial-security apparatus that stretches from regulatory offices in Washington through compliance departments in banks to branch employees monitoring customer transactions. The stated goal is to combat fraud, terrorism, money laundering, human trafficking, and other crimes. But in the process, banks are closing the accounts of an increasing number of ordinary people—private citizens, families, and small-business owners. Most of the victims have no idea why their bank has suddenly turned against them.
The system operates in opacity by design. Banks rarely provide explanations for account closures, citing security concerns and regulatory obligations. A customer might receive a terse letter stating that the bank has decided to “end the relationship,” with no further detail. Appeals are typically futile. The machinery, once set in motion, is nearly impossible to stop.
How Authoritarian Regimes Weaponize Financial Surveillance
Authoritarian and hybrid regimes have discovered a potent new tool of repression: anti-money-laundering and counter-financing-of-terrorism regulations. They deploy these frameworks with increasing frequency to attack their adversaries—civil-society organizations, opposition parties, and associated individuals, both domestically and abroad.
The pattern is consistent: smear campaigns, fabricated criminal cases involving money laundering, accusations of threats to national security, extremism, or terrorism. These have become the standard instruments of twenty-first-century political repression.
The consequences for victims are brutal. Financial exclusion and asset deprivation through closed bank accounts and frozen assets. Without access to the banking system, you cannot pay bills, salaries, or rent. You cannot conduct business. You are financially annihilated.
Worse still, international frameworks for legal assistance—European and bilateral agreements—enable malicious governments to access sensitive information, including the banking data of individuals living abroad. The system designed to protect against crime has become an instrument for persecuting dissidents.
The Man Who Lost Three Hundred Million Pounds Because His Bank Got Suspicious
In mid-May, 2012, the High Court of Justice in London issued a verdict in a case that had dragged on for four and a half years. The court dismissed a lawsuit brought by the Shah family—Jayesh Shah and Shaleetha Mahabeer, who conducted business in Zimbabwe—seeking damages from HSBC Private Bank (UK) Limited for the bank’s wrongful suspension of four financial transactions.
The reason for the bank’s refusal to execute its client’s instructions was suspicion—later proven unfounded—of money laundering. According to the Shah family, they suffered losses exceeding three hundred million pounds. The case generated significant attention in banking and financial circles but failed to resonate more broadly with the public.
That’s unfortunate, because the consequences of the dispute and the resulting verdict are multifaceted and far-reaching, extending well beyond the subjective sense of grievance felt by a Zimbabwean millionaire.
For those paying attention, the case offers an opportunity to reflect on the increasingly omnipotent state, which—contrary to what globalization theorists predicted—has not withered away but has grown in power, controlling all spheres of socioeconomic life. In recent years, it has brutally intruded into the realm of the private financial sector and citizens’ money. Through persuasion, force, and blackmail, it has recruited banks—institutions that once prided themselves on their independence—into coöperation.
The Shah case revealed something crucial: banks now operate as de-facto extensions of state surveillance, making decisions based not on commercial relationships or contractual obligations but on their interpretation of political risk. The cost of noncompliance with AML regulations is so severe—potentially including criminal prosecution of executives and institutional sanctions—that banks err dramatically on the side of caution. Better to close a hundred legitimate accounts than to miss one suspicious transaction.
This creates a perverse incentive structure. The bank that actively serves its customers, that takes the time to understand complex but legitimate business operations, exposes itself to regulatory risk. The bank that simply closes accounts at the first hint of complexity protects itself. The result is a financial system that increasingly excludes anyone whose business model or personal circumstances cannot be reduced to simple, easily auditable categories.
The original purpose of anti-money-laundering regulations—to prevent criminals and terrorists from accessing the financial system—has metastasized into something far broader and more troubling: a mechanism for excluding anyone deemed inconvenient, whether by governments, banks, or the vast compliance bureaucracy that mediates between them. The cost is measured not just in billions of dollars but in the erosion of financial privacy, the presumption of innocence, and the basic ability of ordinary people to conduct their affairs without constant surveillance and the ever-present threat of arbitrary exclusion.
