Globalising the mainstream

Why privacy is important and how does the “real world” deal with it

To make sure that you don’t think I’m on a personal anti-Facebook crusade — which would be silly; I use Facebook every day, and love some of the games offered through Facebook — I’ll give a different examples. In Portugal, in the early 1980s, when ATMs started popping up, the first networks were tied to a single bank, pretty much like everywhere else. Then at some point a few banks thought it was silly to put so much effort in their own network, and instead proposed to join forces and launch a common network. They founded a new company which had their own data centres safe in some bunkers (only one has a publicly known location) and interconnected themselves with this company, which provided the ATMs for all member banks. As a result, debit cards from different banks would work on ATMs installed by the competitors. Soon every bank was buying shares of this company and become part of it — a network explored under the brand name “Multibanco” — and even Visa and Mastercard in Portugal joined the network. As you can imagine, ATMs and portable payment systems became insanely popular; today, every tiny coffee shop with two or three tables and two employees has a portable, wireless terminal which can be used to accept payment of every debit card and every credit card in the world. Everything, from hospitals to groceries, including parking lots and tolls on motorways and bridges, is connected to the same, single network. Systems like invoice payments, direct debit (for regular monthly payments to the utilities), money transfers between banks, check clearances, and so forth, all travel the same network as well. And it’s also connected to the Internet: you can log in to the network, no matter what your bank is, and get a temporary credit card in nanoseconds based on your bank account, to use safely on a single online payment; it’s one of the safest methods for shopping online. And yes, you can even buy Linden dollars through the network — there is a ‘bot in Second Life which will accept your money, interconnect via the network to your bank, update the account, and send you L$. It’s an ubiquitous system which pretty much controls all financial transactions in Portugal — a single, uniform system.

Some banks in the late 1990s loved this idea so much that they set up virtual banks. They are just P.O. boxes and have not a single human being in an office. When joining the bank network of Multibanco, they will immediately give their clients access to dozens of thousands of ATMs nation-wide, as well as hundreds of thousands of points of sales in the whole country. ATMs can both deliver money and accept deposits, so there is nothing else that needs to be provided by a bank. The online “homebanking” systems are little more than interfaces to the Multibanco network with some bells and whistles. You could call Multibanco “the Facebook of Portuguese banking” in the sense that everybody uses it daily for pretty much everything, and new applications are constantly being announced and integrated into the vast network.

Naturally enough, a bit over a decade ago, government started to use Multibanco as well, because it’s so convenient: a sequence of digits can be used by anyone with a bank account, no matter what bank, to make payments to the State, so no citizen would be excluded; for the ones without bank accounts, Multibanco was able to provide a “virtual account” (not tied to any bank) to allow safe payments and universal service for anyone. VAT, revenue taxes, property taxes, vehicle taxes, and all sorts of fines and court expenses are paid via the network. At some point, politicians started to toy with the idea of getting rid of “regular” treasuries where people had to be physically present to make a (cash) payment, since the number of citizens actually still doing that is very small, and let the Multibanco network collect taxes automatically on behalf of government — after all, they have access to all bank accounts of all citizens and can extract automatic payments from everybody in the country; switching bank accounts would be of little practical use, as they would still be connected to the same network, and, of course, your VAT number is the universal identifier to all bank accounts you’ll ever have.

But this poses a problem. Multibanco is run by a private company which is not publicly traded. Delegating tax collection to a private entity which is not under the control of the government (except marginally, through laws regulating financial transactions) is pretty much the same as “tax farming”, which any modern democracy is supposed to have abolished. It’s putting too much power in the hand of a few individuals — bank owners — without public scrutiny. So the idea was abandoned, although it’s still true that a lot of encouragement is being made for citizens (individuals and corporations) to use the network to pay their taxes and fees to the State that way; for instance, if you wish to be incorporated, it’s now mandatory to have a bank account. Even for individual citizens, tax refunds are processed much faster — several months earlier, in fact — than manual refunds using a regular Treasury check. The result of all this is that citizens have no way to hide their money from their Government; and with the current laws, the Government can give Multibanco an immediate order to seize all your bank accounts without even a court order or a due process. Anyone without access to their bank account has automatically fewer (financial) means at their disposal to, say, hire lawyers to sue Government, banks, or the network; once the money has been seized, there is no way to get it back, except after literally decades of court fights which will usually be archived.

Nevertheless, the system is not that bad because at least it is regulated. For instance, the Multibanco network has far more information about all citizens than any other company in the world. They know exactly where you live (your bank account will say that), where you work (from the payments you receive from your employee), how much you earn, how many taxes you pay. But they also know what medicines you buy and what doctors you consult. They know what kind of things you eat (from bills from restaurants and coffee shops) and what groceries you buy more from. And of course all these expenses are geo-tagged — so they can know very accurately where you usually are located. But if you’re a car driver, it gets even worse: every gas station in the country is geo-tagged and shows exactly where you’re buying gas for your car; every toll on all motorways is connected to the system as well. And so are almost all parking lots; the same network deals both with large amounts of money as well as micropayments. On top of that, of course, every ATM and point of sale is connected to the network as well, so there is really little you cannot do without leaving a “paper trail”. It’s almost impossible just to withdraw a large sum from the bank, put it under your leesa mattress, and try to use cash for everything. It’s just barely possible to live without being known by the system — if you have no bank account, no job, no home, and no car.

As you can imagine, this tremendous amount of data is incredibly valuable, and it reveals an insane amount of information about individual citizens and corporations alike. So it’s also very strictly regulated: not even courts can get access to the whole set of data. Financial secrecy has been abolished, so banks might be forced to reveal all the data they have on their customers via a court order, but what the banks actually know is just a part of the whole data. If you have two different bank accounts, only Multibanco will know the relationship between both — courts might just try to get access to all bank accounts individually, but might not be able to make much sense of the complexity of financial transactions between all. Only Multibanco has all the data, and thus they are very thoroughly checked in the amount of information they can actually reveal — which is surprisingly little, and perhaps it might even be more surprising that there were no leaks ever reported in the past 25 years since the system went live.

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