🧵Here's a special Black Friday FATF Thread to complement @pmarca 's explainer on the Joe Rogan show about how the USG's "control mechanism" was applied to Big Tech by emulating the way it already controlled the banking system.
2/ FATF stands for the Financial Action Task Force (FATF). It originated in 1989 as a one-year fact-finding mission, championed by the United States during the “war on drugs,” but has since evolved into one of the most influential, yet opaque, financial regulators in the world.
3/ Its power stems not from formal authority but from the coercive force of economic exclusion. Nations that ignore its mandates risk blacklisting that shuts them out of global markets.
4/ Yet the FATF’s origins and methods reveal a troubling inversion of legal norms, where financial institutions have arguably supplanted judicial processes and presumed guilt has become the default. So how did all this start?
5/ The FATF’s roots lie in the 1980s, a period when the United States began treating financial flows as tools of law enforcement. In 1986, the US passed the Money Laundering Control Act, the first law to formally criminalize money laundering.
6/ This domestic initiative soon spilled into international forums, with the Basel Committee issuing statements in 1988 and the UN defining money laundering that same year. Despite these efforts, global coordination faltered.
7/ To address this, the US proposed the Financial Action Task Force as a temporary intiative under the auspices of the G7. Its initial mission was modest: cataloging the state of anti-money laundering (AML) laws worldwide.
8/ But the FATF’s role soon expanded dramatically. In the 1990s, its mandate grew to encompass broad AML objectives. By 2001, the “war on terror” provided a new pretext for intervention, transforming the FATF into a counter-terrorism financing (CFT) body.
9/ This shift was no coincidence. Around the same time, the US was losing the so-called “crypto wars” — a battle over the control of encryption tech. American attempts to mandate backdoors in encryption software had largely failed, weakening its capacity to surveil digital chat.
10/ The FATF’s expanded focus on financial flows filled this gap, providing a new channel for economic data collection on a global scale.
11/ The FATF’s power is subtle but immense. It operates not as a formal institution, but as a project hosted by the OECD in Paris, staffed by a few dozen officials. Critics say the lack of a formal structure is deliberate, shielding it from accountability mechanisms.
12/ Its influence flows from a deceptively simple mechanism: the creation of black and grey lists. Countries that fail to meet FATF standards are effectively ostracized from the global financial system.
13/ Compliance, therefore, is non-negotiable, even when FATF standards conflict with national legal norms or civil liberties.
14/ Critics say at the heart of the FATF regime is a profound usurpation of judicial authority. This is because the task force’s AML and CFT frameworks rely on financial institutions, rather than courts, to enforce compliance.
15/ Banks are required to assess the risk profiles of their clients and report “suspicious” activity. But these determinations are often subjective, informed by opaque algorithms and vague guidelines.
16/ The result is a system where accounts can be frozen, assets seized, or services denied without due process. Innocent until proven guilty — a cornerstone of the judicial system — is often replaced by its inverse.
17/ 👉This shift has redefined banking. Historically, financial firms served as neutral intermediaries, providing credit & processing transactions without moral or political judgment. Under FATF, banks have become enforcement agents of the state, tasked with policing customers.
18/ Compliance costs have ballooned, with billions spent annually on AML measures that often fail to achieve their stated aims. Suspicious Activity Reports (SARs), for instance, are generated in vast quantities but largely ignored by underfunded law enforcement agencies.
19/ Meanwhile, the regime’s success at curbing actual crime — whether drug trafficking, terrorism, or fraud — remains dubious. There has been no notable suppression of criminal activity or sanctions abuse because of FATF.
20/ The costs, however, extend far beyond inefficiency. The FATF framework has politicized finance, undermining the principle of monetary neutrality. What qualifies as “terrorism” or “money laundering” often depends on geopolitical interests.
21/ Movements supported by NATO allies may escape scrutiny, while others face debanking and exclusion. This discretionary power has been wielded against figures as varied as crypto merchants and politicians like Nigel Farage, chilling dissent and innovation.
22/ Perhaps the most alarming aspect of the FATF’s evolution is its erosion of transparency and accountability. Banks are often forbidden from informing clients that they have been flagged as risks or Politically Exposed Persons (PEPs).
23/ This secrecy compounds the sense of arbitrariness, transforming financial institutions into covert surveillance arms. For individuals, the implications are stark: loss of access to financial services, reputational damage, and no clear recourse.
24/ Yet the FATF marches on. Its latest incarnation sees the EU establishing a centralized anti-money laundering authority in Frankfurt.
25/ FATF’s trajectory is a cautionary tale. What began as a tool for financial integrity has morphed into unchecked economic control, undermining civil liberties and the principle of monetary neutrality. All without meaningfully reducing any of the criminal activity it was tasked to reduce.
26/ The other perverse consequence is that the de-facto outsourcing of policing to banking staff, has left the actual law enforcement agencies underskilled, complacent and under-resourced to fight real crime.
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