Jeffrey Paul: Your Money Isn't Yours

Jeffrey Paul

Your Money Isn't Yours
19 November 2019
( 2323 words, approximately a 12 minute read. )

It startles me to think how many wealthy people actually don’t have any money at all. This isn’t some rant about how we’re all credit-rich and cash-poor, I’m talking about people who actually have a reasonably-sized net worth who aren’t in possession of any money.

Money in the bank isn’t yours. It’s the bank’s. It’s in an account, earmarked for you, sure; but you pay the bank specifically to not have the money in your own possession. The money’s in the possession of the bank, something most people do to limit their liability: after all, if it’s in your possession, you are responsible for its safety, and you’ve nobody to sue if something happens to it. People generally think this is a Good Idea, but I offer that that belief may be based on some false assumptions—inaccurate beliefs that I, too, once harbored. Allow me to tell you a story.

On Being An Employer

Some years ago (10?) I employed someone in the state of Indiana, a remote worker for my business while I myself lived in Berlin. I banked with Chase (and still do, despite them being terrible then and now) and used a payroll services company to take money each month out of my corporate account, withhold appropriate taxes and send them off to the IRS, and transfer the net to my personal account for me to use. I did the same for my remote employee.

Each state in which you do business requires that you jump through certain hoops as an employer; usually the basic two are (in states with a state income tax and a state unemployment benefits program) opening an employer account with some state agency (“Treasury”, “Revenue”, et c) into which you withhold your employees’ estimated state income tax liability (the line below the federal withholding items on the pay stub), and opening an employer account with some other state agency (“Department of Business Development”, “Department of Labor”, et c) into which you pay your per-employee contribution into the state unemployment insurance fund. Indiana has both of these, though I scarcely recall what the two departments are called. My payroll services company set it all up by filing the appropriate forms with the state to create my company’s accounts with these two required agencies. Pay periods elapsed, funds were transferred, state payments were submitted, checks were cut. Everything was working properly.

After some time, I terminated my Indiana employee; she simply wasn’t very good at her job, despite being tremendously inexpensive. In the payroll software, she was marked as terminated, and stopped getting checks, and the payments to Indiana’s two esteemed employer-related offices stopped as I then had zero remaining employees in the Hoosier state. (Unrelated: I never did business in, or hired anyone from Indiana at any point in the future.)

For approximately two years following that time, entirely unbeknownst to me, the payroll company was filing quarterly reports to the state of Indiana, for one or both of these employer accounts. The fields were all filled with zero: zero offices in Indiana, zero employees in Indiana, zero wages paid in Indiana, zero customers in Indiana, zero business operations of any kind in Indiana. Zero funds due to Indiana. Eight times these forms were generated by my payroll company, eight envelopes stuffed, eight stamps placed upon them - eight quarters with all zeroes. This is a clue.

Some time later, I was on the phone with my payroll company adjusting some account settings, and they asked something like “What is this Indiana thing on here?”

I responded, of course, “Oh, that’s old; I haven’t had any staff in Indiana for years, you can delete it if you want.” They did.

Unbeknownst to me, the quarterly reports stopped being printed, mailed, and filed. Indiana has special forms for closing your employer account(s) when you cease business in Indiana. Who knew?

Fast forward six months or so. I live in Berlin, and my US-based mail goes to a post box in New York City, and I pick it up a few times per year.

One morning, I wake up, log into my Chase bank account on chase.com, and find that all of my money that I have in the world is gone. (I wasn’t big on saving, then.) Two line items exist: one for -$150, to Chase, for something like a “legal fee”, and another for -$2,000 or so, putting my account at approximately zero.

Indiana, upon failing to receive a few of my quarterly reports, decided that, because I hadn’t filed some form to close my employer account with the state department of bumfuckery, I must be operating a business in Indiana that I simply wasn’t telling them about. My New York mailing address, the fact that my only history with them was a single employee, terminated over two years previously, followed by EIGHT QUARTERS of zero-everything filings: none of that mattered. Indiana was convinced that I was operating a business there. They sent me some paper mail to this effect, bemoaning my failure to file more zero-filled forms, which entered my possession about a year later.

They invented (“estimated”, in the terminology of this crime) my number of nonexistent employees in Indiana, and further invented their nonexistent wages, and, plugging these two convenient (and entirely fictional) figures into their state-specific formulae, determined what they estimated my liabilities to the state of Indiana to be. As I’d not paid them, they added on the usual late fees, interest, and whatnot. Being owed an (entirely fabricated) debt, they sought a TAX WARRANT, delivered it to Chase bank in Manhattan, and Chase, after docking my account $150 for having one of their lawyers determine that, yes, indeed, the state of Indiana can steal from you at any time in any amount of their choosing, duly complied with the government order and removed 100% of the money from my account and delivered it unto them (less the $150 - the lawyer cut comes first, of course).

Now, you may be thinking: how can they do that? Isn’t there some burden of proof for taking money out of your bank account?

I thought so, too. Indiana taught me a relatively inexpensive lesson, in retrospect.

Dozens, and probably hundreds, of local, state, and federal bureaucratic organizations can fire off an edict with the authority of The State and compel your bank to transfer money out of your account without any recourse. They need not have any burden of proof to do so, and it would appear there is very little oversight (if any existed, eight quarters of zero filings followed by an estimated (and unprecedented) tax bill in the thousands resulting in a tax warrant being issued would have definitely failed any standard of reasonableness applied by any sane person).

Additionally, banks and other financial processors will happily freeze your accounts simply at the request (not even the order) of important parts of the machinery of the state: Wikileaks, a publishing organization, found its bank accounts entirely frozen years before any of its members were charged with, much less convicted of, any crime. The banks know that they are powerless against the state, and they cooperate as best they can, even in the absence of a legal compulsion.

Who’s at fault here? Indiana, for making up a fictional universe in which anyone would want to do willingly do business in their festering armpit of a flyover state, and issuing a tax warrant because I failed to file some account closure form of which I was entirely unaware? Chase, for looking at the robbery order, and saying “yup, this is definitely from the government and it definitely has a government stamp on it!” and helping them rob me (and helping themselves to $150 in the process)? My payroll company, for not automatically filing the state closure form(s) on the database relation being removed, as they filed the creation forms on the relation being created?

I almost lost my home. I never got the $150 back from Chase. About six months later I ended up getting about 80% of the stolen money back from Indiana, after about twenty hours on the phone with different parts of the state government, less around $800 in collections fees (apparently it is a lot more expensive to mail letters to a New York City postbox from Indiana than I realized), and a dozen letters being sent via registered mail via a helpful US Postal Service proxy (i.e. a friend with a printer in the USA) to different officials.

An aside: One of the reasons I wish to become more wealthy is because I would like to make a hobby of taking legal action against such criminals in a venue (presumably federal) with sufficient authority to make them stop fucking people raw. How is it legal to lie the way these people do, with the actual power to compel banks to steal from you?

Fool Me Once

The following applies to the United States. Before we continue, let’s dispel the common misconception that having large sums of cash in the United States is illegal: it’s not. You can have as much cash as you want in your possession. Your local pigs might steal it from you (in various shades of legitimate, from “what money? I didn’t see any money!” to “State of Texas v. $6,037”) if they detect it, so you can argue that it’s de facto illegal, but it’s certainly not de jure illegal. What some people are thinking of with the $10k limit is that it is the limit of money that you can travel with across the US border (when traveling internationally) without having to declare it. You can travel with $9,999 without mentioning it. You can even legally travel with $10,000 or more, if you wish, across the border—provided you declare it to to the government when you do so.

Did you know that your bank’s Terms Of Service for a safe deposit box (it’s “daylight saving (no s) time” and it’s also “safe (no -ty) deposit box”) it says that you can’t keep cash in the box? The only “supported” method of storing cash at your bank is by depositing it. If, after depositing it, you wish to withdraw more than $10k USD at a time, you have to fill out a Currency Transaction Report (“CTR”). The bank can request that you fill out a CTR for any amount of withdrawal if they think it’s abnormal, even like $3k or $5k if they wish. If, upon finding out that your bank would like you to fill out a CTR (for any amount!), you decide that it’s not worth the hassle and paperwork and decide not to withdraw the money, your bank is legally required, under federal law, to file a Suspicious Activity Report (“SAR”) on you, even if the withdrawal inquiry was under $10k, and even if the withdrawal didn’t actually happen (in fact, because it didn’t actually happen once a CTR was requested). It’s a criminal offense if they don’t label you as “Suspicious” for not wanting to fill out a form to access your own funds on deposit.

(As someone who abhors paper, pencils, pens, and handwriting, I have long considered founding a formal religious system that prohibits me from using handwriting, as I find it spiritually repugnant, to say nothing of the waste of meaningless forms, or the electricity used to produce, print, scan, and shred them. The mind simply recoils at the epic amount of waste involved, even before you think about the power used to run the datacenters to store the scans, and the diesel used to transport the tapes offsite…)

If you have more than $10k in the bank and you wish to withdraw it at once as cash, you’ll meet resistance. Over $50-100k, and your bank will probably just say no.

That said, it’s not illegal to store cash in a safe deposit box, simply unsupported. The bank can, if they desire, terminate your account if you do so. If the bank burns down, you will not be reimbursed for the contents (unlike FDIC insurance on deposits). The ToS for the box also prohibits storage of non-collectible coins, i.e. bullion, the closest cousin to cash in our current society (long known to the gentry, and recently promoted more widely by the inimitable Keanu-as-John-Wick).

I know hundred millionaires who couldn’t produce $10k in under an hour, sometimes in under a day. If you are keeping 100% of your assets in a place where dozens of government bureaucrats can point-and-click evaporate them, you’re simply not making prudent decisions.

Define some percentage of your net worth as something to which you want liquid access. Divide it among gold, cash, and cryptocurrency, and store those in a distributed fashion.

For example, I have ca. 1 year of expenses stored in secure locations, accessible to me and a select few others, distributed across four countries. In an emergency, I (or someone on my behalf) could access some or all of this, depending on circumstance. This is independent of banks, national governments, and other organizations. (Note: choosing the people who could or should have access to these sorts of things is a whole can of worms that warrants an essay all of its own.)

If you do nothing else, buy a safe for your house, hook it up to your alarm system, and put $20k cash and a few hundred grams of gold inside of it, in the event of a natural disaster or other calamity. There are dozens of ways that your bank card could stop working: plan for them. Power outages, natural disasters, civil unrest, account freezes, erroneous government investigations, travel fraud alerts, big crowds that result in empty ATMs, cell network overloads, fiber cuts, strong magnetic fields: you can’t even imagine all of the thousands of ways that “insert card, receive cash” can fail to work.

About The Author

Jeffrey Paul is a hacker and security researcher living in Berlin and the founder of EEQJ, a consulting and research organization.

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