In this episode of Upstream, Erik Torenberg interviews Patrick McKenzie (patio11) about the intricacies of the financial system, focusing on banking, money laundering, and regulatory compliance. They discuss several of Patrick’s essays from Bits About Money. 

Patrick discusses the three stages of money laundering - placement, layering, and integration - and how the financial system has been deputized to act as law enforcement. The conversation touches on the unintended consequences of strict regulations, including their impact on economic growth and financial inclusion.

—

🔥 Apply to join over 400 founders and Execs in the Turpentine Network: https://www.turpentinenetwork.co/

—

SPONSORS:

💡 Level up your portfolio with access to pre-IPO companies via the Fundrise Innovation Fund. Access a $125M+ fund of cutting edge tech companies including AI frontrunners, now available to individual investors. Start your journey at Fundrise.com/upstream.

Elevate your investment game with Altea by Alts.co. Discover vetted deals in unconventional asset classes, network with captivating individuals, and indulge in exclusive travel experiences. Ready to invest in pro sports teams or film financing? Apply now at www.alts.co/upstream and redefine your investment journey.

💥 Head to Squad to access global engineering without the headache and at a fraction of the cost: head to https://choosesquad.com/ and mention “Turpentine” to skip the waitlist.

—

RECOMMENDED PODCASTS:

🎙️ Dealcraft: Insights from Great Negotiators is the brand new weekly podcast that features interviews with world’s greatest dealmakers and diplomats, including Former Secretary of State Henry Kissinger, Blackstone CEO Steve Schwarzman, and music industry super-lawyer John Branca, on their most challenging negotiations. Each episode, host Jim Sebenius (Harvard Business School professor and renowned negotiation expert) relates fascinating deal stories and distills useful insights for listeners to apply in their toughest deals and disputes.

Apple: https://link.chtbl.com/3CG3TbHY?sid=Turpentine

🎙️Complex Systems with Patrick McKenzie

Patrick McKenzie (@patio11) talks to experts who understand the complicated but not unknowable systems we rely on. You might be surprised at how quickly Patrick and his guests can put you in the top 1% of understanding for stock trading, tech hiring, and more.

Spotify: https://open.spotify.com/show/3Mos4VE3figVXleHDqfXOH 

Apple: https://podcasts.apple.com/us/podcast/complex-systems-with-patrick-mckenzie-patio11/id1753399812

—

LINKS:

Patrick’s Newsletter: https://www.bitsaboutmoney.com/

Seeing Like a Bank: https://www.bitsaboutmoney.com/archive/seeing-like-a-bank/

KYC and AMI: https://www.bitsaboutmoney.com/archive/kyc-and-aml-beyond-the-acronyms/

Money Laundering and AML Compliance: https://www.bitsaboutmoney.com/archive/money-laundering-and-aml-compliance/

—

FOLLOW ON X/TWITTER: 

@eriktorenberg

@patio11

@turpentinemedia

—

TIMESTAMPS: 

(00:00) Intro

(01:02) Discussing 'Seeing Like a State' and big tech

(03:10) Big tech's competence and failures

(07:20) AI and centralized systems

(09:23) Crypto vs. AI: political implications

(10:58) Sponsors: Dealcraft | Fundrise

(13:03) Banking systems and customer service

(14:28) Structural issues in banking

(22:41) Future of banking and customer service

(25:14) Regulatory risks and compliance in banking

(28:21) The harsh realities of financial decisions

(29:05) Geopolitical conflicts and financial institutions

(29:53) The role of banks in delivering bad news

(31:32) Sponsors: Alts | Squad

(33:41) Understanding KYC and AML regulations

(37:35) Complexities of money laundering

(44:42) The burden of compliance on financial institutions

(51:14) Balancing financial services and crime interdiction

(53:52) Wrap