A curious thing here is that, if this article is correct, the man spent 16 months in prison, and had repaid the amount stolen by then. It seems reasonable to assume that if he had not invested his stolen money in real estate he would not have been able to repay his debt to society so cleanly. I wonder if in the end he didn't make a sizeable profit from all of this.
That is absolutely disgraceful on the part of the accountants and programmers who should have been reconciling the cash vs sales. Over 13 years!
Discrepancies in accounting are the norm, not the exception. No large company will ever have perfectly balanced books for a multitude of reasons - too many different IT systems that sometimes but not always have the same data, humans in the loop that forget or fat-finger entries, inventory loss/theft/damage, you name it.
Having your books off by a few percent is indeed quite common. However, missing 20% on your primary source of income is not the norm. If a company would report that nowadays, it would trigger a money laundering investigation.
Was the cash box here the primary source of income??
Probably not: their (1?) LRT line was just 1 chunk of their transit system, and systems generally have a weekly/monthly/student pass to uhhh, reward their heaviest users.
I'll bet they baselined 20% and started comparing it to the previous month or previous year. After many years, they probably established norms that accounted for this 20% loss unknowingly.
You're right in principle, but are they usually 20%?
This is only 20% of cash fares paid at LRT stations. It wouldn’t count those who used a bus pass, paper ticket (these are sold at many retailers, not just directly by Edmonton Transit), or those who paid on a bus and are using their transfer to ride the LRT.
No chance! (should be the correct answer).
This was decades ago, the ticket machines were not real-time connected to anything. It's entirely possible the numbers accounting used for ticket sales was the amount of cash retrieved from the machines, and there was no separate system keeping track of the tickets printed.
They likely counted the number of passengers via turnstiles or a gate or something. Think passenger count would be a good indicator of expected revenue and there would be a pretty clear gap. Probably one of the things the auditors noticed that was explained away by buggy code.
Unfortunately in Edmonton, the LRT is largely on the honour system. There are no fare gates, turnstiles, etc, to derive an accurate count from. Any passenger counts presumably come from statistical sampling or from checking fares as they exit the system (this is an occasional enforcement activity, not an everyday occurrence).
There is a pilot project[0] to put turnstiles/gates at two stations, but this is to keep the homeless out of the stations, not to count passengers.
[0] https://www.cbc.ca/news/canada/edmonton/transit-turnstiles-o...
Wouldn't they be able to measure the rolls of ticket paper?
And mechancial counters were a thing in 1981 as well. I mean the machines had a way to say "you need to pay X amount" or a way to count money, surely that can be fed into a daily / weekly counter, a printed record, etc.
And also, they were pretty precise with the amount that he stole: they can't bring a guess to court, they had an exact record of how much was stolen.
If they trend it, auditors should still notice it, but different tickets cost different amounts, so there will be variability.
E.g. Kids and seniors get discounts.
Good point. 1981 was a very long time ago in IT terms
Disgraceful? What if they didn't have adequate ridership numbers to use to reconcile? A lot of bus cash fares don't keep a rider number. And it was 1981.
They did; the article even points out that there were two audits that showed the discrepancies:
The failure to catch him, despite discrepancies between fares and cash raised in two audits, was put down to a belief that the errors were software glitches and, after his arrest, led to a significant amount of internal finger-pointing.
Wanna bet a few more people were doing this a bit higher up the coin stream.
Complicit would be another word to consider.
When you get an asshole boss, people stop defecting when they see others getting away with stuff.
I'm not sure I could ignore outright theft. But I've definitely ignored - and watched others ignore - sandbagging, particularly when it has followed burnout.
Read up on the UK Post Office Horizon scandal if you want a really horrible example of this.
Yeah, I immediately thought of this story as a kind of reverse version of that.
Instead of buggy code causing innocent people to become criminals, here a “computer glitch” was blamed to explain away a signs of criminal behavior.
It’s not their money so “meh?”. Actually calling it out probably meant more work for them.
They should have incentivized them with an annual bonus for reconciliation. Obviously keep the ticket and cash people separate (so they don’t just game it to get a bonus).
Just say it's a glitch but never write a fix ticket and it will hang.
Spread out that's still $150k a year. Someone should have noticed >12k a month disappearing.
Kara was effectively stealing 20% of LRT fares over the 13-year period; one in five coins that were fed into the machines by the paying public ended up in his shaving bag
This can't be right. How can one person steal 20% of the coins going through all the machines? Have they miscalculated the amount he took versus one year rather than 13 years?
It would also mean that with him stealing $2.4M, their total proceeds over 13 years were $12M which is less than $1M a year to run their whole LRT.
Something doesn't add up. At his 38k CAD salary as a repairman, the entire budget of the LRT would pay for just 26 repairmen? What about the drivers, electricity, maintaining old and buying new trains?
I don't know about Edmonton/Alberta, but provincial and municipal transit in British Columbia and Vancouver (which is a separate entity but likely still benefits from provincial resources) are subsidized with taxpayer money. Fare collection supposedly makes up a minority of the funding for Vancouver's transit system.
Also, with 68 fare machines in the city in 1978, how many repairmen do you really need?
Heh, every Toronto subway station is manned, you can imagine what that does to costs. Often multiple entrances = multiple booth staff.
Going to unmanned and paying someone a premium to rapidly respond and fix machines 24/7 would be a massive cost reduction.
We don't even have drivers for our trains in Vancouver.
Newer system. But technically with the upgrades in Toronto, they should be able to run driverless.
Recently discontinued Scarborough Rapid Transit could have been driverless, but still wasn’t.
Toronto’s will have both a driver and and an on-train “guard” person to look out the window to make sure nobody is trapped in the door or something. Might get eliminated tho: https://www.newswire.ca/news-releases/toronto-says-no-to-ttc...
The article's author probably just messed up the math somewhere. According to wikipedia, there were 18,220 daily rides in 1978 on the Edmonton LRT. If he got $900 daily and that's 20%, then there were a little under $5000 proceeds daily, so each ride would have only brought in about $0.25.
I guess most people who ride rail frequently have monthly passes, only those who use it occasionally have to buy tickets at the ticket machine. Also, isn't 25 cents a reasonable price for a single ticket, given that this was 1981?
The scope/scale of the Edmonton LRT in 1981 was tiny...a single leg starting from downtown past our two stadiums (football & hockey) and finally to a neighborhood in the northeast. Primarily built to coincide with the 1978 Commonwealth Games.
From Wikipedia: The LRT system had an estimated 18,220 weekday passenger boardings in 1978.
If I remember correctly fares ranged somewhere between 35-65 cents in those days.
While I also doubt the numbers, $1M in fare revenue != $1M in operating cost. Most public transit systems are heavily subsidized.
That said, https://edmontonsun.com/opinion/columnists/gunter-edmonton-t... gives much higher numbers operating costs and fare revenues.
In a report released Tuesday, Wiun revealed the cost to operate Edmonton Transit went from $105 million a year in 2000 to $327 million last year.
Maybe a lot of the revenue comes from transit passes and/or card payments and the 20% are supposed to represent only tickets sold for cash?
Edit: Just saw the year, so you'd have to adjust that for inflation again too, but credit cards likely weren't a thing for transit passes.
Probably 20% of _coin fares_. Most people pay with pre-purchased tickets or have a transit pass.
If you're employed as a machine repairman, I assume you visit every machine pretty frequently...
Also, FTA:
maintain and fix the 68 ticket machines of Edmonton’s LRT
So it’s not like the total number of machines is that crazy either.
it's not a big system. Edmonton is a town built by oil money and they love their cars and trucks; it's Snow Texas.
Do you though? How often did these things need maintenance?
As an American, the part of the story that is very interesting to me is that Canadian coins have enough ferrous content to be picked up by a magnet. Wouldn’t the ability for coins to become magnetized cause all sorts of issues for the internal workings of vending machines and other coin slot using mechanisms?
Looks like all current Canadian coins can be picked up -- $1, $2 .25, .05, .10. (couldn't test pennies as Canada hasn't had them for a while).
I suspect US quarters would have the same makeup
US quarters cannot be picked up by magnets.
American coin mechanisms in vending machines and arcade games have magnets to filter out Canadian quarters.
I thought all coin mechanisms use magnets to differentiate coins, no?
A coin drops at a known speed and the right coin will get pulled by the right amount by a magnet or get rejected.
Not in the US - I think they use diameter and weight.
Sounds like slug heaven. But I guess if they don’t take $1 coins, it’s not as worth it finding a washer that will go where a quarter goes.
It sounds like you're thinking of separating coins using eddy current braking [1]. This works even for non-magnetic coins because the effect is a function of the metal's electrical conductivity.
If you have a silver coin or a small piece of copper pipe and a large, strong neodymium magnet, then you can easily observe this effect at home by putting the metal sample on a table and quickly waving the magnet past it as close as you can without touching it. The metal will slide across the table following the magnet, despite the metal itself not being magnetic, because the moving magnet induces eddy currents which temporarily create a magnetic field like an electromagnet. Other metals besides silver and copper exhibit weaker responses due to higher electrical resistivity.
Interesting that they exist interchangeably in all vending machines, etc in Canada.
Canadian vending machines are happy to accept US quarters at par. Why pay for a more sensitive mechanism to prevent someone from giving you a more valuable coin. Although, probably not more valuable enough that it's worth filtering out from change boxes to deposit with a US based bank instead.
Otoh, there are coin mechanisms that can check for and reject quarter sized objects that are attracted to magnets; they might not be installed everywhere that takes US quarters, but if an operator starts getting a nuisance amount of CA quarters, they will be. See this doc [1] for a description of a pretty discerning mechanism (although it accepts both US and CA quarters, a slightly different design could reject CA quarters)
[1] http://segalandassociates.com/Documents/Coin-Mechanisms_Slug...
Pretty interesting table here: https://en.wikipedia.org/wiki/Penny_(Canadian_coin)#Composit...
I had thought pennies were made of zinc towards the end but that was only for a couple years. Then they were made of steel which should be magnetic.
As an American, the part of the story where a single coin is valuable enough to bother with is very interesting to me. Our failure over years to introduce a working dollar coin (much less a toonie) is frustrating.
This was 40 years ago and he was stealing hundreds of coins a day.
Also, I'm sure you realize, but the US has had dollar coins since at least 1971. The public never really had much interest in using them and with cash use declining, I wouldnt expect that to change.
We have tons of vending machines, and coin slots and I've never had or heard of such a problem? Completely anecdotal but still.
IIRC many vending machines operate or operated on the magnetic properties of coins even. At least in my country before the Euro some did.
There are only several properties that can be easily distinguised from coins without complex digital processing: weight (and its distribution), sizes, conduction and ferromagnetism.
Kara was effectively stealing 20% of LRT fares over the 13-year period; one in five coins that were fed into the machines by the paying public ended up in his shaving bag, amounting to around 2 million customer journeys. It seems inconceivable that he wasn’t caught sooner.
The failure to catch him, despite discrepancies between fares and cash raised in two audits, was put down to a belief that the errors were software glitches and, after his arrest, led to a significant amount of internal finger-pointing.
The 20% could easily be missed if it ended up looking like a ticket wasn't sold at all (ie. just 20% fewer tickets got sold).
Many railways don't keep track of the paper that tickets are sold on, because the same paper is used for printing receipts, seat reservations, free/discounted tickets etc.
Many railways also have a double digit percentage of fare evasion. Also, many railways operate partially/mostly on government funds not ticket revenue, so a 20% loss in ticket revenue wasn't a 20% drop in total revenue.
But surely they would have a counter of how many tickets were sold in a machine?
I do wonder if the repairman had the ability to reset/twiddle with that counter...
It literally calls this out in the article folks. Leadership attributed it to a software bug and didn't look into it further.
But they had a record that said how much he stole. So they knew how much they were supposed to earn vs what they did earn.
Given the Post Office / Horizon scandal, I'd actually be reassured the default assumption was the software was wrong.
Further reading at https://en.wikipedia.org/wiki/British_Post_Office_scandal , the TLDR is the biggest miscarriage of justice in UK history because people insisted the software was right.
About to be the subject of a UK TV series this month.
Well that has the potential to be incredibly depressing. It will be super interesting to see how they portray the developers and if they call out fujitsu
I really hope so. The authorities haven't even compensated most of the victims yet, still stalling. Hopefully the series will shame them into doing the right thing. It was disgusting what they did to these poor people, mostly just small mom and pop businesses who couldn't fight back.
Passing it off as proceeds from a vending machine business was smart, I wonder if he actually had a fleet of vending machines to make that plausible. Of course you’d need to be able to show receipts for cost of goods sold… money laundering is hard!
It doesn’t sound like he did.
Laundromats would have been ideal for this kind of, well, money laundering. In a pre-digital era, who’s going to check that the number of cycles on the washing machines line up exactly with the takings?
An auditor or private investigator, but granted, there's a lot of room for tax evasion - there's a reason a lot of businesses and contractors will gladly take cash, tax evasion being one, most digital transaction costing them money being another. It's fairly common in my country (NL) to see signs saying "please pay in cash" and "€0.25 surcharge if paying with debit card for amounts below €20"
Around where do you live? Anecdotally, I don't see much of any of that in Eindhoven or the surrounding villages.
Correlating with water and electricity bills could raise suspicion, but yeah, it's probably harder.
Hm, what about vending machines with things you make yourself, legitimately without any paper trail that would show what you are making?
And ideally the deliverable would be something digital rather than tangible so your COGS are effectively zero… like a bitcoin ATM for instance… hm
Having an actual fleet of vending machines would be an excellent cover for such a scam, but even if they're unprofitable, you still need do do some amount of work to maintain that cover. Soon, the cover story becomes an actual 'job' and you have to wonder if you're pulling in enough cash with the crime to rationalize it.
If anyone asks, tell them the receipt comes out if they shake it!
I wonder how he explained (or if he ever had to) that his weekly haul, deposited at the bank, apparently doubled when the looney coin was introduced ?
Interesting. A litte after that time, aged 13-14, I was interested in coin pusher machines[0], which (despite being gambling) were not age restricted where I lived. Obviously I wanted a way to do better than the system allowed and wanted to know if I could use magnets to pull the coins towards me[1]; some research showed that some "coppers"[2] were magnetic and others weren't, and that it seemed to depend on the date the coin was stamped.
Although I can't remember now if the older or the newer coins were the magnetic ones, I wonder if the composition was changed in part due to this case?
[0] https://en.wikipedia.org/wiki/Coin_pusher
[1] No
[2] British slang for 1 and 2 penny coins due to colour
Obviously I wanted a way to do better than the system allowed and wanted to know if I could use magnets to pull the coins towards me[1]
In other words, you wanted to cheat. I can't comment on whether that's fraud in a legal sense, it's still cheating.
That's an interestingly hard line to take.
The game in question --the penny pusher-- pits a player's skill against the (the design of the) game, and (probably) allows a skillful player to earn a greater return. The game is inherently designed to restrict winnings, and (so goes urban legend) the owners can restrict winnings further by, for example, gluing coins to the base in certain areas.
I'd therefore argue that exploiting gaps or flaws in the game's design are just an example of a especially skillful operator beating the game and its designers, and not cheating. The line between clever exploitation and outright theft is a probably difficult one to draw; although turning up with a giant electromagnet which just pulled the coins straight off the shelf, would probably be over that line :)
Like most teenagers, I grew up.
There's a reason 13-14 year olds aren't held to the same standards as adults.
The newer 'coppers' are magnetic, so I doubt it. The reason was because they were becoming more expensive to make than their face value. Anyway you couldn't steal a significant amount in coppers, the main debate is whether to get rid of them entirely.
the main debate is whether to get rid of them entirely.
Now, yes. But this was the 90s. You could still (just about) buy some items for a single penny back then.
Fair enough. Still, £2M in copper would weigh about 700 tonnes.
I don't think the 1980's loonies were steel, they appear to have been mostly nickel.
I suspect though, that some detail of the various ways he did this just got lost over time. You could probably fish them out with superglue or sticky mastic on the antenna rather than a magnet, for example.
Or maybe the magnet was always used to hold some kind of trap door open rather than directly fishing the coins.
Article says loonie came out and implemented in their system in 1988. Before that it was mostly quarters. Both were nickel based which is ferromagnetic.
Loonies are coated in a different metal making them less magnetic, but stronger magnets will fix that.
Newer 'coppers' are magnetic, older ones are not.
https://www.royalmint.com/stories/collect/why-are-some-uk-co... - the composition of 1p and 2p coins was changed from bronze to copper-plated steel in 1992 and the composition of 5p and 10p coins was changed from cupro-nickel to nickel-plated steel in 2011
His salary, in real terms, was pretty good by the way. Way more than I earned as a software dev for many years.
I noticed that too.
$38k in 1981 in Edmonton was firmly middle class.
Plenty of homes cost less than $100k. Rent was in the $100-300 per month range for a nice 2 bedroom.
Dude just got greedy. If he had skimmed $600 per week instead of $3000, he would have doubled his take home pay and likely never would have been caught. It would have amounted to almost $100k every 3 years which is a tidy sum back then.
Dude just got greedy.
It seems to me that once a person builds an illegal habit, it demonstrates they: (a) probably have a higher risk tolerance than most people and/or an inaccurate understanding of the empirical risk level and/or (b) they have, perhaps only temporarily, found a self-interestedly-rational aspect of law/society to exploit.
Once one's behavior crosses into that realm, "dude just got greedy" seems to miss the point. It was greed that got them there, right? How many optimally greedy criminals are there? I don't claim to know, but I'm suggesting that risk-adjusted _optimality_ and the criminal mind are not highly correlated.
Anyhow, it doesn't seem the 'level' of greed was the problem; it was the level of spending; the article suggests that Kara's lifestyle upgrade attracted considerable attention.
More generally, the risk-adjusted calculus between "steal a lot quickly" vs "steal a lot slowly" is interesting. First, being a repairman of said machines, he would be a suspect if any discrepancy was found. Second, dragging a larger-than-usual bags of coins to the bank for years seemed rather brazen. But perhaps the consistency of his behavior made it seem 'normal' to the local bankers? Putting both together, sure, larger amounts would attract more attention, but the relationship between intake and risk is probably not linear. As a guess, one might think halfing his intake might only reduce his risk by 10%. If so, a self-interested, amoral calculus might suggest that his intake was reasonable.
He could have stopped stealing when he wanted to have a more lavish life style and they wouldn't be have been able to catch him (at least not red handed).
If they improved their auditing and revised their models, they might get suspicious if dude quit and their revenue suddenly went up 25%.
Or not ask any questions at all and get big bonuses…
> How many optimally greedy criminals are there?
I don't know, how big is Wall Street nowadays? /s
More seriously: it's likely that there are indeed a lot of "optimally greedy" criminals - it's just that we don't label them criminals, because they don't get caught. I guess the actual numbers are somewhat dependent on your trust in the ability of law enforcement.
> perhaps the consistency of his behavior made it seem 'normal' to the local bankers?
Perhaps it was just the '80s, when banks didn't really want to ask any questions.
> the relationship between intake and risk is probably not linear.
I agree there. Note that criminals do tend to understand this, typically regarding the results of conviction. It's the reason capital punishment is not really a deterrent: because once you pass the threshold (which is often with a single act), punishment does not grow prportionally, so they might as well do it over and over.
How many optimally greedy criminals are there?
Bernie Madoff might be close to an example; his scheme kept going for an _amazingly_ long time, and he made some effort at times to reduce inflow to keep it somewhat under control. There was probably a world in which it only came out after he died; as it was he was kind of unlucky with the timing.
Of course, there might be plenty of optimally greedy criminals out there, and you’ll never know; more or less by definition they do not get caught.
All good points. But there is also an element of "if they haven't caught me now, they won't ever". Risk tolerance increases over time.
He did make the "classic, amateur, movie thief" mistakes of spending lavishly and stealing a large fraction of coins that couldn't be covered simply by driving a crappy '77 Chevy Malibu. (That was a particularly ugly car with bad paint. [0] My parents had a '78.)
This is the idiocy of committing various forms of graft or embezzlement in the Western world: the rewards are small and short-term compared to the nonzero legal and financial consequences of getting caught. It's that most people are bad at quantifying the probabilities and qualitatively assessing their risk exposure before they're caught and rationalizing they're different and somehow smarter than everyone else at all times. His theft didn't go unnoticed and they eventually had to hire a private detective
Even if someone could steal much quickly the equivalent of, say, a billion dollars without raising any suspicion or leaving any trace evidence and launder it covertly, the problem becomes there is no country to disappear to where the proceeds could be utilized and where property rights are respected: countries including Iceland, Switzerland, Ecuador, Cuba, Venezuela, Russia, Belarus, Afghanistan, Iraq, Iran, Qatar, Yemen, China, and DPRK will not help you. One could attempt to live openly, but they would find it difficult to launder their funds from nowhere into the legitimate banking world without inevitably raising suspicions or being caught through forensic accounting.
Therefore, a wise criminal™ is generally better off using legitimized means to facilitate large-scale wealth transfer from people and organizations that lack economic and political power using trickery, obfuscation, and complexity. Either that, or by creating genuine (or genuine-appearing) value and monetizing it well through work that doesn't involve criminality reduces the risk of ending up poor and/or in prison. Apart from specialized IP or knowledge work ability that can be productized as a startup, the areas of real estate, public markets, and fintech are the most obvious targets for non-lifestyle business models. Other non-/semi-lifestyle business models readily achievable by an individual is becoming a B2B supplier of high-value, high-margin specialized goods that present one or more barriers to entry, i.e., aircraft parts, nuclear energy parts, safety systems, or medical devices.
0. https://topclassiccarsforsale.com/chevrolet/288637-1977-chev...
He removed the face plate from the ticket machines, which as a repairman would raise no suspicion, then rigged a car antenna with a magnetic tip, like a make-shift fishing rod. Coin-by-coin, Kara hooked his catch out of the ticketing machine cash box into a shaving bag, which acted as his keep net.
I can't picture how his rig worked, the article would have benefitted by anything visual help :/
I can't picture how you stand there long enough to steal thousands of dollars per week without anybody noticing for 13 years.
He did it in the middle of the night
Probably nothing else to do other than listen to the radio. Dude probably kept the machines in tip-top shape because it made them more money that way while reducing the total amount of work required.
It'll be fake and he just broke in, maybe legally it was better to not have 'broke' anything but this was how he started it all.
Do the napkin math -
1. There was no AliExpress to get amazing magnets from, and there were no amazing magnets.
Average of $3k / week
$3000 / 6 days working / 8 hours = $62.5 per hour
Personally I get rid of lower coins into machines. So lets say 4 coins to get $1. He's pulling out 200 coins a hour? And doing his job. And no one sees him pulling up and down 4 time a minute for hours on end?
-------------------------------
Segway -
On the evening of Sept. 29 1994, Constable Ken Chatel, a member of the RCMP Customs and Excise Section in Edmonton leaned back in his chair to catch the six o'clock news.
One of the items that evening covered a police search of the home of Salim Kara, a city transit employee who was charged with stealing in excess of $2 million dollars from Light Rail Transit coffers.
As the camera panned the interior of the opulent residence on Osborne Crescent, several objects caught Chatel's eye and made him lean forward with renewed interest.
The camera revealed two zebra skins on the walls and a threefoot carved tusk in a display cabinet. Depending upon the species of animal each item represented, it was possible that they were protected by international legislation.
https://www.gamewarden.ab.ca/agwmagazine/1996/summer%201996/...
$1 coins were common in Canada for most his operation.
Excellent magnets available inside any speaker, just crack off a piece of the length you need. Basically free.
Here's a typical metro ticket machine
https://lrt.daxack.ca/Cities/Minneapolis/hires003.jpg
The coin slot is in the top right.
As Kara only maintained the machine function, he
didn’t have direct access to the cash box where
the coins were collected after customers had fed
them to purchase LRT tickets.
He removed the face plate from the ticket
machines, which as a repairman would raise no
suspicion
Ultimately what I think happened is that, behind the faceplate, the opening for the coin box is larger than the coin slot on the faceplate, possibly for tolerance reasons to ensure that a coin passing through the faceplate always lands into the coin box. This gap was enough to get an antenna down into with a magnet attached to the end.
It sounds like the cash boxes had an open slot he could just fish coins out of with a magnetic tipped car antenna. You can get things like that ready-made these days for fishing things out of tight spots.
A quick Google didn't return any books on this, unfortunately.
What stood out for me was that the Canadian tax authorities didn't get to him. Maybe he payed tax on his earnings; the article doesn't clarify.
Is not paying tax on income from theft actually tax fraud?
I mean, the theft itself is obviously unlawful. But perhaps you wouldn't be taxed on theft proceeds anyway, so no tax laws are broken in that case.
Yes income from illegal activities is still taxable income in most parts of the world.
Edits, thinking about it...the article says he claimed the money was from his business. And the bank took in the money. So perhaps he did pay tax?
How do you report it? Is there a field "income from illegal activities" in the tax forms? Asking for a friend.
Sometimes. When there isn’t, there’s a directive to enter it under “other income” or something similar.
https://www.cbc.ca/amp/1.1407698
Depending on the seriousness of the crime, the taxman may or may not be able to share those details with law enforcement.
I think the cutoff is if the sentence could be for 14 years, they can share it.
When Canada legalized marijuana, they made many infractions punishable by up to 14 years. So if you sell unlawful marijuana to a minor, you could get 0 to 14 years in prison. As a result, many illegal marijuana sellers will require ID to avoid this (dunno if they’re paying taxes or not, but makes sense to care about this if they are).
https://www.irs.gov/publications/p525#en_US_2022_publink1000...
For the US, yes.
Even if it weren't, I'd suppose that the CRA would want to know how he came about the money in order to attest if it was really exempt.
Generally the end goal of money laundering is to have the money be taxed. Because at that point the money looks very legitimate, and a big part of the government (the tax office) stops trying to catch you.
Stealing 2 million, one coin at a time, over 13 years, mostly at night, by waggling a magnetised car antenna through a small slot for hours and hours, is actually hard work. Its like the opposite of The Shawshank Redemption.
There was that couple in New England where the husband figured out there was a lottery ticket that was nearly guaranteed to return a slight profit if nobody won the previous couple of weeks.
Several articles were written about them, I think I saw an ad for a movie even, but it took both of them working very long days to pull this off, including standing in convenience stores for hours at a time pushing buttons. I think they ended up making less than $100 an hour between them.
Which is a better job than many people can get, but if you're retirement age in a job you can actually retire from, then this is more about Sticking It to the Man than about getting rich.
That was a calculated bet though, where the expected value was known to the positive, but you’d need to buy as much as possible to guarantee your outcome each time that situation happened.
Digging a tunnel through a rock wall with a tiny hammer over years, as in The Shawshank Redemption, seems very similar.
Both sound like a lot of work though.
The direction of travel relative to jail is the opposite though.
Missed the joke.
It's not necessarily one coin at a time, a strong magnet could pull multiple, which means you could make $3-4 in a few seconds once you mastered it. Push it in so it bends down, pull out, drop into the shaving bag, insert again, etc. He probably had a lot of time to work on each box.
Skimming from public transit is an old trick.
There was case like this in Boston about 15 years ago that came to light as they were switching away from tokens to Charlie Cards. It was an MBTA mechanic. IIRC he was caught because it looked strange that someone kept showing up with bags of tokens to exchange for cash at one of the stations.
Even with the new card system, someone figured out a scheme to steal:
https://www.universalhub.com/2011/mbta-revere-man-made-sold-...
And when I was a kid there was a big parking meter scandal in which most of the collectors were implicated after a resident saw two of them skimming. Loved this quote from the investigator:
''The meters in Boston are the oldest I've ever seen,'' Mr. Vitagliano said. ''In some cases, it is actually easier to take a quarter out of one of our meters than to put a quarter in. I mean that.''
https://www.nytimes.com/1982/07/08/us/boston-meter-collector...
That’s nothing, in Canada we had a guy steal half point (200g) gold nuggets… internally… from the Mint. Only got caught when he deposited lots of big cheques from a gold coin shop at his bank and they learned he worked at the Mint.
https://nationalpost.com/news/canada/royal-canadian-mint-emp...
In 2015, this fellow was making $55k/yr, contrast to the guy in the article making $31k in 1981.
The 38k/year was the most striking part of the article. According to a (US) inflation calculator that would be 130k today https://www.usinflationcalculator.com/ which seems very good for an apparently entry level job.
I wonder if the fellow had to be a licensed electrician for that job. It would explain a lot, especially in Alberta where they were in high demand throughout the 70s to work the oil patch.
In Boston in the '90s and early 2000s, an out of order parking meter meant you could park for free. There was a sensor in the coin slot to detect jams which would in turn put the meter out of order. If you ripped off the flip up lid from a Dunkin Donuts coffee cup and inserted it into and removed it from the coin slot, the meter would go out of order. It was almost as if that's what the Dunkin engineers designed it for. It worked every time.
Many a cold morning in Boston my father would prefer to pay the $1 for his Dunkin coffee than pay for parking as we ran errands in the city. A trail of disabled meters laid in our wake. Not the best lesson for 8 year old me but a funny memory nonetheless. RIP Dad.
For years San Francisco had a major problem with city employees and contractors stealing the money from the meters.
https://www.sfgate.com/news/article/robbed-blind-parking-cza...
https://www.nytimes.com/2003/04/08/nyregion/tunnel-vision-ki...
Token sucking - described by police as the most disgusting non-violent crime committed on the NYC subway.
It's amazing how far you can get in crime by not driving a flash car and just generally keeping a low profile
Only necessary if you keep your job. If you don’t, there are plenty of places you can live very nicely without having to explain where all that money came from.
Your neighbours will be too afraid you’ll wonder the same question about them.
And the only one you may need to explain yourself to is taxes; I have (had) colleagues working at the tax office, they're working on machine learning algorithms to detect suspicious activity on bank accounts (because the tax office has full access to everyone's transaction history, of course). They focused on suspicious repeat transactions, but I'm sure they will at some point focus on a suspicious absence of transactions, e.g. no grocery purchases.
That’s cool. Canada implemented some kind of suspicious financial transaction agency thing only in 2000 (to stop money laundering and TerRoRiSM) and just issued its first fines to banks this year.
While large volumes of transactions have been reported, the agency mostly… well, took reports!
It can be a hard nut to crack and I don’t think governments actually want to find and stop the transnational kind money laundering.
Yes, although depositing so many coins at the bank each week that they are having to let you in the back door isn't exactly low profile behavior!
LTR's record keeping/monitoring must have been abysmal if they didn't realize the sudden drop in revenues when they hired this guy, unless the person he replaced had been doing the same !
Remember, every coin has two sides
Unless his coins were microscopically thin, three sides would be more accurate
If the coin is perfectly circular, is does in fact have only 2 sides (as a perfect circle has no sides). If the coin is not perfectly circular, but is (at some microscopic level) full of edges, it could have a near infinite amount of sides.
A perfectly cylindrical coin would have three sides: 2 flat planes and a curved ribbon. No reason a “side” has to be flat. Just ain’t got no internal edges!
Can there be more sides than atoms on the surface?
Three surfaces. Infinite side or two depending on your position on how many edges a circle has.
I'm surprised Canadian coins are magnetic, though my two minute research says the loonie isn't? Apparently it was redesigned around 2000, maybe it switched then.
There is a sizeable community doing so called "magnet fishing". Check out r/magnetfishing
Coins don't seem to be their target, as very few seem to be magnetic.
Hm, true. But I sometimes see people walking along beaches doing this kind of thing. Though they're probably hoping for rings (gold, silver, diamond, ...) rather than coins, which would make it much more lucrative as well.
Gold, silver, and diamond are also non-magnetic.
Lots of confusion here about what such a meter actually looks like. See the start of this [0] document for a photo. It’s an older photo but I remember the same from Edmonton in the 1980s. No digital display, no thermal printer, etc. They were numerous — one meter for each parking spot. Later in the subject’s tenure they were swapped for digital display/timer meters with the same form factor (still no printer).
https://pub-edmonton.escribemeetings.com/filestream.ashx?Doc...
Edit: disregard — this doc is for parking meters rather than LRT machines (which the article also calls LTR).
That’s a parking meter though.
I think this guy snagged money from the light rail transit ticket/token system.
Funny how parking meters can be somewhat standardized, meanwhile every transit system seems to want to design/build its own solution.
You’re right!
In GTA Vice City one of the first ways you can make money outside of missions is to sneak over to the main island, run over parking meters downtown and collect the money. It doesn't take long to collect enough to buy the cheap shack residence downtown, which is conveniently near the police helipad.
I did a quick google search, and this is what the LRT ticket machines looked like in 1988:
https://www.reddit.com/media?url=https%3A%2F%2Fpreview.redd....
In 1981, Kara was hired on a $ 38k-a-year salary to maintain and fix the 68 ticket machines of Edmonton’s LRT – light rail transit system.
If that was their 1981 salary, that’s damn impressive.
Indeed, that's about $117k (CAD) per year in 2023. (80k euro, 88k usd)
While interest rates were sky high then, internets say a detached bungalow in Edmonton cost $82k then, but about the same 10 years later.
they sure ain't 82k now. $482k for somewhere near the LRT might be a good start
It was a technical job and union.
Looking at a similar job in Toronto they make $80-100k today
https://career17.sapsf.com/career?career%5fns=job%5flisting&...
Too bad it doesn’t say how he actually got found out. I imagine he could have gotten away with it if he had gradually reduced his theft of coins over 2-3 years, then quit the job and moved somewhere else. I’m pretty sure there’s tons of schemes like this that aren’t ever found out.
Too bad it doesn’t say how he actually got found out.
Hm? It does:
In 1993, with the red flags mounting up, the city authorities hired private investigators to observe Kara, which finally caught him in the act.
That's fairly vague though. What red flags? How were they novel?
Probably the 19th audit in a row where ridership and fare enforcement stats didn’t match up to fares paid.
He got away too easy if you ask me. You will need to spend a miminm of 2 years in jail for owning not stealing 500 cannabis plants
He gave a bunch of the money back
If we take cannabis legislation as a guideline for other laws, farming as an occupation faces a grim future.
By that logic, you are also stating that you see two years in jail “for owning not stealing 500 cannabis plants” as a fitting punishment, no? Seems to me one is fine while the other is too high.
“ Sooner or later, the temptation to spend became too much and maybe thinking he would never get caught in 1992, Kara decided to trade up from his modest $136,000 home to something much more fitting of a vending-machine millionaire.”
Well… what’s the point of stealing money if you can’t ever spend it?
As anyone who watched The Wire knows, thanks to Stringer Bell's pitch to Marlo Stanfield, "they turn your things against you, that's how they get you".
Conspicuous consumption is bound to trigger alarms. The smart wealth makes itself as invisible as possible, and typically plans generational succession instead.
If you really want to enjoy your riches, you better build all sorts of deniability layers first, or do it as part of retirement from the game. If this guy had dismantled the hack, left the job and retired to a Florida mansion, he wouldn't have been caught.
Or you just move someplace where there's no extradiction agreement with the country where you committed the crime. Look at Ronnie Biggs, one of the "Great Train Robbery" culprits from the UK who then lived for years in Brazil.
Or moved abroad where they wouldn't ask questions; the challenge then is moving a lot of money across the border without customs asking questions. This is where cryptocurrencies have probably come in very handy, although, buying cryptocurrency using coins is probably difficult, lol.
In the words of Ace Rothstein in the movie Casino.
” You can spot these assholes by watching the way they bet. Like this guy. He's bettin' lavender chips at five hundred each with only one little problem. He's always guessed right. If he wasn't so fuckin' greedy, he'd have been tougher to spot. But in the end, they're all greedy.”
This story reminded me of the payphone bandit, James Clark, who stole about $500k picking the payphone locks during the 1980s. Had he kept a lower profile, payphones eventually became obsolete and he might have gotten away with it.
Shortly before they became obsolete, payphones over here switched to pre-paid cards, which made them less convenient / ad-hoc to use and may have contributed to their decline (mobile phones being the obvious one of course).
Making $17/hr in 1994 is equivalent to $31/hr in 2023.
Then again it was Alberta so even minimum wage workers were probably making $17/hr back then since housing costs would have been nuts, or anything really.
He was making $17/hr in 1981, which is over $58/hr in 2023. I imagine he probably got raises, although they probably didn't match inflation.
I’m thinking they had to be a licensed electrician for the job (there’s AC behind that panel, oh no, you could touch the wrong wire and DiE!!!1).
Lots of demand throughout the 70s for electricians in Alberta.
I hope anyway…
Is this the infamous magnet-bandit? https://en.wikipedia.org/wiki/Salim_Kara
I doubt it but it would be a testament if it was this guy and he used a small public transport “seed fund” to start a postage empire.
Common sense points to "unlikely" since there's a filmmaker and other untold namefellows, just like anyone else. I suspect the real SK keeps a low profile.
Reminded me of this great American Dad episode: https://americandad.fandom.com/wiki/Meter_Made
Excellent episode! One of my favorite scenes is Stans first day, when he meets the guy who trains him:
My wife can barely look me in the face.
Mine looks me in the face and more because she knows I'm on these mean streets every day juggling power and justice like they were damn chain saws.
As a non US/Canada based reader reading the article, I had a hard time grokking the article without visuals of how this was pulled off.
Coin goes down slot like a vending machine hitting some sensor telling the machine that a $0.25 or $1 coin has been accepted. Dumb old machine has poor protections against reversing that process, especially with faceplate removed.
Sounds like he used a common telescoping magnet tool, typically used by mechanics for picking up dropped screws, nuts, and bolts. An “antenna with a magnet on the end” is an accurate description.
(2022)
No my dear Kara. Coins have three sides. Can't forget the edge.
"Before his sentencing in March 1996, Kara made an enigmatic statement in court, promising at some point to share his side of this fascinating tale “Remember, every coin has two sides”
an indoor fountain
His fatal mistake. Anyone with an indoor fountain is obviously up to _something_.
As Kara repaid the proceeds of his scam to cover the city’s insurers, he was released after 16 months.
It's hard to find any information about this since it happened 30 years ago, but I wonder if he had to pay a fine. If not, he probably made out pretty well, investing the $2 million into real estate.
Used to do that with public phones as kids in communist Romania in mid 80s. Ate a lot of icecream.
Reminds me of a lesser-known story from the Falklands War. On the HMS Sheffield, there was a civilian laundry worker. When the ship was struck and sank, he tragically drowned, reportedly burdened by a large number of £1 coins he carried from laundry payments.
Reminds me of the salami slicing technique in the movie Office Space.
I did a quick google search, and this is what the LRT ticket machines looked like in 1988 (which includes the period in question):
https://www.reddit.com/media?url=https%3A%2F%2Fpreview.redd....
P: This sounds familiar.
M: Yeah... they did it in Superman III.
P: Right.
M: What a good movie, actually. And then a bunch of hackers did it in the 70s as well and one of 'em got busted.
P: Well, so they check for this now.
M: No, here's the thing. Initech's so backed up with all the software we're updating for the year 2000, they'd never notice.
P: You're right. And even if they wanted to, they couldn't check all that code.
M: Thumbs up their asses. Thumbs up their asses.
P: So, Michael, what's to stop you from doing this?
M: It's not worth the risk, I got a good job.
P: What if you *didn't* have a good job?
Edit: All of the publicly available scripts and quotes were wrong. Checked the original source. ;@]
That's actually pretty common criminal activity in banking, where an employee will take money from accounts of clients and "gamble" it on high-return short term investments.
Obviously I won't be naming Banks here but what usually happens is:
1) If they succeed in their investment they put the money back and walk out rich. Their venture can be detected during an audit some time later but if there's no money missing the worst that will happen is that they will be fired because banks are very sensitive on their reputation and they don't want people to hear that its possible for a such thing to happen. They also don't want the insurance and other regulatory bodies to hear about this.
2) If they are caught before returning the money(this could be audit, customer complaint or a whistleblower) they will be given the option to return the money and get fired. If they can't return the money, then a formal investigation and criminal case is initiated.
3) If they lose their investment, they will flee and trigger an audit. They won't be able to resign and leave gracefully because the process of using this money involves periodically putting it back at strategic times to avoid trigger an audit due to discrepancies, therefore it's very risky to keep coming back to work if you don't have the ability to put the money back at short notice.
This is one of the reason for people in banking having mandatory 2 weeks time off at a time in many jurisdictions. Stealing needs maintenance and maintenance needs access.
I also wouldn't call it "repay his debt to society" because due to money that he stole, he made the public transport more expensive and housing less affordable.
Isn't this literally what banks do? Take peoples deposits paying a minimal interest rate and then invest that money to earn a return higher than the interest rate they pay the customer (they actually will also borrow more money on the back of your deposit). So, when it's the bank doing it it's ok but a bank employee doing it independently for personal gain it's an issue.
The book deal aspect was interesting also. So, the guy profits and has a potentially lucrative book deal with minimal jail time.
Yes but banks do it within a legal framework that moderates the risk(at least in theory) and people know what they are signing into and what are their guarantees. You don't see too many banks collapsing, don't you? When it happens, its a big deal like with the SVB earlier last year.
It's also what Sam Bankman-Fried and others did in exchanges that acted as unregulated banks.
The system is not perfect and there are many scandals but if you compare it to what happens in crypto exchanges, its a day and night difference.
Running a machine as intended and screwing up is different from pretending doing one thing and actually doing something else and screwing up. This is also why bankers and fund managers don't usually go to jail when they lose clients money. It's not illegal to suck at your job as long as you follow the rules.
"Moderating risk" = depending on the US federal government bail you out?
There really is no need for the charade of banks now that electronic databases are very solid technology. Their whole role in transmitting and keeping an account of money is surely reproducible by the federal government at very little cost (maybe even lower cost due to not needing FDIC and all that infrastructure) without having to pay a middleman.
Banks don't store money. They connect money to businesses in a structured way. No banks means businesses won't get created.
I specified an (FDIC insured) bank's role "in transmitting and keeping an account of money". There would be nothing stopping a lender from lending if the US government gets rid of FDIC insurance and just provides the people of the US electronic money accounts directly.
Sure, but then what happens to the thing I said? How do businesses get loans? How much interest should be paid on that money, if any?
Supply and demand determine the price (or interest rate). Businesses get loans the same say any other business transaction happens. A buyer and seller hash out an agreement. This already happens all the time, even in the US (see investment banking).
If the lender, such as a bank, is any good at their job of underwriting, then they won’t need the federal government’s assurance to bail them out and they will still be able to attract funds from people seeking returns (and risk).
Fewer rather than zero businesses. Rich individuals could directly invest. Where banks shine is in making moderate risk investments which aren’t worth much individually but are a significant economic boost in aggregate.
Housing may be unaffordable, but people aren’t living in sod houses with dirt floors and no running water either.
Going cap in hand to an angel investor for every £10k loan is not viable. And they don't have the levels of cash needed for this.
Why not use banks for this as well?
Get rid of Banks and many different things change.
Some wealthy investors would setup a lending operation using their own cash, based on historical examples of such. They would however need to charge higher interest rates than banks because they would be more capital constrained.
Sounds like it could be a variation of the office space skit:
So what would you say you do here at the business factory?
[…]
I connect the money with the businesses because businesses are not good at dealing with money! I have people skills, can’t you see that?
Nope. It's about creating a system that attempts to analyse risks and invests within margins that are acceptable for specific products.
It impossible for a bank for example to put all their money into Dogecoin because someone got a hunch that Musk will tweet about it. To do that they will need to create some kind of instrument that allows others to bet on Musks tweeting habits.
That's not what banks do. You can do that without being a bank, like PayPal did. Most places will have different and much lightweight regulations than banks for this and you will go to jail if you do anything more than holding and transmitting customer money.
Except PayPal has no FDIC protection.
The part of the bank (or credit union) that required the US government to provide FDIC protection was due to dealing with cash. Imagine creating a country with just electronic money. What purpose would a bank with a FDIC protection serve if the government can just operate electronic money accounts itself? And if you want to take more risk and earn a higher return, you find a broker or investment fund or investor.
Investing customers money, create money.
Most money in the world is digital already, there are many banks that don't have physical presence and traditional banks are shutting down branches more than the open because branches are just the foot soldiers. There are also countries where cash is almost not used. Banks are not about cash, they are about credit.
I don't know what a "physical bank" means though, AFAIk there's no such thing and the buildings that banks own or operate would serve functions like hosting employees/clients/systems but they might choose not to have some of those.
And they can do this without a federal government backstop, just like an SP500 ETF does or a US Treasuries mutual fund, or an REIT, etc.
My point is the federal government need not provide a subsidy to these businesses that "invest" customer's money (or simply handle the underwriting of loans in many cases).
Right now in the US, via the Fed Funds rate, the federal government pays a business 5.5% just so the business then turns around and pays me 5.05%, all for keeping an entry in a database. And these businesses pay a lot of less discerning depositors a lot less. Surely the federal government can just give all 5.5% to people directly.
I wouldn't know about the legal structure you would like to invest your assets. Do it as you please, these things vary country by country too. The core concept is that you need to have some kind of structure for handling the money and a method to keep that structure in check.
The problematic part starts when someone acts outside of this structure, like employees who take customers money and invest with it without explicitly having a right to do that.
Banks' job isn't just keeping money safe and doing transactions. It includes maturity transformation as well.
[1] https://en.wikipedia.org/wiki/Maturity_transformation
I should have written "There really is no need for the charade of FDIC insured banks now that electronic databases are very solid technology."
I am not seeing the necessity of the federal government backstop to these businesses.
What does this have anything to do with maturity transformation? Are you simply trying to say that we don't need banks to do maturity transformation, and they should stick to handling transactions?
I am saying we don’t need the federal government to backstop businesses just so people do not “lose” money.
Money is electronic, the government can handle electronic money accounts directly, and skip paying businesses for no reason.
Banks or whatever other financial businesses can continue to sell maturity transformation services, without FDIC insurance.
I'm not so sure most people know what they're signing up for when opening a bank account. I also don't think banks particularly hide it, but I'd be surprised if the average person realizes that their checking and savings accounts are only IOUs or that money lent out for a mortgage likely didn't exist until they signed closing documents.
For all practical purposes for a customer who doesn't do more than putting money in, it's just a storage and they know how much of it is protected if something happens to the bank. From their point of view their money is there, even if the implementation details are much more complicated.
But the money literally isn't there, and the FDIC insurance that secures up to a limit is itself poorly funded and incapable of covering the failure of a moderately sized bank.
Saying the money appears to be there is very different from the reality of it, and in the context of whether customers consent to how the system works its also feels disingenuous IMO.
Can people spend the money as though it were there? Sure. Is the money they deposited there or are they aware that 90-100% of the money was immediately allocated to something else? Almost certainly no.
Who cares, the customers aren't exposed to all that and that's why they don't know it. It's like saying that McDonald's doesn't have any hamburgers, it's all buns and meat and lettuce. Yeah, that's how it works.
Last year a few banks went tits up, all the deposits were paid.
Can you clarify what you mean by "covering the failure of a moderately sized bank"? Bank is almost never "all the money is missing". Instead, it's usually something like "we have assets > deposits, but they're long term assets that can't be liquidated immediately so we can't pay all the depositors right this second", or "we have assets < deposits, but the gap isn't big enough that FDIC can't handle it".
That are guaranteed by the US Government up to $250,000. While the average person may not know the details, the average person’s faith in the banking system is well founded. That’s why these “alt-banks”, which avoid FDIC or NCUA coverages, are so problematic.
There have been 538 US bank failures since 2008.
https://www.spglobal.com/marketintelligence/en/news-insights...
Yes, this is correct. The bank does it in a somewhat government controlled fashion, with checks and balances, which the world has been fighting for a millennia, if not more. And the guy inside does it with stolen money, for personal gain.
Consent, for one, is a difference between the two actions, if we're talking morality.
I'm not sure how many people know this is what the bank is doing with their deposits, making consent difficult.
Usually people don't care what the bank does because they consent to the government making them whole in case the bank fails to return the deposit.
Well, not really. Do people consent when politicians reallocate their taxes to bail out too "large to fail" institutions? Given the protests, I think not. What if you didn't vote for the candidate that voted in the bailout? What if you specifically didn't vote (or voted for an opponent of) that policymaker. That's actually anti-consent
The concept of voting includes the possibility that a plurality of voters reject your preference. You consent to this outcome by participating.
When half[1] the population refuses to participate (perhaps they're tired of being lied to, or the candidates are slime, or there are too many selectively-interpreted, arbitrarily-enforced "laws" to count[2], or the idea one person should represent 617,000 is absurd, or they just don't like bossing their neighbors around)...
Maybe the government doesn't have consent.
[1] https://www.politico.com/news/magazine/2020/02/19/knight-non... [2] https://en.wikipedia.org/wiki/United_States_Code#Number_and_...
You could use the same argument for the scammer employee who gambles with your money to make a personal gain. You implicitly consent because you consent to the government prosecuting injustice and returning your misappropriated funds.
Do you have any examples of the public being asked to consent before governments made banks whole after a failure?
I believe that people have the opportunity to learn about banks' dealings, which is to an extent mandated by law. This can't be said about the person stealing the funds for their high-risk investment.
Consent is a difficult topic though, I agree. For example, what choice does a person have, not use banks at all? I don't think that's realistic.
Have you ever tried calling your brokerage firm, if you own any stocks or a 401k, to ask them who owns the actual shares you purchased?
$10 says they won't give a straight answer unless you ask just the right question. Eventually you'll find that there isn't a share you own directly, its effectively an IOU claim to a share. People can technically learn how the system works, but that leaves a lot of gray area there.
We could also technically read medical journals and learn how our medications work, but its unreasonable to expect everyone will and recent history has shown that in a pinch you'll be called out for doing your own research and thinking critically.
I'm sure I wouldn't understand their answer, even if they would give it to me 100% truthfully. In fact I just recently learned about the share IOU thing you mention too. And I'm somewhat interested in the topic too, so I too think that people in general understand it even less. Same for medication.
Not quite because it’s almost backward with banks. Yes they take your deposits, but to the bank a deposit is a liability not an asset. Banks can lend out much more than their deposits (fractional reserve) but they technically don’t even need deposits at all to create a loan, because a loan is credit (asset) and a liability to the borrower. This means banks in the modern sense can literally create money, so they don’t need your deposits. You can imagine if no one defaults banks can balance their cash flows without any deposits at all, but in practice there is risk so deposits are more like a form of reserves more or less, and potentially an expensive one if interest rates are high. https://www.investopedia.com/articles/investing/022416/why-b...
The part that is missing is that when you take that money to buy the thing intended with the loan the bank has to give you that money unless it is going to a customer of the same bank; impacting the fractional reserve requirement.
As a thought experiment, if you started a bank from 0, how do you pay out the first loan?
Yes, they create money, but deposits are a requirement to do it. (Unless you are doing some interest rate arbitrage by getting a loan from another source)
Deposits, although an important source of funding are not a requirement, capital is. There are capital requirements that make starting and running a bank a fairly expensive enterprise - you need to put up a lot of your own money (equity) for use.
I think a primary benefit of a bank is the ability to borrow directly from the Federal Reserve or similar central government bank. The spread on interest rates between the central bank and consumer rates is revenue.
Deposits are an asset AND a liability
Not really. Banks still have to spend central banking money when doing interbank settlements, and deposits are an important source of funding to day-to-day operations.
Say you have an account within Chase and want to send money to your friend at JPMorgan, Chase can't simply "create dollars" - they need to have enough reserves in their Central Bank account.
To add to what you said, fractional reserve banking is really not a think. Many countries don't have any fractional requirements and in some it only applies to certain kinds of loans.
If the bank came into your home, took money without your consent, gambled it on high-risk activities, then tried to replace it before you noticed that would also be bad.
But that’s not what banks do. People deposit their money at the bank consensually and with an understanding that the bank’s activities are regulated within relatively strict frameworks.
I don’t understand if you are trying to downplay the severity of criminal embezzlement by bank employees or trying to demonize banks, but the two scenarios you’re equating are nothing alike in terms of consent, regulation, risk, and criminality.
It was more a curiosity driven statement. I think the similarity is interesting, that is all.
It’s what investment banks do, but it’s not how retail banking works.
Retail banks hold their assets in various forms (central bank reserves, bonds etc.) but can’t really ‘invest’ because they can’t accept the risk.
They make most of their money on lending, but can’t actually “lend deposits” because they are on the wrong side of the balance sheet. The bank levers up capital (money that shareholders have put in as well as retained earnings from previous years) to lend from.
Deposits do count as liquidity and are a fairly inexpensive form of it, which is why banks want you to move money into them and pay interest to encourage you to not transfer them out.
No, banks don't take deposits and invest that money. Banks don't loan out deposits. The opposite is true, loans create deposits. Banks make money off the spread in the interest of their loans to deposits (which are usually zero ore almost zero). Also fees, they make money off charging fees.
By no means are banks the hero in most stories but from the view of normal depository actions I do not believe them to be the villain. Banks are required to follow very specific rules when it comes to deposits and while yes they should be making a spread on the money, they are not just buying up risky investments with it.
I worked in finance and I am not aware of jurisdictions that mandate 2 weeks time off. Can you mention one? I am aware of some recommendations but I have worked up to board level, and never see this being more than an excuse to not miss the next golf tournament.
I worked in a bank in Europe that was Dutch owned and we were requied to take two weeks. I don't know of that was a company policy though.
It probably wasn't. In many places in Europe it's legally mandated for employees to have 1 big leave per year, at least 2 weeks, so that they can fully unwind.
https://www.codulmuncii.ro/titlul_3/capitolul_3_1.html
"at least 10 working days of non-interrupted leave"
Of course, this is not always enforced, but many countries to have it as part of the labor code.
Sounds like these are recommendations some organizations can use or substitute by better methods of auditing. I would argue that if fraud can be covered by the presence of an individual, the problem is with the audit processes and controls in place.
Plus the individual being aware of the requirement could easily circumvent by only stealing every quarter or every month :-)
"Required Absences from Sensitive Positions" - https://www.newyorkfed.org/banking/circulars/10923.html
I worked at a Wall St. trading firm (albeit not in the trading area), and a lot of the back office/audity type people were required to switch roles every so often, so that any little unforeseen way to steal money somehow wasn't overlooked and "hoarded" by one person. In addition to multiple people having to sign off various things, etc.
IIRC, there were mandatory PTO/vacations required as well, so that everyone's job was done by at least 2 different people during the year.
This was not a legal thing, but required for the firm I worked at. My manager at the time said this was pretty common practice on the street, then. (Early/mid 90's.)
Yup, control counts a lot! Working at IBM just our of college, someone several levels up was getting a promotion for discovering an interesting loophole. Apparently, he'd discovered a way that four people could collaborate to exfiltrate just under $25 million (several decades ago) on Friday, and could be out of the country by Monday before it was noticed. The controls were previously good enough that it would take no less than 4 people cooperating. Obviously, he reported it, and this was good for a skip-level promotion.
I worked at an investment bank in the New York area. Employees had a two week lockout each year.
The "mandatory 2 weeks time off at a time in many jurisdictions" statement might not be precise enough or technically accurate description of the legal status. It's more like "everywhere I know it's mandatory to take 2 weeks time off" and the mandate can come from the institution itself, their partners or a regulatory body recommendation or requirement.
London? Pretty common in all banks for front office staff.
A lot of Canadian businesses do because unused vacation banks are a personal liability of corporate directors (they’re treated as unpaid wages).
While individuals could ask for their vacation time to just be paid out, a lot of employers don’t like that because they budgeted to pay you 100% of your salary per year, not 104% or 106% (ie: paying you for both 52 weeks of work plus whatever weeks of holiday per 52 weeks).
I was required at an American credit union. Having such a policy was a line item in state regulators’ auditing, but not mandated to the extent that the banking charter would have been lost if not fully in place.
Yeah, I mean, real estate in BC (where he bought one of his properties) is notoriously corrupt, and lucrative. Most real estate bought in BC is paid in cash, often by some dizzying maze of LLCs or whatever the Canadian equivalent is. Essentially money laundering and investment rolled into one.
This is provably false. It's not "most" real estate, it has only recently approached 30% or so, and only in hot markets like Vancouver and Victoria.
There's a money laundering problem in Canadian real estate for sure, but let's try to be reasonably accurate in our statements, shall we?
Holy cow. 5% would be high. 30% is dizzying. You're saying that if I pick a random recently sold BC property, there's a one in three chance it's bought with cash?
That's not a money laundering problem, that's a money laundering infestation.
1 in 3 U.S. Homebuyers Are Paying All Cash, the Highest Share in Nearly a Decade
Just over one-third (34.1%) of U.S. home purchases in September were made in cash, up from 29.5% a year earlier and the highest share in nearly a decade. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.
https://www.businesswire.com/news/home/20231108812516/en/1-i...
AFAIK "Paying All Cash" doesn't necessarily mean the buyer has $1M (or whatever the purchase price of the house) saved up. It just means their offer isn't contingent on them securing a mortgage, and they have the money secured somehow (probably through a preexisting loan).
https://www.bankrate.com/real-estate/all-cash-offer-upfront-...
100%. Not unusual for a multi-property investor to buy “cash” through a cheque on their line of credit to close quickly (you’ve already decided you want to properly and quick close can be a competitive advantage).
Then arrange the mortgage later, possibly after some capital-value improving… improvements.
Huh. Apparently it's my expectations that are wrong, not the market. Thanks, I learned something today!
Again, not across all of BC, but in hot markets like parts of Vancouver and Victoria..
It sounds high but it seems to be normal enough?
I found this with some quick Googling:
https://www.thestreet.com/housing/a-surprising-number-of-hom...
https://www.washingtonpost.com/business/interactive/2023/all...
This got me confused. Says he "repaid the proceeds of his scam to cover the city’s insurers". Does that mean it was lower than the amount stolen and just the amount the city paid the insurance? So he paid the premium but not the total amount covered?
edits: another source says he settled with the insurance company which implies its less than the total amount.
Typically when you have damages and are insured, then the insurance pays you and then goes after the original claim to get their money back. That is, the party that had the original damage leaves the claim to the insurance which then deals with getting the money back from the perpetrator while the original victim already got their money from the insurance.
This also moves the risk of the perpetrator not being able to pay the damage. Now the victim does not carry that risk anymore. The insurance does. Which is their value proposition.
You could say he graduated to Banking.
"Why didn’t any Wall Street CEOs go to jail after the financial crisis?" - https://features.marketplace.org/why-no-ceo-went-jail-after-...
He likely paid interest on the money too. That interest is part of what he stole.