I was reading this new report by US DOJ on how digital currencies are increasingly popular with money launderers(or is it laundries?) - http://www.usdoj.gov/ndic/pubs28/28675/index.htm
The DOJ notes that digital currencies 'combine the intrinsic value of gold and other precious metals as well as the designated value of national currencies with the worldwide reach of the Internet to create an ideal mechanism for international money laundering'.
To me this statement clearly declares that digital currencies are the best thing that have happened for the criminal fraternity. They no longer have to rely on cumbersome processes of transferring money through mules and have people open bank accounts to wash dirty currency. As ever, the shadowy world is the first mover and adopted innovations to benefit from the digital revolution; leaving the legitimate world to debate on regulations and consumer security!
The report defines digital currencies as 'privately owned online payment systems that allow international payments, which are often denominated in standard weights for gold and precious metals.' This really seems to suggest that the criminal world can literally start and operate a 'parallel' digital currency system with full settlement and transfer mechanism. Who knows, perhaps there is one already operating! All that needs to be done is to 'digitise' systems like 'Hawala' and other money transfer mechanisms tailoring them to the online world and lay down the rules for settlement and exchange.
I am sure sooner or later we will stumble upon a seamlessly operating 'underworld digital currency' on a global scale while the legitimate financial world will continue to debate and get only their feet wet in the deep waters of digital currencies.
Monday, August 18, 2008
Buddy - can you spare me a Billion?
It is amusing to see how the banking industry is snorting in relief that Citi Bank declared a 2Q 08 loss of 'only' $ 2.5 Billion. Things have come to such a pass that a bank like IndyMac going under has only elicited marginal interest. Just as social scientists declare '40 is the new 30', the banking gurus seem to say 'Billion is the new million'! UBS, Bear Stearns, Lehman ..... these giants have got the whole world talking like investment bankers - in billions.
Apart from a few merchants of doom, everyone seems to be wishing away the crisis by harping on 'we reaching the end of the curve'. The number of big wigs trawling around the globe for additional capital would certainly give the airlines some cause for cheer. The 'capital lounges' in the GCC countries' SWFs resemble a doctor's waiting room.
It now looks like our sensitivities have been so numbed by the billions of dollars flowing down the gutters that we look to becoming oblivious to the potential failures of an important part of the financial industry - small and medium banks. Poor Bradford and Bingley only got a passing show of interest in their rights issue caper. What happens to the average man on the street when your neighbourhood banks start folding up? Are we now in a world where we prescribe 'Capitalism for the poor and Socialism for the rich'? Clearly, the banking industry appears to moving its value system at a pace beyond our understanding.
Perhaps, the next stage is where we react only to figures in Trillions. We seem to have made a start last week in the news item of Citibank's $ 1.6 trillion off balance sheet holdings. Small fry like me who still count in thousands aren't likely to attract any attention!
Apart from a few merchants of doom, everyone seems to be wishing away the crisis by harping on 'we reaching the end of the curve'. The number of big wigs trawling around the globe for additional capital would certainly give the airlines some cause for cheer. The 'capital lounges' in the GCC countries' SWFs resemble a doctor's waiting room.
It now looks like our sensitivities have been so numbed by the billions of dollars flowing down the gutters that we look to becoming oblivious to the potential failures of an important part of the financial industry - small and medium banks. Poor Bradford and Bingley only got a passing show of interest in their rights issue caper. What happens to the average man on the street when your neighbourhood banks start folding up? Are we now in a world where we prescribe 'Capitalism for the poor and Socialism for the rich'? Clearly, the banking industry appears to moving its value system at a pace beyond our understanding.
Perhaps, the next stage is where we react only to figures in Trillions. We seem to have made a start last week in the news item of Citibank's $ 1.6 trillion off balance sheet holdings. Small fry like me who still count in thousands aren't likely to attract any attention!
Monday, April 28, 2008
Cash -back - still the king!
For all of us who have been tom tomming electronic money, digital payments and mobile payments, this report by the British Retail Consortium is a bucket of cold water splashed on our face! See http://www.brc.org.uk/details04.asp?id=1360
This report actually says that cash usage in UK has gone up and going strong! Reticent consumers; burnt by credit card and other debt, appear to be playing safe and sticking to 'jingle' payments. So, all our enthusiasm to write off cash and sneer at anything that isn't digital seems to be prematurely misplaced. If this is the scene in UK, you can imagine how much cash is required in emerging markets.
I also recommend this report by Mike Lee - CEO of ATMIA posted here -
http://www.epaynews.com/resources/hundredyearsofcash.pdf
Mike believes that cash will still dominate for at least another 100 years.
So, Cash even if not the King, will at least be a Princess courted by all of us!
This report actually says that cash usage in UK has gone up and going strong! Reticent consumers; burnt by credit card and other debt, appear to be playing safe and sticking to 'jingle' payments. So, all our enthusiasm to write off cash and sneer at anything that isn't digital seems to be prematurely misplaced. If this is the scene in UK, you can imagine how much cash is required in emerging markets.
I also recommend this report by Mike Lee - CEO of ATMIA posted here -
http://www.epaynews.com/resources/hundredyearsofcash.pdf
Mike believes that cash will still dominate for at least another 100 years.
So, Cash even if not the King, will at least be a Princess courted by all of us!
Wednesday, April 9, 2008
Thought for food
Going by the events of the 10 days, it looks like Lady Subprime who has been grabbing all our attention has serious competition. The 'World Food Crisis' threatens to take us back to the basics and make us forget all about CDOs, Ninja loans, mortgage, etc. Many countries like India, China, Philippines, Thailand and most of Asia have taken extreme measures to curb the runaway inflation of food commodities. Most of them have banned export of rice and other food grains to curb rising prices and address shortages. The Middle East countries (GCC states) who have traditionally operated on 'oil for everything' model now face a converse scenario on food. They now look exactly as what the oil consuming countries face on fossil fuel.
This to me, looks like we are on a crisis of such fundamental nature that people will stop thinking about banks and financial market woes! Egypt witnessed the worst food riots in recent history. Ruling governments are all jittery over the mass demonstrations and protests over food prices. Much has been made of the effects of global warming, diversion of agricultural land to alternative fuel inputs, commodities trading and even GM foods.
So, we are going to see a mass movement of economists, analysts and social scientists to analyzing whether old Malthus has finally arrived on his theory. How is this going to affect the banking industry? The big S word - Stagflation promises to be the buzzword. Any hopes we had on emerging markets being decoupled from the US crisis is under question now. Emerging markets now find the very 'feel good' growth that was being hailed is a major cause of inflation.
The final irony may be in the US morphing into an attractive destination - with low prices and adequate food supply! The economic wheel may twist around to where we started.
This to me, looks like we are on a crisis of such fundamental nature that people will stop thinking about banks and financial market woes! Egypt witnessed the worst food riots in recent history. Ruling governments are all jittery over the mass demonstrations and protests over food prices. Much has been made of the effects of global warming, diversion of agricultural land to alternative fuel inputs, commodities trading and even GM foods.
So, we are going to see a mass movement of economists, analysts and social scientists to analyzing whether old Malthus has finally arrived on his theory. How is this going to affect the banking industry? The big S word - Stagflation promises to be the buzzword. Any hopes we had on emerging markets being decoupled from the US crisis is under question now. Emerging markets now find the very 'feel good' growth that was being hailed is a major cause of inflation.
The final irony may be in the US morphing into an attractive destination - with low prices and adequate food supply! The economic wheel may twist around to where we started.
Monday, March 24, 2008
Future Management V 2.018
Chartered Management Institute - UK has released an engrossing report on the what the workplace/ organisation will look like in 10 years. You can download the report and 'accessories' from;
http://www.managers.org.uk/client_files/user_files/Milburn_21/Management%20Futures%20Report%20Final.pdf
The report called 'Management Futures' outlines how our working world is going to look like when viewed through three prisms - 'World continued' - Probable, 'Unexpected Future' - alternative worlds and the 'Desired Future'.
The only gap I see in the report is lack of attention to the most basic human element - 'stupidity'. The recent events in the financial world (sub prime!) shows that humanity is still governed by the base values of greed and stupidity. Whatever happens, it is unlikely that we, as a human race, are going to display any fundamental change in our driving forces. I think we will continue to have equivalents of Enron, WorldCom, Subprime in varied forms or mutants.
------------------------------------
On another front, it was gratifying to note that 'Visa takes Life' through a bumper IPO. The Visa adv campaigns say 'Life takes Visa' - so we are happy to note that it holds true the other way around too! This was one IPO that the whole world collectively worked to make it a success. It is an irony of our times that a company sells itself on the tag line 'it does not offer any credit and hence runs no risk of default!'
But all said and done, our badly battered world needed some cheer!
http://www.managers.org.uk/client_files/user_files/Milburn_21/Management%20Futures%20Report%20Final.pdf
The report called 'Management Futures' outlines how our working world is going to look like when viewed through three prisms - 'World continued' - Probable, 'Unexpected Future' - alternative worlds and the 'Desired Future'.
The only gap I see in the report is lack of attention to the most basic human element - 'stupidity'. The recent events in the financial world (sub prime!) shows that humanity is still governed by the base values of greed and stupidity. Whatever happens, it is unlikely that we, as a human race, are going to display any fundamental change in our driving forces. I think we will continue to have equivalents of Enron, WorldCom, Subprime in varied forms or mutants.
------------------------------------
On another front, it was gratifying to note that 'Visa takes Life' through a bumper IPO. The Visa adv campaigns say 'Life takes Visa' - so we are happy to note that it holds true the other way around too! This was one IPO that the whole world collectively worked to make it a success. It is an irony of our times that a company sells itself on the tag line 'it does not offer any credit and hence runs no risk of default!'
But all said and done, our badly battered world needed some cheer!
Sunday, March 23, 2008
Card Fraud - truly globalized!
APACS released the latest figures on UK Card fraud - http://www.apacs.org.uk/2007Fraudfiguresrelease.html
It really shows how good criminals are in quickly exploiting 'systemic' loopholes. UK spent more than a billion pounds to implement chip and pin. Shows how truly globalized the criminals are! If ChipPin impedes my fraudulent activities in UK; no problem, I simply copy the magstripe and use it 'non' chip countries. Well, the biggest non EMV country is the US. Overall card fraud has increased 25% in 2007 over 2006. This is mainly driven by the 77% hike in overseas fraud. Online fraud rose 33%. I think these figures will look the same for all countries across the world.
Total card fraud losses stand at a mind numbing £535.2m. So, what do we infer from these figures?
-Whatever level of Chip / EMV security you put in a country, criminals will always find a way to clone magstripes and use them in places where EMV hasn't reached yet.
-Criminals will continue to thrive in the online world. With the surfeit of social networking and other areas for interaction, there is ample opportunity for criminals to indulge in 'social fraud'.
-As long as the US remains out of bounds on EMV, counterfeit fraud cannot be stamped off.
-With the economic downturn and heightened jobless levels, more vantage opportunities caused by desperation.
All in all, expect these figures to up further in 2008. There is nothing to suggest that criminals are getting dumber or restricted in any way. If anything, worsening economic conditions are going to lead to more power to card fraud and swelling in the ranks of fraudsters.
"Fraud is like electricity; it is shocking and follows the path of least resistance."
It really shows how good criminals are in quickly exploiting 'systemic' loopholes. UK spent more than a billion pounds to implement chip and pin. Shows how truly globalized the criminals are! If ChipPin impedes my fraudulent activities in UK; no problem, I simply copy the magstripe and use it 'non' chip countries. Well, the biggest non EMV country is the US. Overall card fraud has increased 25% in 2007 over 2006. This is mainly driven by the 77% hike in overseas fraud. Online fraud rose 33%. I think these figures will look the same for all countries across the world.
Total card fraud losses stand at a mind numbing £535.2m. So, what do we infer from these figures?
-Whatever level of Chip / EMV security you put in a country, criminals will always find a way to clone magstripes and use them in places where EMV hasn't reached yet.
-Criminals will continue to thrive in the online world. With the surfeit of social networking and other areas for interaction, there is ample opportunity for criminals to indulge in 'social fraud'.
-As long as the US remains out of bounds on EMV, counterfeit fraud cannot be stamped off.
-With the economic downturn and heightened jobless levels, more vantage opportunities caused by desperation.
All in all, expect these figures to up further in 2008. There is nothing to suggest that criminals are getting dumber or restricted in any way. If anything, worsening economic conditions are going to lead to more power to card fraud and swelling in the ranks of fraudsters.
"Fraud is like electricity; it is shocking and follows the path of least resistance."
Mobile phone - birthright of every world citizen!
In one of my earlier blogs, I laid out the opportunity of mobile numbers being used as 'citizen ID' and enabling access to credit to the huge mass of unbanked citizens of the world.
Well, I now go a step further - we need a 'Universal Declaration of Mobile Phone Rights'. I think it is about time the United Nations passed a resolution requiring every country to issue mobile phone to its citizens. All the global talk of identification, rights, cheap credit is meaningless without a global platform on which every world citizen can enjoy rights.
Companies like Mi phone are coming out with a $ 20 mobile phone. See www.mi-fone.mobi/
Very soon, a phone will be as affordable as a watch and it makes sense for the world to seize this opportunity and get the world 'mobile'.
As a popular advertisement by a MSP in India goes ; 'Air, Water, Food .... .. Network'.
Time to make mobile phone a basic human right.
Well, I now go a step further - we need a 'Universal Declaration of Mobile Phone Rights'. I think it is about time the United Nations passed a resolution requiring every country to issue mobile phone to its citizens. All the global talk of identification, rights, cheap credit is meaningless without a global platform on which every world citizen can enjoy rights.
Companies like Mi phone are coming out with a $ 20 mobile phone. See www.mi-fone.mobi/
Very soon, a phone will be as affordable as a watch and it makes sense for the world to seize this opportunity and get the world 'mobile'.
As a popular advertisement by a MSP in India goes ; 'Air, Water, Food .... .. Network'.
Time to make mobile phone a basic human right.
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