Ross Anderson argues for less ID management and more traceable money
Ross Anderson posts a terrific paper he’s done for the Fed, arguing we should spend less effort tracking people and more effort tracking money (see Light Blue Touchpaper).
He points out the dangers and irritations of the post-9-11 switch from thoughtful risk management to a mechanical due diligence:
Thanks to pressure from the Financial Action Task Force (FATF), bank customers worldwide have become familiar with an ‘identity circus’ over the last few years – where even private bankers feel driven to write to customers of thirty years’ standing asking them for utility bills as proof of address. This is not merely ridiculous, as private bankers know their customers far better than the gas company does; it is a classic example of risk management having been displaced by due diligence, which in turn creates moral hazard. A corrupt bank manager may reckon he can get away with opening accounts for a money launderer so long as he has a bundle of gas bills filed away. Gas bills are easy enough for the wicked to forge, especially now that the UK has over 400 gas companies, many ofwhich supply bills online. But the regulations are oppressive to many groups of law-abidingpeople, such as married women whose household bills are addressed to their husbands, and students arriving at university from overseas. The worst hit are people in the third world; there are millions of people living in huts in Africa with no addresses and no utilities but who need financial services as part of their route out of poverty.