Why Are People Less Likely to Act Safely About Their Finances?

Why Are People Less Likely to Act Safely About Their Finances?

Our brains are hardwired for safety.

Every day we follow routines to keep ourselves and our families safe. We lock our doors, we look both ways before crossing streets, we wear seatbelts. When it comes to protecting your finances, why are people less likely to act safely? 

Related: How to Embrace Accountability to Meet Your Financial Goals

Click below the image to listen and lern to this episode as I discuss the safety paradox and why I think people are willing to put their financial security at risk.

Justin Bennett
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Justin is the Founder and President of Bennett Financial. He excels at helping clients understand and adapt to different paradigms to achieve different outcomes. Justin focuse ... Click for full bio

The Lies Spread by Bankers About Cryptocurrencies

The Lies Spread by Bankers About Cryptocurrencies

I had a chat with The Financial Times the other day, and provided lots of background as to why I don’t think cryptocurrencies are the choice of criminals. The comment that was reported was the following:

Chris Skinner, a financial technology author, said it was “complete rubbish” to suggest the main use of cryptocurrencies was criminal. “There is some criminal activity associated with some cryptocurrencies but it is quite minimal,” he said. “It’s a myth that the financial community want to promote.”

I feel I need to explain this further, so here goes.

My response was in answer to Vasant Prabhu, Chief Financial Officer of Visa (the card network) who made two claims:

1) Most people have no idea what they’re doing with cryptocurrency investments; and

2) Cryptocurrencies are mainly being used by criminals.

With the first point, I agree. In fact, I loved the John Oliver Show that discussed crypto and started with the line that cryptocurrencies are “everything you don’t understand about money combined with everything you don’t understand about computers”. A perfect combination for idiots to invest in. I agree with both Vasant and John, as many people are buying cryptocurrencies for no other reason than other people are buying them.

The second point I completely disagree with. Mr Prabhu said cryptocurrencies were a “favourite” for criminals.

“It’s very hard to get dirty money through a banking system. Cryptocurrency is phenomenal for all that stuff . . . Every crook and every dirty politician in the world, I bet, is in cryptocurrency.”

This is complete baloney and is a smokescreen being created by financial people to deflect the real purpose of cryptocurrencies, which is to use software and servers to manage value rather than buildings and humans. In other words, cryptocurrencies have the opportunity to reduce or even replace banks, which is why I find it interesting how often I hear a financial person say that bitcoin and cryptocurrencies are just for criminals when it’s blatantly not true. Unfortunately because they are in a position of authority, politicians believe them; and unfortunately, because they are also in a position of authority, the media believes them; and unfortunately, because they are in a position of authority, the public sometimes believes them too.

Most law enforcement authorities however, state that the levels of criminal activity with cryptocurrencies is so tiny today that it doesn’t matter and, specifically, does not warrant deflecting their time and energy to investigate them. Just to illustrate this, the total worldwide investment in all cryptocurrencies is around $300 billion today. Even if criminals were running 10% of that, it’s still just $30 billion. That is an insignificant amount compared to the trillions being laundered through the traditional financial system, mainly through offshore companies buying up properties.

From The TelegraphNovember 2017:

Organised crime generates income equivalent to around 2.7pc of global GDP. Around $1.6 trillion of this is laundered to disguise its criminal origins: financial crime is undoubtedly a worldwide problem.

From What Mortgage, February 2018:

Julian Dixon, CEO of Fortytwo Data, whose research found that more than a third (37%) of all suspicious activity reports (SAR) across the entire legal sector were related to property: “For criminals, the vast amount of cash involved in property purchases provides the perfect cover for laundering the proceeds of drugs, terrorism and firearms offences.

From The TimesFebruary 2018:

Rob Wainwright, director of [Europol], revealed that 3 to 4 per cent of the £100 billion of illicit cash circulating in Europe is laundered through anonymous digital currencies such as bitcoin.

So that’s around £4 billion max right now. That’s less than a particle of a drop in the ocean of crime globally.

Now, the concern may be that cryptocurrencies offers the opportunity to launder funds. This is possibly true and is why I said there is some criminal activity with some cryptocurrencies which is tiny today, but might grow over time. Even then, it is speculative and too early to call. For example, that paragraph from The Times is factually incorrect, as bitcoin is not anonymous. In fact, nearly all digital transactions can be tracked and traced online, and therefore offer the worst use case for money laundering.

This is why the only currency that criminals currently use in any volume for illicit activity is Monero, because it is nearly an equivalent of digital cash. Nevertheless, the total market cap of Monero is $3 billion, and even if half of that is criminal activity, it’s totally insignificant on a global scale.

All in all, it is obvious that most financial people have created this myth of criminals opting for cryptocurrencies for two reasons:

1) it is to protect their turf, as they don’t want to lose their role as intermediators of finance; and

2) it is to deflect the authorities from looking at the true perpetrators of illicit monetary activity, namely the banking system.

Bear these two points in mind when I say that banks were built for the physical distribution of paper, which is why cash and property are the physical assets that are the preference of criminal choice. If you didn’t know it, London is actually the money laundering capital of the world:

  • British registered companies and British-based banks helped move at least $20 billion of the proceeds of criminal activities out of Russia between 2010 and 2014.
  • Transparency International’s research found 766 UK corporate vehicles involved in 52 large scale corruption and money laundering cases approaching valuations of £80 billion.
  • Around half of the 766 companies alleged to have been involved in high-end money laundering were based at just eight UK addresses.
  • The Home Affairs Select Committee hearings found that the London property market is the primary avenue for the laundering of £100 billion of illicit money a year. No wonder first time buyers cannot get on the property ladder.

If anything is the preferred market for money launderers then it is banks, not cryptocurrencies. No wonder financial people are trying to deflect the media elsewhere.

Bottom-line: as all things move to digital distribution of data, the trail to audit such movements get easier because they can be sniffed out and monitored; as a result, most criminal activity will continue to leverage the weak links in the chain, which is the physical distribution of paper through cash and property assets in the traditional financial system.

I’ve written a lot on this in the past and would point to these two blog entries for more:

And there’s also a lengthy but worthwhile read about why bitcoin cannot be regulated, as it is protected by America’s first amendment and the right to free speech.

Chris Skinner
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Chris Skinner is one of the most influential and prolific thought leaders on the future of banking, finance and technology. The Financial Brand awarded him best blog and ... Click for full bio