A library of snippets
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By comparison in the EU’s most cashless society (Finland), the national electronic purse scheme (Avant) has had a slow start and even though retail banks offer online “real time” electronic payments there are no interbank systems in place, so consumers and merchants have to have accounts with several different banks if they want to transact this way [4].
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The Bank of Finland expected Avant would take over from coins for small purchases. And while on paper Avant appeared to work, in practice consumers were unhappy about being charged to load the cards, especially given that ATM withdrawals were free.
From Podcast: Bank of Finland’s Aleksi Grym on a 1990s’ digital currency – Central Banking:
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The review also calls for laws to ensure that everyone has the ability to make digital payments, reducing reliance on cash.
Britain on course to become cashless society ‘within the next 10 years’:
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Powell also spoke out in support of private cryptocurrency transactions, such as those offered by privacy coins like Monero, and Z-cash. The Chairman admitted that a fully transparent system where everyone can see everyone else’s financial transactions and balances is not ideal for the US economy.
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Fed Chairman Jerome Powell testified this morning in front of the House Financial Services Committee, on the state of the U.S. economy and monetary policy. During his testimony, Chairman Powell acknowledged the need for privacy, and private crypto transactions, sparking bullish sentiment on social media.
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Specifically, according to the FATF Interpretive Note to Recommendation 16, originator and beneficiary information should include the following:
Name and account number of the originator and benefactor
Originator’s (physical) address, national identity number, customer identification number, or date and place of birthQ3 2019 Cryptocurrency Anti-Money Laundering Report – CipherTrace:
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When Norwegian police earlier this year gave details of the kidnapping of the wife of a wealthy businessman, they said the family had demanded a ransom in cryptocurrencies. Local press reported that the suspects wanted to be paid in Monero.
Explainer: ‘Privacy coin’ Monero offers near total anonymity – Reuters:
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In these difficult economic times, I think it only prudent to have a fall-back career identified, especially if you work in the precarious and uncertain world of consultancy. With this in mind, I was excited to be asked to chair the opening panel discussion on innovation to combat financial crime at Finovate Europe. I was hoping to pick up a few reasonable tips on tax avoidance, concealing the proceeds of crime, routing mafia drug money and other payment-related activities that might pay as well as consulting but with lower marginal tax rates. I was a bit disappointed, to be honest. It turned out that the panel was about the use of modern information processing technologies to help financial institutions ensure that their customers comply with the manifold draconian regulations rather than circumvent them.
Still, it was enjoyable and an interesting examination of the key technologies in the fintech space and their impact on criminal behaviour. The discussions ranged around quantum computing, the blockchain, biometrics and all sorts of cool new tech that some of the enterprising start-ups who flock to Finovate might find themselves using in years to come.
Naturally much of the discussion was about artificial intelligence (AI) and the impossibility of doing anything about the cost-benefit situation around regulation and compliance without machine brains to help us. I agree.
(The issue of cost-benefit analysis is an important one, but I don’t want to get side-tracked here. Suffice to note that I saw a presentation from my old friend Michael Mainelli back in 2011 when he reported on a City of London study on the cost-benefit of AML, noting that in common with other similar studies that it was unable to find any benefits at all, only costs.)
To me at least, this line of AI-centric thinking can be more disruptive than might seem at first glance because it suggests an alternative vision of regulation where we do away with a lot of the expensive barriers to entry to the financial system that are nothing more than speed bumps to criminals but a major friction to legitimate users and instead use machine brains to police what is happening inside the system.
(There are other negative impacts from the current “high walls” approach. I remember a discussion in with noted former minister Andrea Leadsom at techUK back in 2015 during which she noted that the enhanced customer due diligence we expect from financial institutions is itself a friction against a more competitive sector because it serves to create a moat around the larger incumbents.)
The core concept is that instead of trying to prevent criminals for getting in to the system, we instead let them in and monitor what they are up to. If we force them to continue using cash, then we have no idea what they are up to! Whereas if we can persuade them to use electronic transactions of some kind, particularly those that leave an immutable record of criminality, then we would would actually be better off.
This led me to think again about likely developments given advances in cryptography. Since cash cannot be tracked around the economy, we (society) have put in place a whole bunch of complicated and expensive rules about accounting for cash when it enters the financial system. But suppose there wasn’t any cash. Suppose there was only Bitcoin. In that case, as I pointed out some time ago, you wouldn’t need anti-money laundering (AML) regulations because you would be able to follow every coin around the blockchain.
Many observers, and Bitcoin fans in particular, say that this is nonsense because there are a variety of ways to jumble up and otherwise obfuscate the sources of value in transactions on the Bitcoin network. I did not see this as a realistic barrier to criminals though, and I noted that a simple rule that required banks to investigate any coins that had originated in anonymous wallets (or mixers) would be sufficient to stop the large-scale use. This is all to do with tracking and fungibility. As I pointed out more recently, if Bitcoin were to be widely used in serious criminal enterprises then the authorities would step in. What if law enforcement agencies go to the biggest miners in the world and tell them that if they continue to confirm easily identifiable mixing transactions, they will be accused of money laundering?
Well, it’s not even a fortnight since I wrote that, and now I discover via interweb tubes that the U.S. Department of Justice (DoJ) has indeed just indicted Mr. Larry Harmon for allegedly participating in a money-laundering conspiracy worth more than $300 million in cryptocurrency. Mr. Harmon created the bitcoin mixer Helix. DoJ prosecutors refer to Helix as a “money transmitting and money laundering business.”
As I (and, I have to say, a great many others) predicted, the DoJ’s views on mixers and the like are clear and plainly stated. Assistant Attorney General Brian Benczkowski says the indictment “underscores that seeking to obscure virtual currency transactions in this way is a crime”. Whether you agree with this or not, you can see the logic from the government’s point of view. Which, of course, leads me to wonder if while obscuring virtual currency transactions “this way” is a crime, what about obscuring virtual currency transactions in other ways? Will any attempts to transfer electronic money privately be a crime too? What about Monero? Are they going to arrest Zooco Wilcox for inventing Zcash?
There’s a big question about payments philosophy to ask here. I might phrase it this way: If the DoJ’s crackdown encourages money launderers around the world to use privacy-enhanced alternatives to Bitcoin, are we (ie, society) any better off?
I encountered a very practical related case study in this field when my colleagues at Consult Hyperion were working on a study concerning the UK-Somalia remittance corridor. As I wrote back at the time, following a comment from a government representatives that “cash couriers, if structured properly, can play a sensible and legitimate role”, it was as if the government were recommending Hawala over the international banking system. Essentially, the AML crackdown on that corridor meant that payments that had gone electronically (where they could be at least measured and tracked) switched to cash that could not be measured or tracked. And, of course, the costs for the least well off people went up.
Our lawmakers and regulators need to think very carefully about what is best for society and they could start by using more rigorous risk analysis to determine policies with a decent cost-benefit structure for a new AML framework for the new economy.
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DID Owner (or Identity Owner) – the individual or entity who stores and controls the private keys associated with that DID. In other words, the one who’s granting permission to access certain data.
From Self-Sovereign Identity Systems: How Businesses Win From Letting Go of Customers’ Data – By Jan:
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For a recent example, consider Clearview AI: a tiny, secretive startup that became the subject of a recent investigation by Kashmir Hill in The New York Times. According to the article, the company scraped billions of photos from social-networking and other sites on the web—without permission from the sites in question, or the users who submitted them—and built a comprehensive database of labeled faces primed for search by facial recognition. Their early customers included multiple police departments (and individual officers), which used the tool without warrants. Clearview has argued they have a right to the data because they’re “public.”
From A World Without Privacy Will Revive the Masquerade – The Atlantic:
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Snippings