New Ways to Watch You - Scrutiny of Your Banking Activity

Except for the timing, the recent developments by governments to monitor your banking transactions were entirely predictable. Now (March 2011) a new milestone has been passed. Financial institutions and other commercial ventures which handle money have been pressed into getting and implementing sophisticated computer programs to identify anomalous (out of the ordinary) events, and suspicious transactions. You may be surprised to learn what triggers these programs to spit out an alert. More surprising is what happens to your personal banking information when an alert is generated by the computer analysis.

It is the aim of this piece to give a crude synopsis of the systems that are being used these days. In turn, by informing, a discussion may be promoted about the public policy issues surrounding the new measures.

The legislation at the heart of this program is the federal government's Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The full text of the consolidated version is online here: http://laws.justice.gc.ca/eng/acts/P-24.501/index.html

The government agency that administers the  rules in Canada is called FINTRAC.
A brief history of this agency, from their 2010 Annual report is online here:
http://www.fintrac.gc.ca/publications/ar/2010/1-eng.asp?a=4

Here's how it works.
The law requires those that handle money ( banks, credit unions, credit card companies, law firms, etc.) to  report to FINTRAC any suspicious transactions or events. If the money handler fails to report as required then it is open to sanctions - charges, prosecutions, fines, and other penalties not least of which is revocation of any license needed to stay in business.

In order to comply with these onerous reporting obligations, the financial institutions and others required to report have been snookered into buying and implementing fancy computer programs to analyze every individual & organization they deal with, and virtually every transaction made with a view to deciding if a specific report to FINTRAC is required. Understandably such reporters will want to err on the side of caution rather than be exposed to the penalties.

 

 

Jim,

Interesting piece, thx for passing on.

This reminds me of a rabbit hole I went down, pretty deep, a few years back.

My focus was the Canadian scene.

The catalyst for this descent was my role on the Board of a local Credit Union ( a 10 year run).

Every quarter we had to review and approve a report that was being sent to the regulator, disclosing individual transactions and account holders (identities hidden) for any transaction that was considered suspicious. We averaged a half dozen or more each quarter.

My original concern was that it was deemed essential to handle the administrative tasks by using a comprehensive, expensive, complex software package. The package did virtually all of the identifying of evil transactions. It over-classified. Routinely. Shamelessly. Without meaningful oversight (yrs truly excepted).

Worse, I later learned was what happened to this Expensive Invasive very personal data, or worse what didn't happen. Fewer than one percent of one percent of transactions (1 in 10,000) 

were passed on to a (ir)relevant agency (RCMP, RevCan, being the two most frequent.)

BTW - It is an offense under the Cdn federal legislation for any person to disclose the contents, in whole or part, of any report to FinTrac. As in: your friendly credit union is forbidden from telling the customer that her transaction has been caught in the Web. She may never know.

Presently this scandal has precious little impact on your regular Mike.

But I'll bet (need some odds) that next year FinTrac Canada will announce they have just started an AI project working with Open AI. And then, well let your imagination run wild.

otherwise,

Carry On

M

​Tagline:          These are the good old days.