HSBC, the world’s third largest bank and money launderer of choice for drug traffickers, arms dealers and terrorist groups worldwide, was recently in the news for limiting the amount of cash customers could withdraw from their own accounts (though, after the hue and cry that policy engendered, HSBC has rescinded it).
To wit, from the BBC:
Some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it… Listeners have told Radio 4′s Money Box they were stopped from withdrawing amounts ranging from £5,000 to £10,000.
During the same period the bank seemingly had no such troubles honouring electronic transfers, from which one can fairly surmise that it’s customer’s cash, rather than customer’s money in general, that’s at issue.
This new stunt from the British-based bank, already up to its neck in just about every financial scandal imaginable, is merely the latest episode in big finance and big government’s all-out assault on cash transactions.
The Noose Tightens on Cash Payments
For years national governments have been seeking to reduce the number and size of cash transactions within and between their respective economies. In the U.S., any business or person receiving $10,000 or more in “cash” (in quotes because it’s not just cash) for a sale must file Form 8300. Banks must also report cash transactions of that size.
The same practice has also been implemented in Europe. As such, parties to any large cash transaction are required to explain where their money came from and what it was used for. In 2013, the government of France took this practice even further by erecting new controls on cash transactions which saw the cash transaction limit decrease from 3,000 euros to a paultry 1,000 euros.
The reasons for such measures are obvious: at a time when most countries are struggling to rein in their public spending, not to mention meet the ever-rising interest payments on their wholly unsustainable debt load, governments are frantically surveying their surroundings for anything of value to steal or pawn. And when it comes to government greed, especially during acute fiscal crises such as the current one, there is no limit.
As Patrick Henningsen at the Center for Research on Globalization notes, “it has long been the dream of collectivists and technocratic elites to eliminate the semi-unregulated cash economy and black markets in order to maximize and to fully control markets. If the cashless society is ushered in, they have near complete control over the lives of individual people.”
However, it’s one thing to be required by law to ask bank customers or parties in a cash transaction to explain where their money came from; it’s quite another to ask them how they intend to use the money they wish to withdraw from their own bank accounts.
As one Mr Cotton, a HSBC customer, complained to the BBC’s Money Box programme:
“I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”
In many ways, cash offers citizens the last remaining refuge of privacy and anonymity in an increasingly amalgamated worldwide web of control. And it’s for this precise reason that big government and big finance seem intent on doing away with it altogether. As I wrote in Beware, The Borderless Taxman Cometh, by creating a global cross-reference of everything that moves in the financial world, governments will be able to track every penny we earn, spend or save.
Is it a coincidence that the self-same governments that have been implementing increasingly draconian measures to limit the use of cash in the economy have also been promoting the use of digital alternatives such as mobile money, which can be much more easily tracked and traced?
The Rise of Mobile Money
Until now, much of the growth in the mobile money market has been in sub-Saharan African where undeveloped financial sectors have provided the perfect testing ground for mobile money projects. According to the Mobile Africa Report 2011, over 500 million mobile phone subscribers were estimated to be active in Africa. As The Economist reports, a survey by three corporate behemoths – the Gates Foundation, the World Bank and Gallup World Poll – found that there are 20 countries in the world in which more than 10 percent of adults said they used mobile money at some point in 2011. Of those, 15 are in Africa. In Kenya, Sudan and Gabon half or more of adults used mobile money in 2011.
The leading mobile operator network in Kenya, Safaricom (now majority owned by Vodafone), boasts over 14.7 million active users of its mobile money platform, M-Pesa. This translates to over 36.75 percent of Kenya’s population holding M-Pesa accounts — without considering mobile money users on the other networks. The funds transferred by M-Pesa are now equal to a staggering 25 percent of the country’s GDP.
Since the introduction of mobile money transfer in Africa – particularly by Safaricom’s M-Pesa – Africa has witnessed a paradigmatic shift in methods of financial transactions. In certain ways, this has been a positive development: mobile money has allowed many people with primary education or no education to gain access for the first time to financial services. It has also helped bridge the gap between the banking and unbanked, enabling people to bank remittances from family members abroad, as well as propelling a new generation of African start-ups.
But there is also a very sinister side to mobile money. As the African tech site Humanipo.com reports, the rise of mobile money has also exposed customers to a whole new species of fraudster:
Recent cases have seen fraudsters spoofing SMS to appear as originating from the mobile providers, banks or other financial institutions to cheat mobile money subscribers of their funds. In July last year (2011), statistics from Safaricom showed that 65 percent of phone-related fraud cases originate from prisons.
It’s not just in Africa where fraud and other related problems have been identified. In the UK the Financial Conduct authority has warned that fraud, malicious software, “fat finger” style errors and IT meltdowns all pose threats to customers who use mobile banking services.
A Dark Future
However, by far the biggest risk posed by digital alternatives to cash such as mobile money is the potential for massive concentration of financial power and the abuses and conflicts of interest that would almost certainly ensue. Naturally it goes without saying that most of the institutions that will rule the digital money space will be the very same institutions — institutions like HSBC — that have already broken pretty much every rule in the financial service rule book.
They have manipulated virtually every market in existence; they have commodified and financialized pretty much every natural resource of value on this planet; and in the wake of the financial crisis they almost single-handedly caused, they have extorted billions of dollars from the pockets of their own customers and trillions from hard-up taxpayers.
What about your respective government authorities? Do you trust them? As Scott A. Shay, the chairman of Signature Bank, warns in a surprisingly cogent and informative CNBC article, perhaps you have good reason not to:
The U.S. government is becoming very fond of seizing money from citizens first and asking questions later via ‘civil forfeiture. Amazingly, the government is permitted by law to do this even if it is only government staff members who have a suspicion, not proof, of wrongdoing…
To make matters worse, the dramatic consolidation of the banking system has made it easier for the government to acquire information as there are fewer access points. For example, JPMorgan, one of America’s largest and most powerful banks, is the size of more than 3,000 smaller banks combined, and the top four U.S. banks control about 60 percent of the U.S. banking deposits.
Thanks in large part to Edward Snowden’s revelations, we already know that the U.S. government is using the NSA’s snooping prowess and big-data manipulation in some truly frightening ways.
And yet we continue to sleepwalk, almost zombie-like, towards a cashless society. For the sake of a few gains in convenience, we are prepared to grant our governments and biggest, too-fat-to-failest banks the possibility of complete control over our every single daily transaction. And while virtual currencies like Bitcoin might seem like an antidote from this scenario, they are, as Shay warns, also subject to monitoring and can be regulated in ways that could limit or even end their utility.
Paraphrasing one of the most quoted dictums of our time — courtesy of the great, late Lord Acton — we are, it seems, descending into a world where new technologies threaten to put absolute power well within the grasp of a select group of individuals and organizations — individuals and organizations that have through their repeated actions betrayed just about every possible notion of mutual trust.
You know the rest!