From: Duncan Frissell <frissell@panix.com>
Date: Tue, 10 Oct 95 07:12:28 PDT
To: cman@communities.com (Douglas Barnes)
Subject: Re: Conference Summary, Part the First
Message-ID: <199510101411.KAA01820@panix.com>
MIME-Version: 1.0
Content-Type: text/plain


At 10:23 PM 10/8/95 -0800, Douglas Barnes wrote:

>  o Regulators are not amused by attempts to run unlicensed online
>    banks. They are aware such things are starting to pop up, and
>    they are very interested in shutting them down when they do.

The jurisdictional problems are going to be very interesting.  As with
gambling.  Nations are reluctant to extradite their nationals for acts that
are not crimes at home.  The US follows this practice just like everyone
else.  Witness the lack of success of the German government in extraditing
neo-nazis from the US.  They had to grab one in Europe.

>  o The same goes for NBFIs (Non-bank financial institutions) --
>    these appear to be regulated primarily at the state level, with
>    some IRS and FinCEN involvement. These include everyone from
>    stock brokers to Casas de Cambio.

This is the real problem for the Feds.  When everyone is a non-bank
financial institution...

>  o The attendees displayed an understanding of the situation wrt
>    electronic payment systems that ran from dim to non-existent. 

Hard to control what you don't know.

>  o Fewer formal, specific or deterministic rules for reporting
>    suspicious transactions.
>
>  o More vague, subjective, and privacy-invading rules for
>    reporting suspicious transactions, coupled with more severe
>    penalties for banks and NBFIs.

But unlicensed NBFIs don't have licenses to pull so regulation is tricky.
An unlicensed NBFI includes any institution in another jurisdiction (no *US*
license) and any person running Quicken version 9.0 that will no doubt
support exotic electronic payment systems.

>  o Banks are now considered "deputies" of the federal government
>    in the War On Money Laundering.

Generals are always fighting the last war.  Banks are history particularly
if they are unable to offer competitive services because of regulatory
restrictions.

>  o Banks must implement strict "Know Your Customer" policies.

Which are trivial to defeat particularly under an EPS system when the
customer hands his keys over to his actual principal.

Note:  I've often wondered why the rulers place so much faith in their
ability to identify people when those who have studied the Is A Person
problem have thrown their hands up.

"Homeless?  Want to make a few bucks?  You have a brilliant future in the
identity sales business.  Remember, you can sell your identity as many times
as you like.  It never wears out."

DCF