What is “risk” when you delegate enforcement under systems of fines or rewards?

Frisbee, money-laundering and ICE compared and contrasted

Image: the first-ever competition frisbee.¹

What is the incentive behind capitalism?

Well, the incentive isn’t giving things away. It isn’t being compassionate. It isn’t compromising your own interests for the benefit of others. It is money. However important you think that Christmas presents are, or conceding union demands in order to ensure a friendly workplace, or the value of not having the destitute littering your streets, capitalism’s incentive is money. It is self-centred and self-congratulatory and avaricious. If you think it’s not entirely that, then perhaps you’re confusing it with a society based on a social contract or one that permits regulated commerce in exchange for a restricted but basically free market. You’d be being deluded. And delusion is a big part of the society we live in.

Take money laundering. It is based on the idea that the proceeds of criminality should not get put through the legitimate financial system in order to make it clean, and therefore freely spendable. The same system is used to throttle flows of money to terrorists (although that is disingenuous, because terrorists in fact do precisely the opposite: they take clean money and use it for dirty purposes). The AML (anti-money laundering legislation) is designed to raise red flags on transfers of funds through the banking system in circumstances or amounts that indicate risk. AML is a product of the G7 meetings in the 1980s and can be contrasted with the game ultimate.

Ultimate (sometimes known, contrary to copyright law, as ultimate frisbee) is a throwing-and-catching game involving the beach sports item known as a Frisbee (originally a pluto platter, whirlaway, or flyin’-saucer, now a flying disc), which started life as the plastic cap on a tin of popcorn back in the 1960s. Once the corn had been consumed, the diners would throw the plates to and fro, and thus was born the beach game of Frisbee, out of which grew a sport: ultimate.

The well-known feature of ultimate is that there is no umpire or referee. It is the players themselves who adjudicate on contraventions of the rules. That is to say, except in one context and that is in international competition, where a referee is appointed to adjudicate. The reason for this is that the national team of one particular nation is renowned for its aggressive rule contraventions and (I believe it has been expressed to me as) cheating. It shall go unnamed.

Now, in any classic sport, such as football, the players play according to the rules and the referee steps in when the rules are broken. In ultimate, the players also play according to the rules and they themselves adjudicate on when the rules are broken. But money laundering combines these two ideas: governments, prompted by the so-called 40 principles of anti-money laundering, do not enforce the money-laundering rules; instead, they get banks to do that, which means that banks have to employ large teams of so-called compliance officers to do the work that the government has legislated on: preventing use of the financial system for money-laundering purposes.

The main way they do that is by flagging up transactions that are suspicious. That means that they involve a certain amount. Or certain parties (often known as PEPs, or politically exposed persons). The banks supposedly reduce the risk of money-laundering by way of this compliance work, but they don’t. In fact, they don’t to such an extent that the international body governing anti-money laundering has told them they’re doing it wrong. And the reason they do it wrong all has to do with how you interpret the word risk.

If banks don’t ensure compliance with money-laundering legislation, it’s they who bear the penalty: a fine. A hefty fine. So, they are very assiduous at flagging up anything and everything that looks as if it could conceivably be money laundering. That’s why, when you go to open a bank account, they give you a six-sheet questionnaire to fill in, and why owners of companies have to do declarations each year to the UBO (ultimate beneficial owners) register, and so forth. And the volume of transactions that are flagged up each year is many times the capability of the law enforcement agencies to keep pace, because the risk that banks are keen to mitigate is the risk of being fined, whereas the risk they are supposed to mitigate is the risk of real money laundering.

So money laundering is a sport in which you have both a referee (government) and adjudication by the players (the banks). And the referee’s job is not to tell the players who’s right and who’s wrong, but to tell them how well they have been adjudicating contraventions of the rules. And if the players allow a contravention of the rules to slip by, it is the teams of players who get penalised, not the player who broke the rules.

The irony is that the inconvenience of being flagged as a money launderer, by being debanked or investigated, reputationally besmirched, when you are not in fact laundering illicit money does nothing to affect the supposed results of the AML: the government is proved to be effective, and the banks, while needing to expend money on compliance, simply decide on money laundering matters according to the mantra of is it worth it? So, taking a risk on a customer who simply has a low-level current account, but who never contracts loans or incurs interest, may end up being flagged out of simple precaution (to reduce the risk to the bank, because they are Muslim, for instance, or a non-profit organisation), whereas a wealthy billionaire offering a hefty commission on the transfer of a suitcase of used tenners, will be judged worth it. Worth the risk. So, the risk evaluation in the hands of the bank is very different from the risk evaluation in the hands of the government.

In a recent report in the newspapers, a European traveller to the US who was detained at the border and thrown into a detention centre for six weeks, learned from chatting with the guards that they work on a bonus system. The chat revealed, if revelation was needed, an underlying incentive for ICE in the US to be whisking away anyone looking remotely like a risk to the United States’ immigration and settlement policy off the streets or out of the lines queuing up to enter through ports and airports into the United States’ territory. And it will hardly come as a surprise when you learn that that incentive is money.

Customs and immigration officers in the United States get paid a bonus for every immigrant they catch. They do not serve ICE and the federal government out of a sense of simple duty, although that may of course be an element. Nor do they do so out of political fanaticism, as members of the MAGA movement, although that cannot, of course, be ruled out. But they do do it out of an interest in money. That goes to explain why the ICE narrative gets taken to such extremes: that the ICE campaigns in various towns and cities are intended to sweep up the criminal elements of society who have illegally infiltrated America through unlawful channels. This all sounds very good and proper and, most importantly, garners a certain degree of approval from the lawful residents of that country.

But the underlying incentive is in fact cash bonuses. So now one can see why ICE patrol the streets of a district known to be home to persons of colour and pounce on those who fit the profile, regardless of whether they are there lawfully, unlawfully or whatever. You can almost compare it to the cynical policy in the Gaza Strip, of urging residents to gather together in orderly queues in order to receive humanitarian aid, and then picking them off with sharpshooters. In fact you could compare it to dynamite fishing.

And then they whisk the captured person immediately off to a detention centre hundreds of miles away. They won’t reveal where in many cases, and won’t allow access by family or lawyers. They evade due process and the rule of law. All to preserve their bonuses. They are indiscriminate as to age, including small children among their victims. And many of these captees are, before long, deported around the world and left to fend for themselves, whilst their captors line up at the office of the paymaster general to receive payment of their financial rewards.

The government is selling the narrative behind these operations to the general public as a reduction in the risk to society from having the deportees within their midst. But ICE is motivated by a very different perception of the risk, one that has been proved over millennia to be a factor that divides and antagonises society, instead of uniting it and bringing it together. It is the reverse of that which banks perceive through administering AML: the banks want to mitigate the risk of a fine; ICE wants to maximise the financial benefit of capturing immigrants.

One can imagine that these ICE operatives will one day settle back with their piles of lucre, in a society ethnically cleansed of all persons of colour, of non-Jewish non-Christians, and then imagine that the US will miraculously turn into biblical Canaan, a land of milk and honey, where butterflies flutter by and peace and harmony pervade the heavy air of dreamland. The images of dystopia that accompany these ICE purges really do invite the question as to what image the perpetrators have in their own mind of where lies utopia.

However, the masking of faces that ICE indulges in makes me wonder how the paymaster knows which operative captured which immigrant—a little like Battle of Britain pilots needing to argue out who had downed which Messerschmitt in a dog fight. So, maybe there is a team premium that gets doled out amongst the officers in a particular patrol detail—that will perhaps preserve some shred of community among these gentlemen.

However, if that is not enough to turn your stomach, then perhaps this will: the thought that not only were Renee Good and Alex Pretti murdered, but the incentive for their killers was that they earned a bounty for doing so.

1. By Audra454 - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=38690770.