Guilty until proven innocent | #328

How banking shouldn’t work

Our weekly newsletter covers news, industry perspectives, and updates from the USBC ecosystem. Check out our last report here.

This week:

1. The story of Mahmoud Reza Banki

2. Scott Bessent promises new regulatory approach

3. Stuff happens

1. The story of Mahmoud Reza Banki

Mahmoud Reza Banki is a United States citizen who immigrated to the U.S. in the 90s. A graduate of Berkley and later Princeton, he was working at McKinsey in 2010 when ICE agents raided his residence and arrested him for alleged sanctions violations.

The violations in question related to transfers of money from family in Iran, the proceeds of a divorce settlement between his parents. Banki leveraged the hawala system, an informal money transfer system, which he argued was the only method available at the time.

The case, at the time, was polarizing, as evidenced by a NYTimes report from May of 201.

Denied bail, Banki would spend the next 22 months in prison with half of that time served at maximum security facilities in New York, from where he would fight his case in court.

Banki would initially lose, being sentenced to 30 months in prison but would eventually win on appeal. Prosecutors attempted to reopen the case in 2012 but Banki would agree to pay $710,000 to avoid a retrial. He was provided a full Presidential pardon in 2021.

Check out Banki’s Ted Talk (via Greg Kidd):

2. Treasury Secretary Scott Bessent promises new regulatory approach

Short on specifics, this was more of a vibe check. Here’s Reuters:

In prepared remarks to an American Bankers Association conference, Bessent called for "commonsense principles" in banking regulations to ease burdens, especially for community banks that have had to deal with rules tailored for larger institutions.

…

In the past, bank regulators have exercised vast powers on almost every aspect of daily life - but without meaningful accountability to the American people," Bessent said. "Most glaringly, regulation through supervision has too often taken place behind a veil of secrecy that precludes scrutiny by the public and their elected officials."

…

Bessent said that regulation should be fair and applied evenly across entities.

"The Treasury Department intends to drive a change in the culture of supervision through improvements to examination procedures, enhanced monitoring of examiners' compliance with those procedures, and more realistic processes for appealing supervisory findings," Bessent said. "Perhaps the most consequential step would be to define 'unsafe and unsound' by rule using more objective measures rooted in financial risk."

3. Stuff happens

• No, Stripe is not becoming a bank | TechCrunch

• Tether might build a U.S. payment network for stablecoins

• US Banks Finance Their Own Competition to Tune of $1 Trillion

• Wall Street Giant DTCC Unveils Tokenized Collateral Platform in Crypto Push

• The Effects of Tariffs: How the Machine Works

• Stablecoin Issuer Circle Files Publicly for IPO as Revenue Grows

• Stablecoins Are Growing Up

• Via Mitja Simcic—Crypto giant Circle just filed for an IPO: Here are 5 key takeaways

• JPMorgan’s Jamie Dimon warns Fed may need to step in to support bond market

• Did tariffs contribute to the Great Depression? Here's what to know

• Is the world heading into recession?

• Are Trump's tariffs as bad as the Smoot-Hawley Act, which is blamed for deepening the Great Depression? They're actually worse