Seizure of Cypriot Bank Shows the Need for Bitcoin



For the majority of people, money is the equivalent of food and water � access to it is life itself. If the money spigot is shut off, a lot of us would very quickly find ourselves wondering how we will even survive. Add a family, an illness, or a looming retirement to the mix and the desperation can be palpable. I’ve been there myself � about to lose a job and with two small chlldren to take care of. It’s not a feeling I would wish on anyone.

For some, though, money is about ego and power, and if their manipulations of the movement of money cause people like you and me to suffer, so be it; it’s just collateral damage.

On Friday, at the behest of the US government, the Central Bank of Cyprus took over one of the only solvent banks on the island: FBME. The reason? Money laundering. It appears that members of FinCEN have accused the bank of large-scale money laundering justifying the extreme action shutting down the bank. Reports have mentioned a few scattered examples, including a claim of the bank funneling money to terrorists and an Italian politician laundering money, but statements closest to FinCEN merely mention a pattern of suspicious activity in wire transfers being routed through US.

As an expatriate living in Japan, it’s hard for me to think that FinCEN would just have noticed this. A few months back I wired a few thousand dollars to the US and I wrote on the designated part of the form that the purpose was to pay bills. This seemed clear enough to me, but two days later I received a call from the bank asking me to clarify what kind of ‘bills’ I would be paying. This was not my Japanese bank asking; this wire had hit the US and the question has been sent back before the transaction would be allowed. Given this level of scrutiny, how is it that FBME would have been able to run enough shady transactions that it would require a sudden shut down to clear everything up?

Muddying the waters further is the fact that on July 4, mere weeks before the seizure of the bank, PricewaterhouseCoopers, an American accounting firm, had completed an Anti-money laundering survey of the bank’s operations and as yet has reported nothing amiss to the bank. Further, KPMG based in Germany completed an audit in April of last year and made compliance recommendations, all of which the bank claims to have implemented.

So, what’s really going on here? The answer may lie in the fact that FBME has it’s main operations in Cyprus, but also has branches in Russia. Simon Black writing on his blog Sovereign Man has claimed that the real reason is that this take over is part of the pressure the Obama administration is trying to apply over the continuing crisis in Ukraine. Given the fact that HSBC was proven, not just accused, last year of massive money laundering and was not only not shut down for any period of time, but was given a slap on the wrist, lends credence to the possibility that this move is more political than it is fiscal.

It also means that for all of us who rely on banks for our ability to get by day to day, the stakes have just been raised again. The customers of FBME in Cyprus have no way to access their funds in the bank. There is no one to call no matter how dire your situation is. Comments left on the stories published in the local press are full of posts by people who can’t pay the electricity, can’t pay employees, and can’t pay their mortgage and face foreclosure. These are real people caught in a political chess match, and just like during the bail-in last year, (during which time FBME was not only not failing, it was actually propping up the government through bond buying), these are the people who will pay the highest price in the effect this will have on their lives.

Last year, the crisis in Cyprus put Bitcoin on the radar for many people. This seizure of this particular bank is unlikely to cause the same kind of panic given that it is owned by a Lebanese family, headquartered in Tanzania, and has branches in Russia. It will be too easy to throw allegations of money laundering and supporting terrorists at FBME without any need to provide proof that the average newspaper reader will accept the government’s actions. But for those of us paying attention, it highlights again the need for a currency that can be used outside of government control.

This is not (necessarily) an anti-government statement. But it used to be harder for the government to arbitrarily freeze or seize people’s money. With the dual rise of the security state and the cashless society coupled with the fact that Clapper syndrome (people in power will tend to do anything they can to increase that power regardless of the actual need or the harm they will do), we are all at the mercy of people who can victimize us and tell us its for our own good.

In the final analysis, I can’t say if FBME should have been shut down or not. There may be very good reasons that I’m not privy to, though I find this unlikely. On the other hand, I do not feel that it’s anyone’s business why I am sending money from one of my own bank accounts to another of my own bank accounts. I also think that freezing a bank’ assets and causing thousands of people untold hardship should be an act taken very carefully while giving full justification to the public. Whether or not the latest act of the US government will be a catalyst for Bitcoin, it certainly does show the need for it.

By Mark Norton [email protected] 7/25/2014