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The World Financial Police Attack Anonymity

by J. Orlin Grabbe

The world financial police are determined to eliminate all opportunity for individual financial privacy and anonymity. Their coordinated efforts to make possible the tracking of every financial transaction represent a direct fascistic attack on human freedom. And there is nothing secret about what they are doing. Their campaign is as overt as the war on drugs, and as well-funded as next year's intelligence budget. New legislative proposals to make their political efforts "the law," to expand their intrusive powers, and to criminalize their critics, pour off the assembly line daily.

Call their goal the Global Financial Jackboot. The jackboot's construction proceeds according to a fairly detailed blueprint. Maybe you should take a look.

Why Anonymity?

There are many reasons for financial anonymity. People with visible assets are inviting targets for theft or extortion; for lawsuits from customers, strangers, wives, husbands, girlfriends, boyfriends, family members, patients, and others seeking an easy and convenient way of enhancing their own financial well-being; for arbitrary assessments from governmental agencies which have budgetary problems or which have visions of expanded influence through a greater command of resources; for asset seizures based on inane and arbitrary laws such as those relating to minor drug possession (laws which allow parents' assets to be seized as a result of their children's activities); and for political pressures exerted by the implicit threat that if one does not toe the current political line, then one's personal belongings may become a government target.

In short, the possession of financial assets can limit freedom as well as enhance it. Anonymity reduces the negative impact on freedom that comes from building personal wealth. Hence there is often a demand for anonymity from freedom-seeking individuals who don't choose to be poor.

Imagine how this demand could be met.

A truly anonymous bank account would provide much more security than does, say, a Swiss numbered account. A Swiss numbered account is not anonymous. The identity of a numbered account owner is not generally available within the Swiss bank, but is nevertheless known to a small number of upper level managers. A Swiss numbered account reduces the number of individuals who have access to information in the account, but it does not reduce this number to zero. Moreover, little consideration is given to the secure anonymity of transactions made within such an account. The Swiss numbered account system is based on outdated technology. For years Swiss banks have made a living by providing a haven for flight capital. But Swiss banks are as now leaky as a sieve.

If even one bank employee knows who you are or what is happening in your account, that could be one too many. The motto of a truly anonymous bank would be: Don't know your customer.

True anonymity would provide protection for the bank which issues anonymous accounts, as well as the customer. Bank employees could not be placed under legal, economic, or physical pressure to reveal what they know ("rubber-hose cryptanalysis"), because they would not know anything. Bank employees could not be bribed to give out information for the same reason. If bank records were seized, the only data that would be gained would be information that is already public. Hence there would be no reason to take such action in the first place. Neither would any customer be placed in the position of worrying that information about his activities might be given out to others by the bank: the bank would not possess such information.

By contrast to popular press and belief, anonymity of this imagined type is not even remotely supplied by current purveyors of digital cash systems.

Digital Cash By Itself Does Not Provide Anonymity

Is anonymity of the type imagined here practical? Current digital cash systems fail to address this issue. At best such systems are interested in the anonymity of digital coins, not account holders. Such systems--such as David Chaum's ecash system--offer a watered-down of anonymity that is severly limited in scope. They offer teenage anonymity.

In such systems one can withdraw anonymous digital coins, and spend them anonymously. Parents (or anyone else) will not know the coins were used to rent a porno videotape, or spent on "unsavory" reading materials. But the coins will be withdrawn from a known, identifiable account, and the receiver of such coins will deposit them in a known, identifiable account. In short, there is customer spending anonymity, but not real anonymity in terms of bank accounts or asset- holdings. It is true that anonymous coins would prevent data-mining of one's spending habits. But they do not prevent data-collection on one's asset-holdings.

Real anonymity, by contrast, would mean account- holder anonymity. Such a system would also provide a mechanism for transfers between anonymous accounts, which could take place for whatever reason. Possible business deals between account holders are not the business of the bank, and there is no reason for the bank to collect any information on the identity of its customers, or to know anything about such business dealings. In particular, there is no reason for the bank to guarantee payment in the familiar manner of credit-card transactions (which would require the collection of customer information). Rather, all the bank would need to do would be to make anonymous, authorized, secure transfers between accounts.

Money serves two principal functions. It is a medium of exchange, and it is a store of value. A few digital cash systems seek to partially anonymize money in its role as a medium of exchange. But anonymous banking accounts would also anonymize money in its store of value function.

Current and proposed digital cash systems that anonymize coins do not provide anonymity in asset holdings: but only anonymity in payments.

There is nothing wrong with, or unattractive about, anonymous digital coins and anonymous small- denomination payments, of course. But a true system of anonymity would allow anonymous digital coins to be withdrawn from anonymous banking accounts, as well as to be deposited into anonymous banking accounts.

Anonymity and the FATF

The imagined anonymous account system as outlined so far would protect the customer's privacy. This, of course, creates the main problem: most governments don't want their citizens to have any privacy. To the organs of the State, privacy implies the ability to avoid taxes or whatnot. This is especially true of the United States, but the problem extends far beyond the U.S.

Because such privacy services would directly conflict with stated national policies of governmental control of citizen resources, these privacy-providing institutions would inevitably become targets of government attack. Countries angry at the privacy services offered, and looking for something to steal, might fabricate spurious charges of "money laundering" or "catering to tax evaders," followed by an attempt to seize all or part of the anonymity-providing bank's assets. This is not a trivial probability. The existence of the Financial Action Task Force (FATF) almost guarantees it will happen.

The FATF thinks it is the World's Financial Police. It promotes a metaphysical offense called "money laundering" in order to attack financial privacy and anonymity, and to subvert normal legal procedures.

The FATF was established by the G-7 Summit in Paris in 1989 to "combat money laundering." In April 1990 it issued 40 recommendations. These recommendations were revised in 1996. (The revised version, The Forty Recommendations of the Financial Action Task Force on Money Laundering, is the basis of the discussion here.) There are 26 FATF member countries--Australia, Austria, Belgium Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the Kingdom of the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States--along with 2 international organizations: the European Commission and the Gulf Cooperation Council.

The purpose of the FATF is to criminalize money laundering among member states and to harass non-member states who do not follow its recommendations. Note: acts that are criminal, such as theft, are already outlawed in all these countries. The purpose of the FATF is to create a further criminal category called "money laundering" in abstraction, whether or not it is associated with any other activity that one might consider criminal. This includes (#5) the awareness that someone else is laundering money:

". . . the offence of money laundering should apply at least to knowing money laundering activity . . ."

The objective of the FATF is to buttress the notion of "money laundering" with a sufficient number of circular and self-referential definitions so that the crime of money laundering may be applied to any financial activity the FATF disapproves of. This, in particular, includes anonymity.

The key recommendations in this regard are #10 and #13. Recommendation #10 directly attacks anonymous accounts:

10. Financial institutions should not keep anonymous accounts or accounts in obviously fictitious names: they should be required (by law, by regulations, by agreements between supervistory authorities and financial institutions or by self-regulatory agreements among financial institutions) to identify, on the basis of an official or other reliable identifying document, and record the identity of their clients, either occasional or usual, when establishing business relations or conducting transactions (in particular opening of accounts or passbooks, entering into fiduciary transations, renting of safe deposit boxes, performing large cash transactions).

Recommendation #13 says the FATF should monitor new technologies (such as anonymous digital cash software systems) that might favor anonymity, and--in a Luddite way--act to hinder their use if they could conceivably be used for money laundering:

13. Countries should pay special attention to money laundering threats inherent in new or developing technologies that might favour anonymity, and take measures, if needed, to prevent their use in money laundering schemes.

In particular, the FATF has devoted taxpayer resources to the study of the question of when and how the assets of those citizens accused of money laundering can be seized, and how the loot can be shared among governments. In its standard circular reasoning, the FATF in another document notes:

Confiscation is an important topic in relation to money laundering. The criminal's concern that their proceeds of crime may be confiscated is a major factor in motivating them to launder the proceeds of crime. An effective confiscation system is a necessary component of the anti-money laundering measures taken by any country. (FATF, Evaluation of Laws and Systems in FATF Members Dealing with Asset Confiscation and Provisional Measures.)

No Burden of Proof

A key focus of FATF attention has been to create an environment where financial assets can be seized by the government without any burden of proof such assets are in any way associated with any crime. The FATF says:

Probably the single most important issue though for most members is the question of the burden of proof upon the government and whether it can be erased or reversed. Integrally linked is the question of depriving a defendent of proceeds of offences other than those for which he is immediately convicted. If the aim of governments is to strip a convicted defendent of all his criminal [read: "money laundering"] proceeds, then they should seriously consider measures to make the task easier for the prosecutor. Measures that should be considered include:

  • applying an easier standard of proof than the normal criminal standard to the confiscation proceedings;

  • the more effective alternative of reversing the burden of proof and requiring the defendent to prove that his assets are legitimately acquired;

  • if a conviction is required for confiscation, enabling the court to confiscate the proceeds of criminal activity other than the crimes of which the defendant is immediately convicted.
  • (FATF, Evaluation of Laws . . .)

    So, in sum, the FATF has declared itself the enemy of privacy and anonymity, and represents an international, inter-governmental endeavor to seize assets at will. Much like any thief.

    In its most recent statement concerning the application of these principles (1997-1998 Report on Money Laundering Typologies), the FATF continues to emphasize the threat posed by anonymity:

    What is clearly a problem, however, is the opening of bank sites on the Internet in breach of banking regulations. In this case, the difficulty is to bring proceedings against the perpetrator, given the international character of the Internet and the difficulty of locating a site, which may be different from the one where illegal practices were identified, and identifying the national law that would apply. As yet only one case of this kind has been encountered, namely that of the Antigua-based "European Union Bank" which explicitly proposed completely anonymous investments.

    Notice the identification of "completely anonymous investments" with "illegal practices". (The example is ironic, in that European Union Bank was a swindler's scam enacted by two Russians. But the FATF is more concerned with anonymity than fraud.)

    The report even suggests that software vendors become subject to money-laundering supervision:

    In more concrete terms, particular consideration might be given to the following measures: . . . authorisation and surveillance of issuers of new technology products, since anti-laundering measures are better complied with when they apply to a regulated and controlled sector.

    The FATF has declared itself the enemy of financial privacy enhanced by cryptology.

    What Is To Be Done?

    The next time one of Stanley Morris's or Louis Freeh's henchcreatures asks you, "What do you want anonymity for? Do you have something to hide?" respond by asking him or her:

    "Can I have a copy of your latest bank statement?

    "Where do you live?

    "Can you supply me with photos of your children?"

    You will quickly discover that the henchcreature believes in privacy and anonymity. Both for himself and for people like him.

    He just doesn't believe in it for scumbags like you. And that's precisely the problem.

    If you want to be a willing victim he will gladly oblige.

    But despite the efforts of the FATF fascists, privacy and anonymity in the present age are both possible and practical. Over the next several months (be patient), I will tell you how to obtain it.

    The first step is to achieve privacy in your communications. The next step is to achieve privacy in your finances.

    In the meantime, you might want to look around to better understand the dimensions of the problem. For this is a war. This ain't no disco.

    This article appeared in Laissez Faire City Times, Vol 2, No 23.
    Web Page: http://www.aci.net/kalliste/