Dark Money (and Pools)

Illustration by Konani Chinn

Dark money is money that moves around out of the public eye, making it hard to know who’s spending it or what exactly they’re buying.

Story: Come On In, The Water’s Dark

Imagine that all money transactions happened underwater, in crystal-clear pools and lakes. If you held your breath and dove under, you could see everyone handing cash to each other and signing contracts.

But what if that changed, and people suddenly decided to do their transactions only in muddy, dark waters – so nobody could see what they were buying (or from who)?

That’s the essence of dark money, which is becoming more popular.

‘Dark money’ is notorious in politics, where corporations and individuals can cover up big campaign contributions by funneling them through ‘front’ organizations like non-profit political action committees, to get around laws on contribution limits and mandatory disclosures.

Of course, people have been buying off politicians discreetly (and laundering money) for centuries with envelopes and briefcases of cash and gold. But computers have made it much easier to do ‘dark’ transactions on a much larger scale.

Another example is the trading of securities (like stocks). This has traditionally been done on exchanges (like the New York Stock Exchange) in public view, so everyone could see who was buying (and selling) what, and at what price.

But more big trades lately are going through so-called ‘dark pools,’ where transactions are made privately between large buyers and sellers who don’t want others to figure out their trading secrets.

Finally, new financial technologies are making it easier to move money anonymously – for example, blockchain based currencies like Bitcoin. The attractions of these networks to the dark-money crowd is that there’s no built-in tracking and disclosure, as there is with traditional banking networks.

So is dark the new green?

Maybe. A lot will depend on what laws are passed and how they’re enforced… and whether people and governments think it’s important to have big money transactions be visible and accountable, or not.