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